4.5. Family Inheritance Pact

As a result of a recent change in the law it is possible to enter into a pre-inheritance contract, in which one or more protected heirs (children) gives up, or defers, some or all of their future inheritance in favour of another person(s).

It is possible to see such a pact operating in a variety of different circumstances.

In the case of a family with children from a previous relationship, a child could agree to defer taking up their inheritance until the death of the surviving partner who could then continue, for instance, to remain in the family home.

In such circumstances, children from both within and outside of the relationship then benefit from an inheritance as part of a more global settlement for division of the estate of the wider family.

In other circumstances the pact would enable grandparents who wish to favour their grand-children over their own children, which they could do through a pacte successoral.

In other cases it may also be suitable for the transfer of a family business to a particular successor.

Given the serious nature of such a pact, it is obligatory for the child(ren) to have their own notaire, who would provide them with independent, personal advice.

This change of law is operative from 1 Jan 07. It remains to be seen how popular it becomes. Minors are expressly not permitted to sign such a pact.

The taxation implications of such an action would also need to be carefully weighed, as it is likely to result in an increased liability to inheritance tax to inheritors.