A life insurance with a designated beneficiary is an attractive planning tool in Belgium, but it is often treated as a legacy for tax purposes. The rules vary by region and depend on who paid the premiums, who was insured and who is the beneficiary.
What is taxable
As a rule, the capital paid out is treated as a legacy and taxed at inheritance-tax rates when:
- the policyholder and the insured person are the same (e.g. the deceased), and
- the capital is paid to a third party (beneficiary) on death.
The rate depends on the kinship between deceased and beneficiary:
- spouse: partner rate with possible exemption;
- children: direct line (Flanders 3% to 27%);
- brothers/sisters: collateral line (45% to 65%);
- others: up to 65%.
Important exceptions
AAB clause (marriage in community)
If the insurance was taken out with common premiums by spouses married under community of property and the surviving spouse is the beneficiary, part of the capital may be considered own assets and escape inheritance tax.
Gift with reserved usufruct
A parent gifts the insurance capital to a child while reserving the usufruct. On the parent's death, the full capital goes to the child without inheritance tax, provided the gift was properly registered.
Three-person (ABC) clause
When A pays the premiums, B is the insured and C is the beneficiary, the capital may be seen as a gift from A to C (potentially subject to gift tax instead of inheritance tax). Common structure, but fiscally complex.
Flanders specifics
VLABEL has specific rules: for group insurance (2nd-pillar pension) or outstanding balance insurance linked to a mortgage, an exemption often applies for the surviving spouse. Check the policy and the tax certificates.
Documents to request
For each life insurance, ask the company for:
- tax certificate for the inheritance declaration;
- copy of the policy and beneficiary clause;
- proof of the payout or allocation of the capital;
- detail of the premiums and who paid them.
Practical example
The father holds a life insurance of 100,000 euros with his daughter as beneficiary, premiums paid from own assets.
- Flanders: 100,000 (no exemption, not the spouse) taxed in direct line on 100,000 euros.
- Calculation: 50,000 × 3% + 50,000 × 9% = 6,000 euros of tax.
If the beneficiary were a friend, the tax would jump to the "all other" rate: 100,000 × 25 to 55% = easily 40,000 to 50,000 euros.
Nalenta and your insurance policies
Nalenta systematically asks for life insurances, tax certificates and beneficiaries, and applies the regional rate to the calculation. For planning see also gifting vs inheriting.