Estate planning – ideal way to transfer your wealth
If you have invested well, you may have built up a considerable amount of wealth in your life. Perhaps you have your own company or a house. You want your wealth to end up in the right place. It is therefore wise to think about the destination of your wealth during your life. Thinking about and planning this form of inheritance is popularly called ‘ estate planning ‘ (translation: wealth planning). You then put on paper in what ways you can pass on your wealth to the next generation in a smart way. It would be unfair if they had to pay a lot of tax because you have not done enough research into estate planning. Below you can read how you can do this in a smart way!
What is estate planning?
If you have assets, you want your assets to end up in a good place when you can no longer use them. This could be a specific charity, but you could also help relatives by leaving them part of your assets.
Questions you should ask yourself: who do you want to give your assets to? At what point in your life do you want to give up your assets? And how much money do you want to leave behind, all of it, or just a portion of your assets? What are the requirements and conditions for this form of inheritance? How do you do this in a responsible and convenient way? You will find the answer to all of these questions!
The above questions all belong to estate planning (other name: wealth planning). Estate planning combines all your wishes, demands and rights. Information is used in the field of gift law and, for example, tax law. An expert estate planner will be of great help to you and help you put a plan on paper. This way you can indicate your priorities and indicate in what way you would prefer to see this taken into account? What are the advantages of one method and the disadvantages of the other? What steps still need to be taken for this, for example in the legal field?
What is your goal?
The most important question to ask yourself when putting a plan on paper is: “what exactly is my goal?”
Answering this question is not easy, because it consists of different parts. You have to take into account your age and how much wealth you have. Are you already quite old, or even a bit younger? Do you have a lot of money to leave behind, or not that much?
In addition, you must consider what you want to be done with your assets after your death and whether you want to donate assets during your lifetime. Can you already miss something during your lifetime, or do you only want to donate something after your death? Important questions!
Taxes have a significant impact on answering these questions, even at the beginning of the process. Do you want to consider any tax benefits, or does it not play any role in your decision-making?
All of the above questions are important when making choices and decisions, with your goals in mind. Some examples:
- You have a fair amount of wealth through stocks and investments, and you don’t necessarily need it in your life. You would like to help your children buy a home.
- As a self-employed person, you have your own company, and you want to transfer that company to your children in the long run. You can also choose to offer it for sale to someone outside the family and give a portion of the profit to your children.
- You have no children and would like your assets to go to your family and would also like to support a good cause.
- Your assets are mainly in your home and you would like to find out how you can transfer them in the most favourable way possible.
Possible forms of inheritance
Donations or gifts
You can transfer part of your assets to the next generation without having died, or donate part of your assets to a charity. You do this in the form of a donation. Your assets will then become smaller, and the assets of the person to whom you donate your money will become larger. This has the advantage for you that your heirs will have to pay less inheritance tax when you die. However, you will of course have to pay gift tax if more is donated than the amounts that are legally exempt.
You can also make donations during your lifetime. You can choose to make a one-off donation or to give a certain amount on an annual basis. You can choose to give your children the power over this, but it is also possible to take matters into your own hands. You can give your children the money in concrete terms, but a ‘paper donation’ is another option. You also have a say if you decide to divorce: you can choose that the ex-partner does not receive any money from you.
It is a good idea to write down a financial plan when assessing how much money you want to give. Many estate planners can be of great help to you with this. Of course, you can also look for an external financial planner who also takes your pension into account.
Partners
If you live together with a partner (in the form of a marriage or a partnership), then the matrimonial property regime comes into play. It is then determined for you how much money you are allowed to give up. It can happen that you only have your own private assets and that there is no shared property, but in other cases there can be a community of assets.
In a cohabitation contract you can include agreements about the donation of assets and the division thereof. This way it is clear for everyone!
If you make a plan together with an estate planner, your situation will be examined from top to bottom by your estate planner to see which plan best suits your situation. For example, it may be that a cold exclusion is more advantageous in the case of a prenuptial agreement, because it will still be decided after your death that there was a joint estate. This can sometimes save a lot of tax. It is then necessary to change the conditions.
Testament
In a will you put down on paper what your wishes are regarding the inheritance. Who exactly are the heirs and who gets which part of your assets? Is the inheritance part of a joint estate?
An estate planner will take your will into account and will evaluate it. The person will check if adjustments are necessary in view of your objectives. They will also look at changed laws and rights so that your will is up-to-date.
It is always a good idea to regularly compare your will with the existing laws and regulations, and to check whether your wishes are still represented by the will. Do this every five years or so, because then your will remains up-to-date!
Policies and insurance
You may have taken out a specific policy or insurance in the past. Money from these policies can affect the rules regarding your estate. It is wise to take this into account when making decisions about this.
There is a good chance that this will have an impact on the gift amount that you can afford. The policy can also influence the amount of inheritance tax that you have to pay. The estate planner will take all of this into account in the plan and will recommend an adjustment if necessary (for example through prenuptial agreements).
Worldwide (international)
If you have built up assets outside the Netherlands, you must also take into account legislation from other countries. Sometimes you need a separate will for this, and tax from other countries can also be levied on the gift amount.
This can also happen if one of the individuals you want to donate to lives outside the Netherlands, or if the charity is foreign to whom you want to donate a large amount of money. Then you also have to look at legislation from other countries. Your estate planner will help you with this.
Own company
An estate planner also finds it important to know if you have your own business. There are specific rules for ZZP’ers, so it is important that your estate planner is aware if you have your own business. You then also have business assets, and then everything becomes a little different.
Duties of an estate planner
The end result of estate planning is a gift plan. What is a gift plan? A gift plan states what can be gifted tax-free each year to whom and how much tax this will save. It is a step-by-step plan that clearly states how much and when this can be gifted.
What steps does an estate planner take to arrive at a gift plan?
1. Inventory
About family matters:
- The financial picture
- How much money is available to donate
- When can this money be accessed?
- How much money does the donor still need?
From wishes:
- How much money do you want to spend?
- Who do you want to leave your money to?
2. Drafting and coordination
- Create a financial plan and distribute your assets properly
- Aligning your will with current legislation and policies
Which parties offer estate planning?
Estate planning is not standard in the services of an asset manager . However, you often see this at a private bank. At a private bank, in addition to asset management, you can also go for other financial services, including estate planning.