Advantages of Family Succession in Brazil – a comparison to Europe

After the death of a person, a process must start to allow the transfer of that person’s property to those who are entitled to receive them, who are the heirs or beneficiaries of the inheritance, er. family succession.

This process, however, may be different depending on the country where the death took place because each place has its own laws and specificities.

In this article, we are going to establish a comparison between the proceeding of family succession in Brazil and in some European countries, as well as highlight the advantages which Brazil offers for the succession process started in its territory.

Author: Lucas Gomes Furtado

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How much is the inheritance tax rate in Brazil and in Europe?

In most countries, after the death of a relative, it’s necessary for the heirs and beneficiaries to pay the inheritance tax for them to be able to inherit the property of the deceased.

In Brazil, the inheritance tax is named ITCMD (Imposto sobre transmissão causa mortis e doação) and must be paid whenever there is the transfer of goods or transfer of rights, in case of death or donation.

In our country, each federative state determines its inheritance tax rate and how it will charge it, but the percentage must not be higher than 8% of the market value of the property.

In other words, we can say that the inheritance tax rate in Brazil may reach a maximum of 8% on the value of the transferred property, in accordance with Brazilian law.

In comparison to this number, the reality in many countries in Europe is very different, as there are inheritance tax rates there that can reach high percentages.

For example, look at the following chart with the percentages that inheritance tax may reach in some countries in Northern Europe:

Country	Percentage
Belgium	80%
Germany	50%
Netherlands	40%
England	40%
Finland	33%

 

Other Northern countries, such as Sweden and Norway, have recently decided to abolish inheritance tax from their territories, much because of the already high tax burden that exists in these places.

Therefore, in an international context, it’s easy to realize how the inheritance tax in Brazil has a relatively low maximum rate, for a family succession.

How does the division of property work in these countries?

In many European countries, it’s common for local people to make a will in order to determine how the division of property must happen after their death.

If a person dies without making a will, however, the succession laws of that country must be followed.

In Germany, Finland, Belgium, and the Netherlands, the division of property happens in a quite similar way, and also in a similar way in comparison to the Brazilian rules.

Generally, the order of preference happens in degrees of kinship, and usually follows this order:

• descendants;
• parents, siblings, nephews, and nieces;
• grandparents, uncles and aunts, cousins. 

However, it’s important to mention that, when there is at least one alive relative of a lower degree, all the other possible heirs will be excluded from inheriting.

In Germany, the descendants are preferred over the others and should receive equal shares of the inheritance, alongside the surviving spouse, who is always going to inherit as they are considered legal heirs.

The exact share that the spouse will receive will depend on the matrimonial regime applied to the marriage with the deceased.

In Finland, the Netherlands, and Belgium, it is common for the surviving spouse to inherit the right of usufruct to the property of the deceased, while the children will receive the right of ownership to the same property.

This means that the spouse would have the right to freely use the property and receive its fruits, but the children are the ones who become the legal owners of the property.

It’s also important to highlight that, if the couple was not married, the civil partnership must have been correctly registered for the surviving partner to have at least some right to inherit.

That is because, in most countries, officially registered partners have the same rights in comparison to spouses.

Besides that, if there are no descendants and spouses, other biological relatives will be entitled to inherit, such as parents and siblings, and the closest relatives will exclude the most distant ones from inheriting.

Family Succession in other countries

In Sweden, it’s common for the surviving spouse to receive all the property from the deceased, and their descendants will only inherit this property after the death of the surviving spouse.

On the other hand, in England and Wales, the division of property process will depend on when the death happened due to a law issued in 2014, which considerably altered the way that the transfer of goods happens without a will.

To sum it up, if the death has occurred after this date, the surviving spouse or partner is entitled to the equivalent of 270 thousand pounds, plus half of the amount exceeding this limit. Also, the remaining amount must be divided among the descendants, in equal shares.

If the total value of the property of the deceased is less than 270 thousand pounds, the spouse or partner will inherit everything, and the descendants will not inherit anything.

Similarly, if there is no surviving spouse or partner, the children will inherit everything, and if there are no children, the spouse or partner will inherit the totality of the property.

Are there any obstacles or prohibitions to inheriting in these countries?

In Brazil, there are occurrences where the heirs may lose their right to inherit, in specific situations, such as unworthiness, disinheritance, and the existence of debts.

An heir will be considered unworthy if they commit any act against the life or the honor of the owner of the estate, or even against their freedom to make a will. For this to happen, an unworthiness lawsuit must be filed in court.

Besides that, an heir can also be disinherited for the same situations mentioned above, or if they physical offenses, or serious injury, have illegal relations with a stepparent, or fail to assist their ascendants in case of disease.

On the other hand, heirs may also be prevented from inheriting in case of debts made by the deceased, if the payment of these debts uses all the property left by them and there is nothing left to inherit.

In European countries, these obstacles that prevent heirs from receiving their share of the inheritance also exist in similar ways.

In Germany, for instance, the situations that prevent them from inheriting are mostly identical to those determined by Brazilian law.

The same occurs in the Netherlands and in Belgium, where an heir can also be considered unworthy if they have lost, hidden, destroyed, or falsified the owner of the estate’s will.

In the United Kingdom, there is a law named the Forfeiture Rule, which precludes a person found guilty of a crime from benefiting in any way from that crime, which includes unworthy or disinherited heirs.

Another peculiarity in the United Kingdom is that, if a couple is not married and one of them dies, the surviving partner must file a lawsuit to claim their right to inherit, which is not automatic. 

What are the advantages of starting a family succession in Brazil?

When we stop to think about the details, it is noticeable that there are many advantages when it comes to starting a family succession in Brazil, which may be a decisive factor for this choice.

As it was mentioned before, the law determines a maximum tax rate of 8% for the payment of ITCMD on the market value of the property of the deceased, and this percentage is considered low compared to other countries for family succession.

This aspect in itself can be seen as a great benefit for the heirs, even if the deceased left a considerable amount of property because they will pay much less inheritance tax than they would in many European countries.

Also, Brazilian law also allows for any person to get a private pension plan, which works as a sort of complementary pension in order to guarantee better sustenance after retirement.

In terms of succession, private pensions can also be seen as an advantage because the pension holder, or the person who chooses to get a plan, will be able to determine the division of these values after their death.

In other words, the holder will establish who the beneficiaries of that money are going to be, and they can be any person – not necessarily their legal heirs.

In addition, most federative states do not charge ITCMD on the amount left in private pensions because this amount is not a part of an inheritance and does not need to be included in the inventory proceeding.

Actually, the amount of money left in private pensions could be received by the beneficiaries irrespective of the course or the conclusion of the inventory proceeding.

Benefits to start a family succession in Brazil

Therefore, these benefits allowed by the legislation in regard to private pensions can also be considered an advantage of starting a family succession in Brazil.

Another interesting possibility to be considered is the creation of a holding company by the owner of the estate.

In this kind of company, it is possible to plan the management of property and/or other companies by the company partners.

There, particular goods belonging to natural people will be gathered and start belonging to the holding company, although still managed by the partners.

An advantage of holding companies is having more safety and better planning of the property that belongs to it, which will also be divided according to the owner of the estate’s wishes, after their death.

Another positive aspect of this kind of company is related to the taxation on the holding, which is usually considerably lower than what the law determines on natural people.

In both scenarios, a holding company allows for a less expensive, less bureaucratic, and more simplified way to conduct the succession family process, as everything has been planned in advance.

Therefore, because of such benefits allowed by Brazilian legislation, bringing property from other countries to Brazil with the intention of planning a family succession may be an attractive decision for whoever owns property abroad.