Estate Planning for Expats in the Netherlands

Your estate is essentially delayed income. If you've inherited it, your beneficiary might have earned it and postponed using it for personal consumption, leaving it to you. Most of us don't inherit and delay consumption. Delayed consumption of past earnings can manifest in various forms: a home, an investment portfolio, a healthy bank balance, a pension fund, and more. So, your estate could be what your parents left you, what you need for your family, and what you'll leave for the future after you.

We've noticed that shockingly few of our clients, from all walks of life, have a clear idea of why they save or invest. This lack of planning stems from not answering the fundamental question first.

Tailoring Solutions to Your Needs

If you rely on part of your estate for your income, you wouldn't want to tie that portion up in, for example, a house or an annuity that you can only access from a certain pension age onwards. Conversely, when saving or investing for retirement, you don't need all your money on day one, so you should stagger the release of capital and convert it into income over time.

When you have a clear timeline for when you'll need parts of your estate, you can start considering product solutions. Sometimes, products with the best expected returns come with "fine print clauses" that severely limit flexibility. We've helped clients unwind such products, even if it's messy, as it might still be the best option available. So, it's not just about pricing; other product terms also play a crucial role in your plan.

Directing Your Estate as You Desire

Are you saving income for yourself for later in life? If you anticipate leading a comfortable life and having enough for yourself, does it make sense to start transferring your wealth to the next generation? Conversely, if you're not prepared for your inheritance, much of the benefactor's intentions might end up with the Tax Authorities instead of the intended recipients. Surely not what was intended.

Many international clients plan to retire in their home countries. However, life sometimes throws unexpected challenges, and does that mean your estate should suffer due to your former intentions?

Structuring your estate to avoid unnecessary taxation and, where necessary, improve legal efficiency is something you should periodically review. Your financial planner can help you determine the size or range of financial commitments for different phases of your life and what products are available to achieve that. The next step is discussing with your tax consultant; since the financial planner has already done a lot of groundwork, your tax consultant doesn't need to start from scratch. Then, your lawyer or notary, as the case may be, gets involved to ensure solutions are properly executed. Just like with products, all professionals involved are aware that situations akin to "Hotel California" must be avoided to the extent permitted by current legal and tax expectations.

What Should You Do Now?

It starts with updating or creating your first financial plan to align your hopes, dreams, risks, and remedies with your financial situation. Once you've considered how to structure it to minimize income tax and inheritance tax leakage, you can take the next steps.

Today's financial markets may look inflated. If you don't need your invested money for another 12-15 years, it probably won't matter much if a downturn occurs. So far, we've never seen longer recovery periods. But if you truly need it sooner, observing from the sidelines for a while could also be a good alternative.