Financial planning to prepare for unexpected and unpleasant situations – such as a premature death – is essential. As a financial planner, I have always known this however there is nothing like having a child to hammer home the point.
My wife and I were blessed with our first child last year, a momentous occasion which has brought us great joy but also great responsibility, as it does for all parents. It meant taking a fresh look at our financial situation and making a few important changes and it has inspired me to write this post for those Dutch expats living in Asia who have not yet looked at the important issue of estate planning to protect their families.
Clearly this is a complicated subject which I am unable to cover in full so I would urge you to seek expert advice on estate planning. Nevertheless, I thought a brief summary of the situation may be helpful.
Dutch inheritance law is governed by Book 4 of the Dutch Civil Code (Law of Succession) and the 1989 Hague Inheritance Treaty. It is applicable to Dutch Nationals living in the Netherlands and foreign residents living in the Netherlands for the five years prior to their death.
Things get more complicated for Dutch nationals not living in the Netherlands when they pass away and who may well have assets in more than one jurisdiction. Dutch nationals who have lived in the Netherlands within the last 10 years are likely to be classed as residents for inheritance tax purposes. Each country has its own inheritance laws which will apply to estates of an international nature and it is possible to have more than one will although important to ensure that they do not contradict one another. The Netherlands will have treaties with some countries to avoid double taxation (), although not all.
The most important point to make about estate planning, whatever nationality you are, is that if you do not specify who will receive your assets with a valid will there is no guarantee that they will go to the people who you want them to. In the absence of a will intestacy laws apply and they may conflict with your wishes. This is why everyone – no matter your age – should draw up a will. You can do this yourself but I’d always advise having a professional do it to avoid mistakes which could render it null and void.
The Netherlands operates forced heirship laws which dictate to a degree how an estate is distributed. This means that succession is a right of the heir and not entirely the choice of the deceased. Specifically, under Dutch law, the children of the deceased have an automatic right to claim 50% of what they would have received under intestacy rules if they are disinherited. In addition, disinherited spouses/partners can claim lifetime use (also called usufruct) of the family home or other estate assets
Inheritance tax thresholds in the Netherlands depend on the relationship between the deceased and the heir. Here’s a handy summary table for 2019 thresholds:
|Relationship to deceased||Exemption amount for 2019|
|Spouse or registered/cohabiting partner||€650,913|
|Child, foster child or stepchild||€20,616|
|Child with a disability||€61,840 (subject to certain conditions)|
|Other (brother/sister etc)||€2,173|
Inheritance tax rates also vary depending on the relationship between the deceased and the heir. Here’s an overview for 2019:
|Value of inheritance||Partner/child||(Great) Grandchildren||Other heirs|
|€0 – €124,727||10%||18%||30%|
A will is also important for the following reasons:
- To include or exclude certain individuals, for example someone who is unrelated to you or an unmarried partner who may not be considered an automatic heir
- To make specific arrangements for property which you own outside the Netherlands
- To appoint guardians for your children
- To appoint an administrator to manage the wealth of children who have not reached majority when you die
- To minimise the inheritance tax burden on large estates
- To avoid fiscal complications
- To appoint an executor who is responsible for managing the estate, sorting out related administration and paying any inheritance tax due
- If you wish to leave part of your estate to charity
If you need assistance with drawing up a will or wills which adhere to the rules which apply to both your country of domicile and your country of residence, complement one another and leave no room for doubt as to what you want to happen after your death we can put you in touch with professionals who have the knowledge and expertise to do this. Please do feel free to contact me for further information.