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What is a legacy? Molitor Avocats answers your questions!

    In a world afflicted by numerous upheavals, many of us feel that it is necessary to support such organisations as Médecins Sans Frontières (MSF). MSF responds to all manner of major crises around the world, making no distinction between one human being and another.

    Support for such organisations, motivated by solidarity, can take many forms, including both one-off donations and regular donations. These make it possible to assist thousands of people affected by serious illnesses, pandemics, civil wars, malnutrition, natural disasters, etc.

    Another option is to leave a legacy in one’s will. This questionnaire is intended to supply some basic information about what that involves, so that you can ensure that a legacy will have the greatest possible impact while at the same time avoiding difficulties, both for MSF and for you and your nearest and dearest.

    How to leave a legacy?

    In practical terms, a legacy is like a gift which is provided for by a clause in a will and will take effect only upon the testator’s death, when the will is opened.

    The different types of will

    There are various types of will. The best-known is the holograph will, which is written entirely by hand by the testator, who also dates and signs it. It may then be kept at home, in a safe deposit box or even in the archives of a notary, who in that case will draw up a deed of deposit.

    An authentic will is dictated to a notary and written out by them in the presence of two witnesses, then entered in the register of last wills and testaments administered by the Registration Duties, Estates and VAT Authority. There is also a third type of will, but it is little used.

    The different types of legacy

    A legacy may be specific, partial or universal.

    • Typically, a specific legacy applies to a specific item of property or a sum of money.
    • A partial legacy applies to a set of items of property (e.g. ‘I leave my furniture in my flat at (address), Luxembourg, to …’).
    • A universal legacy applies to the entire property left by the testator at his/her decease: ‘I leave my property to Mr X, born on, residing at ...’.
    Are legacies subject to inheritance tax?

    Yes. Inheritance tax is payable on legacies, although the rate payable may depend on the legatee’s relationship with the deceased and the value of the legacy.

    Médecins Sans Frontières is a Luxembourg-based non-governmental organisation recognised by the Ministry of Foreign and European Affairs. Organisations that have been so recognised or registered as charities pay a reduced rate of inheritance tax.

    Is it possible to ensure that the organisation receiving the legacy will not have to pay inheritance tax on it?

    Yes. If the will stipulates that the chosen beneficiary is to receive the legacy ‘nett of inheritance tax, which shall be charged to the estate’, the recipient will not be required to pay inheritance tax, enabling it to receive the full amount willed to it.

    Are there any formalities that a registered association has to complete in order to receive a legacy?

    If a legacy exceeds EUR 30 000, the association must seek the approval of the Ministry of Justice and submit documentation to it comprising a copy of the will, a copy of the affidavit (identifying the heirs) and a copy of the declaration of succession with evidence that it has been submitted to the Registration Duties, Estates and VAT Authority.

    What preliminary steps should you take before leaving a legacy to MSF in your will?
    1. Check that you have not already had a will registered with a notary or that you have not forgotten a previous will which is still in your safe deposit box or at your office. Serious difficulties can arise if successive wills are found to contradict one another, to lack coherence or even to be difficult to interpret. To ensure that part of your estate or part of the money that you wish to leave to such organisations as MSF is not swallowed up by legal proceedings, it is vital to put your affairs in order by modifying, revoking or destroying a previous will so that you can reconsider in full what should happen to your assets after your death and leave behind a coherent picture. It is recommended that you check your will whenever a major event occurs in your family life (death of a family member, divorce, birth, etc…). Professional lawyers such as notaries and advocates will always be very happy to help you with this, in order to avoid any later complications.
    2. Consider the structure of your family. It is important to anticipate the risk of conflict that could arise from the execution of your will, for example if the will violates the rules automatically reserving part of your estate for particular heirs (your children), which could lead to legal action with the aim of reducing legacies. Or, if you have a spouse who may outlive you, your will may conflict with the rights to your assets that he/she automatically enjoys by law. If you fail to check these points, you may harm such family members and indirectly cause one or more cases to be brought before the courts. It may be important to discuss your intentions with your family in order to avoid any risk of legal action.
    3. Check what personal assets you have. Sometimes, on a generous impulse, people leave legacies that give rise to serious complications because they exceed what is technically referred to as the ‘freely disposable part of the estate’. That term refers to the percentage of your assets that you can give to whoever you like. For example, if you have two children who, by law, have an automatic right to inherit part of your assets, the disposable part of your estate will be 1/3 of the total estate. If you leave a building as a legacy, that may cause serious complications and generate unexpected costs.
    4. Word your will clearly and precisely. Always bear in mind that the people who will be called upon to read and understand your will may have difficulty in putting themselves in your place and that they will probably be trying to do so many years after it was written. Do not forget, therefore, that clarity and coherence are overriding requirements, while anticipating that some situations may change: for example, if you leave a legacy of EUR 5 000 to ‘a child welfare organisation’, that will be far too vague to make it possible to ascertain what organisation you meant by it. It is preferable to identify clearly the organisation referred to, while allowing for an alternative beneficiary to receive the legacy if the organisation that you named has ceased to exist by the time of your death (which often happens in the case of local or national associations).
    What type of legacies are the most effective?

    Generally speaking, MSF tries to make it clear to potential benefactors that the legacies which it is most grateful to receive are those that take the form of sums of money and are not earmarked for a specific purpose.

    That means that the generous giver does not impose any particular conditions requiring the money to be used to promote a particular cause, to assist a particular country or to provide a particular category of assistance.

    Why are pecuniary legacies which are not earmarked for a specific purpose the most effective type of legacy?

    MSF has no way of foreseeing exactly when it will receive money left to it in a will because, by definition, the transfer depends on the death of the testator and the point in time when it is possible to liquidate the estate and execute the will. Because of this, MSF has to manage its affairs on a long-term basis, while constantly responding to emergencies.

    A legacy of a sum of money enables MSF to limit the indirect costs and the administrative effort involved in receiving it. Let us suppose that somebody were to leave the usufruct of a building to a member of his or her family and the bare ownership to MSF. A notary would have to draw up an inventory of the property, which would then have to be supervised to ensure that it was maintained in good condition, or perhaps major repairs to it would become necessary over many years, etc. MSF’s teams must be able to concentrate on their core tasks with a minimum of administrative constraints and costs.

    A legacy which is not earmarked for a specific purpose will allow MSF to use the money in the way it considers best. Accordingly, MSF will be able to provide assistance to those who urgently need it at the time when the funds become available – that is, to do what MSF’s teams customarily do every day all over the world.

    Of course, this is just a preference: it does not imply any judgement regarding the wishes that our generous donors are always free to express.

    Although these questions and answers are not exhaustive, we hope that they will help you to make an informed choice and that they will set your mind at rest if you were thinking of supporting MSF in this way. The humanitarian commitment of MSF’s teams is more necessary than ever at a time when war, political instability and a wide range of disasters are afflicting many parts of the world, rendering its work on the ground vital.

    François Cautaerts, avocat à la cour-Associé, Molitor Avoats à la cour sarl.


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    François CAUTAERTS
    Barrister and Associate
    Molitor Avocats à la Cour s.à.r.l.