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#Tax Law #Estate planning

Importance of a properly executed bank donation reaffirmed

Tuesday 27/04/2021

A bank donation is and remains very popular. You can still donate a sum of money or a securities account with a bank donation without having to pay gift tax.

But be aware, there are also pitfalls if a bank donation is not made according to the rules of the game!

Away from the “cheese route”

From now on, any donation of movable property by way of a domestic or foreign notarial deed will give rise to gift tax. The recent abolition of the so-called 'cheese route' leaves the bank donation untouched, however. But in order to retain its advantages, a bank donation must be carried out according to the rules of the game.

Benefits and conditions of a bank donation

Everyone agrees that a bank donation is generally regarded as an indirect gift. The formal requirements of a notarial deed do not apply,  and the donation can be made without paying gift tax. Moreover, if the donors remain alive for three years after the donation, no inheritance tax will be due either.

As with any other donation, the basic conditions must be met cumulatively:

  • impoverishment of the donor
  • intention to donate or animus donandi
  • acceptance of the donation by the beneficiary, and the latter’s enrichment

Follow the rules of the art

It is important to execute a bank donation in accordance with the rules of the art. A recently published judgment confirms this once again (Court of First Instance East Flanders, Ghent Division, dated 2 October 2019).

The facts

A married couple wishes to donate a sum of EUR 1,000,000 by means of a bank transfer to the account of their two children.

Before the money is transferred, the donors and beneficiaries sign a private donation document.

That document is then presented for registration,  so that gift tax is due. If one of the spouse-donors dies (even within three years of the gift), no inheritance tax is due because it is a registered gift. The reason for the registration turns out to be calculated, however: the spouse-donor dies a few months later by euthanasia. At that time, the bank transfer has still not taken place.

It is a bank donation

To the family's surprise, the donation is nevertheless added to the estate of the deceased donor-husband, and inheritance tax has to be paid on it. The Flemish tax administration Vlabel is of the opinion that this is a bank donation,  and not a registered direct gift. As the donor died within the three years, inheritance tax must be paid. The gift tax that was paid is waived by Vlabel.

It is not a bank donation ...

But the court ruled that there was no question of a bank donation. After all, at the time of succession, there had not yet been any ‘traditio’, or material transfer of the object of the gift: the money had not yet been transferred.

But a gift that is null and void

According to the court, on the basis of the private donation document, this does constitute a direct donation. But since there is no required notarial deed and only a private document (Article 931 of the Civil Code), the donation is null and void. The entire donation has to be added to the estate of the deceased spouse-donor, and inheritance tax has to be paid on the entire sum.

Respect the correct order and rules

In this particular case, the approach was imprudent. The whole discussion could have been avoided:

  • By first executing the bank donation by transferring the bank balances.
  • Then confirming this in a "pacte adjoint" (associated pledge) drawn up for that purpose. Ample attention must be paid to the wording of this document: it may only be interpreted as a document confirming the donation made, and serves purely as evidence. In practice, it is therefore drawn up after the transfer.
  • Then registering this document.

If you have any further questions or would like advice on making a bank donation, please do not hesitate to contact our specialists. They will be happy to help you.

Contact one of our lawyers

Dirk De Groot

Dirk De Groot


Laurens Gastmans

Laurens Gastmans