It is possible to make a donation without going before a notary and still retain partial enjoyment of your assets. All you have to do is set up a “pacte adjoint” or side agreement. Explanations and a free downloadable model in this blog!
The side agreement refers to all the clauses and conditions that complete a donation made without formalities, i.e. that has not been executed before a notary. The side agreement stands as a roadmap for manual donations of which it formalizes the terms and conditions. It also serves as proof of a manual donation or a donation by bank transfer. It is useful to confirm the date of the manual donation (which must occur prior to the side agreement), the donor's intention to donate and the donee's acceptance, as this must be effective before the donor's death.
The donor can decide in the side agreement on the use of the funds resulting from the donation, the administration of the donated funds or the temporary inalienability of the funds. To give some concrete examples, the agreement may specify that:
The drafting of a side agreement allows the donor to continue to enjoy his assets and to keep an eye on the use of the donated funds. It also confirms the date of the donation. This is useful because if the donor dies within the first 3 years after the donation, inheritance tax is due. After these 3 years, no inheritance tax is due. To avoid the 3-year rule, it is also possible to register the joint agreement at the Legal Security Bureau and pay the corresponding donation tax, which is much lower than the inheritance tax.
The first disadvantage of the joint agreement is a direct consequence of its main advantage: it leaves traces. Furthermore, despite the signing of an ancillary agreement, control over the donation is not total: it will have to be asserted in court in the event of family discord. Finally, even if a side agreement with a non-disposal clause has been signed, the donation passes entirely into the hands of the donee and could be subject to seizure in the event of default.
The objective is to pass on one's assets while avoiding inheritance tax and ensuring an additional income for the future. This income can be freely determined: monthly or annual amount, fixed or indexed, corresponding to the fruits (interests and dividends, even capital gain) of the given capital or to an annual percentage of the given capital.
Providing for the enjoyment of the usufruct of a portfolio in a side agreement is not the most optimal approach to perceiving an annuity. On the one hand, this approach is a source of uncertainty since the fruits of a portfolio can vary considerably from one year to the next. On the other hand, the distributions of interests and dividends that this approach impose are subject to significant withholding tax. As a result, the annuity expressed as an amount (monthly or annual) is preferrable because of its predictability and the possibility of investing in more tax-efficient capitalization funds.
The burden of proof of the agreement lies with the party that has something to claim: with the donor, if he wants to claim the execution of a clause indicated in the agreement; with the donee, if he wants to prove that the donation was made outside the inheritance and that he will not have to report it to the estate.
Other formulas allow the donor to keep control of the donated property and ensure his financial independence. The most classic is to make a donation with bare ownership-usufruct dismemberment by means of a notarial act. The donor gives the donee only the bare ownership of the donated assets and continues to perceive the fruits. This formula is most often used in the context of the donation of real estate.
As the side agreement is a private document, there are no legal constraints on its drafting. Having been asked on numerous occasions by our clients on this subject, we are therefore sharing here, as a free download, the model of a side agreement. This could accompany the opening of an joint investment account, for example, allowing the donation to be invested. Or the opening of an retirement income plan, which allows you to invest a capital with a view to drawing a fixed (or indexed) monthly income - with or without the objective of a legacy at the end of the period. Please note that this document is a standard model and may not be suitable for every situation, given its particularities. We cannot therefore be held responsible for the use that would be made of this document and invite you to have it reread, once completed, by a professional in the sector (notary, lawyer or tax expert).
This article was written when easyvest was authorized and regulated by the FSMA as an agent in banking and investment services. Today, easyvest is a brand of EASYVEST NV/SA, authorized and regulated by the Belgian Financial Services and Markets Authority, with company number BE0631.809.696, as a portfolio management company and as a broker in insurances, with its registered office in Rue Gachard 59, 1050 Brussels, Belgium. Copyright 2023 EASYVEST NV/SA.