Inheritance tax rate (ITCMD) at 20% seems to be a reality ever closer. Not only by the government’s present proposal a few months, but now officially a proposal from the states is on the table since the 20th of this month.
The strong increase in revenue on gifting (53.8% higher than the same period 2014 in São Paulo) shows that many families are front running this scenario. On one side will be much more expensive to do estate planning or probate proceedings in Brazil, on the other Brazilian culture to always left the matter for later, often beyond the time required for an orderly planning, might change making families seek more sophisticated solutions to reduce or avoid the higher taxation.
Although the tax increase is sufficient reason for this search, we still see a difficulty of the patriarchs and matriarchs to execute a plan: a lack of knowledge. A very common thing we hear is the loss of control of the property, or who fear that the heirs do something, etc. This is somewhat surprising because virtually any form of estate planning, international or done in Brazil, maintains control in the hands of patriarchs and matriarchs, but there is still a great suspicion about the use of structures and service providers that are widely used globally by citizens of other nations.
A problem that may stem from this lack of planning and affecting more families than we realize is that the very incidence of ITCMD in the middle of a death process of a family, which is often the family provider, puts the heirs in sticky situation financially speaking, they may lack resources to pay for the tax.
Two articles published in the Folha newspaper go over these issues, follow the links below (Portuguese):