Selling an inherited or gifted property

1. INHERITANCE

Have you inherited a property from a loved one and now wish to sell it?

When you inherit a property, you pay what is known as inheritance tax. This inheritance tax is calculated on the market value of the assets on the date of death. The heirs submitting the declaration of estate must estimate this market value themselves. The applicable rate varies between 3% and 30%, depending on the value of the inherited property. You can find the rates applicable in Brussels here.

If you subsequently decide to sell the property or properties received as an inheritance within two years of the death, it is important to pay close attention to the value stated in the declaration of estate. Indeed, if the sale price is higher than the value stated in the declaration of estate, you may have to pay the unpaid inheritance tax, as well as an under-declaration penalty. To avoid this, you can always submit a supplementary declaration to adjust the value that was initially set too low.

However, more than two years after the death, you will no longer have to pay any additional tax or penalty.

Example: you valued the inherited house at €300,000 at the time of death. You sell it one year later for €370,000. You will therefore initially have paid inheritance tax on the €300,000 stated in the declaration of estate, and an additional amount will be assessed after the sale on the €70,000 difference, together with a penalty. However, if you decide to sell the same property more than two years after the death, you will not have to pay any additional tax or penalty.

When you decide to sell a property received as an inheritance, several scenarios may arise:

Are you the sole heir?

If you are the sole heir, the procedure is generally very quick. Indeed, you alone have the right to sell (or not sell) the property or properties you have just inherited. As we will see below, matters become more complicated when there are several heirs.

Are there several heirs?

In this case, this is known as co-ownership arising from succession. But what exactly does this mean?

A property forming part of an estate enters into co-ownership arising from succession. Among other things, this means that each heir must consent to the sale of the property for it to be valid. In other words, the agreement of all co-owners is required for the sale! If even one person does not wish to sell the inherited property, you will be obliged to keep it, at least until an agreement is reached.

However, please note that no one is required to remain in co-ownership; there are legal means of bringing it to an end.

The heirs reach an agreement

Have you all jointly agreed to sell the properties you have just inherited? This will save you many problems… and the procedure will generally be quicker as a result.

All that remains is to decide—again, in agreement with the other heirs—how to sell your property. Will you, for example, use an estate agency to handle the sale of your property?

An heir blocks the management or sale of a property

The sale of inherited property or properties is frequently blocked by disputes between the heirs, or an heir may delay the entire procedure by failing to respond or even remaining silent. This complicates the situation; indeed, as mentioned previously, you unfortunately cannot decide on your own to sell the properties you have just inherited. What can you do in such cases??

1. Possible alternatives

1. You (and the other heirs) have inherited several properties that can be divided among you more or less equitably (= distribution in kind).

2. You may also decide to sell your share in the house to the heir who refuses to consent to the sale. An heir who wishes to keep the inherited property can therefore buy out the other heirs’ shares.

3. If you are still unable to reach an agreement with the other heirs, or if you do not wish to sell the property for personal reasons, letting it may be another solution to consider.

4. And the final solution if no agreement can be reached: court-ordered partition

If you are still unable to reach a compromise, you will need to consult a notary to obtain a summons to appear before the court. A judge will rule if necessary. Furthermore, if you are still unable to reach a compromise after consulting the notary, the property will generally be sold at public auction (which is often less advantageous for the heirs). The Civil Code provides that no one can be required to remain in co-ownership. This means that each co-owner may demand to receive “their share” and may therefore force the sale of the property.

It is up to you to find the right arguments to resolve the situation and reach an agreement.

2. GIFT

Has a loved one gifted you a property that you wish to sell? There are several things you need to know. First of all, a property received as a gift differs from a property received as an inheritance in that it is transferred to you by the donor during their lifetime and free of charge. The donor must use a notary, who will draw up a deed of gift. In this deed, the donor will specify all the conditions of the gift, such as the type of gift and whether or not the property may be sold. In other words, everything depends on the deed of gift.

IMPORTANT: If you own only part of the property received as a gift, as with an inherited property, you will need to reach an agreement with the other co-owners regarding the sale.

Therefore, make sure that the deed of gift does not contain any of the following provisions:

• Non-transferability clause : No transfer of ownership may take place without the donor’s consent.

• Usufruct reservation clause : The donor chooses to retain the usufruct of the property and grant you bare ownership. You will therefore need to obtain their consent for any sale of the property.

However, if a sale authorisation clause is included in the deed of gift, you will be able to sell the property without any difficulty. The procedure will then be the same as for a conventional sale.

NB : Some deeds of gift contain right-of-return clauses : if you die before your donor and have no successor(s), the property will revert to the donor’s estate (unless it has been sold).

For tax purposes, a gift entails various costs:

– Gift tax (registration duties): These are taxes payable to the region on a gift. Rates vary from one region to another. Gift tax varies according to the relationship between the donor and the beneficiary, as well as the value of the property gifted. You can find the current rates for the Brussels-Capital Region here.

– Searches and administrative formalities relating to the deed

– Notary’s fees

NB: For gifts, the calculation is reset every three years. What does this mean in practical terms? If you decide to make a second gift less than three years after the first, the amounts of the two gifts will be combined. Gift tax will therefore be calculated on this new combined amount. In some cases, it is therefore preferable, for tax purposes, to wait three years before making a second gift of immovable property in order to mitigate the progressive nature of the tax. This is known as gifting in instalments (this technique applies mainly to relatively expensive properties and therefore particularly in Brussels).

PLEASE NOTE: In the Walloon Region, if the donor dies within three years of the gift, the assets will be taken into account when calculating inheritance tax (but this has no longer been the case in Brussels since 1 January 2018!).