In Flanders, a seismic financial shift is underway as the affluent baby boomer generation prepares to transfer unprecedented wealth to the next.
However, this impending inheritance boom has stirred controversy, prompting a surge in succession planning sessions. These sessions aim to educate the public on minimising inheritance tax and ensuring a smooth transfer of assets.
Experts are emphasising the importance of timely action, asserting that failure to plan can lead to costly legal battles and familial strife. The high inheritance tax is often labelled a "grief tax," and is portrayed as a potential threat to family wealth.
The intent behind inheritance tax is to prevent an accumulation of wealth within select families or institutions. Nonetheless, discontent with the current system is palpable, with attendees branding it as "theft by the state." The tax brackets, established in 1987 and never adjusted for inflation, are increasingly viewed as outdated and inequitable.
Some experts contend that the inheritance tax disproportionately affects the lower middle class, arguing that those with wealth tend to have better access to information and wealth planners, enabling them to minimise their tax burden. This knowledge gap, some suggest, transforms inheritance tax into a levy on the uninformed.
Rise of gifting
Avoiding inheritance tax becomes a complex game of strategies, with gifting emerging as a popular tactic.
The distinction between hand or bank gifts and registered donations becomes crucial, each carrying its own set of advantages and disadvantages. Notably, in the period from 2015 to 2022, more money was donated than inherited, underlining the prevalence of these tax-minimising strategies.
However, cautionary tales of unexpected expenses arising from premature gifts highlight the risks associated with such manoeuvres.
Some opponents of the tax have called for an overhaul that equalises inheritance and gift taxes at a fair rate, eliminating the need for elaborate planning.
Despite calls for reform, Flemish Minister of Finance Matthias Diependaele has maintained the status quo, arguing that the current trend of increased donations is beneficial for the economy.
The reduction of gift tax in 2012 reflects a policy geared towards putting money into circulation sooner, supporting the spending habits of younger generations.
As Flanders stands at the brink of the largest intergenerational wealth transfer, the discourse on inheritance tax reform intensifies.
Will the government adapt to ensure fairness, or will the affluent continue to navigate a landscape where strategic planning determines the fate of their fortunes? The answers may shape not only individual legacies but also the socioeconomic fabric of the region.
