Trusts in België: Liaisons Dangereuses (Trust in Belgium: Dangerous Liaisons)

Abstract:     
In this article I make a claim against off shore trusts and foundations as useful estate planning vehicles for Belgian residents. My point is that such structures may end up causing a nightmare both from the perspective of tax law and of civil law.

On the fiscal side, the Belgian tax administration makes a strong argument for taxation both on the level of income tax and inheritance tax. Even fully discretionary and irrevocable trusts have a hard time to pass the tough tresholds. The administration has a point: how often is such fully discretionary trust really also in the facts fully discretionary with no power whatsoever for the settlor?

This may change dramatically upon the decease of the settlor. At that moment the trust may become genuinely discretionary, in the hands of the trustees. Their fiduciary obligation is towards the goals and objectives set out in the trust deed and defined by the settlor. The latter however is not there anymore to correct or finetune.

Hence, on the civil law side, the paradox of the discretion may turn into a true nightmare after the settlor has passed away. In many instances trustees may then rely on the discretionary character and the will of the late settlor to pretty much act as they seem fit. The heirs of the settlor are then at the mercy of the trustees goodwill.

Note: Downloadable document is in Dutch.

Number of Pages in PDF File: 7

Keywords: Trust, Fiduciary obligation, Inheritance taxes, Income tax

JEL Classification: K11, K34

Accepted Paper Series