BRAZIL Law and Practice Contributed by: Daniel Zugman and Frederico Bastos, BVZ Advogados | Bastos, Bari, Vilela e Zugman
In practice, succession planning is commonly imple - mented through lifetime gifts, usufruct arrangements, family holding companies, shareholders’ agreements and wills. These mechanisms facilitate the orderly transfer of wealth, preserve governance and reduce risk of disputes among heirs, while remaining subject to Brazil’s forced heirship rules. 2.4 Marital Property Brazilian law recognises different marital property regimes, each producing distinct consequences for asset ownership during marriage and upon divorce or death. • Partial community property ( comunhão parcial de bens ) – this is the default regime. Assets acquired for consideration during the marriage are jointly owned, while assets owned before marriage and those received by gift or inheritance remain sepa - rate. • Full community property ( comunhão universal de bens ) – as a general rule, all present and future assets become jointly owned, subject to limited statutory exceptions. • Contractual separation of property ( separação con- vencional de bens ) – each spouse retains exclusive ownership, administration and disposal of his or her own assets throughout the marriage. • Mandatory separation of property ( separação obrigatória de bens ) – this regime applies in spe - cific situations established by law, such as marriag - es involving elderly individuals, although Brazilian case law may, in certain circumstances, recognise the sharing of assets acquired during the marriage. • Final participation in acquisitions ( participação final nos aquestos ) – each spouse manages his or her own assets independently during the marriage, but upon divorce or death each may be entitled to share in the net assets acquired by the other during the marriage. The chosen marital property regime directly affects succession planning, divorce, gifts, family holding companies and corporate reorganisations. As a gen - eral rule, the transfer or encumbrance of real estate requires the other spouse’s consent, except where full separation of property applies or another statu - tory exception exists.
Brazil recognises prenuptial agreements, which must be executed by public deed before the marriage. Changes to the marital property regime after marriage are also permitted but require prior judicial approval and must not jeopardise third parties. A proposed reform of the Civil Code, still ongoing in the Brazilian Congress, may modify certain rules governing marital property regimes and spouses’ succession rights. 2.5 Transfer of Property In Brazil, the transfer of property during life ( inter vivos ) or on death ( causa mortis ) may have different effects on the recipient’s tax basis for income tax purposes, depending on how the transfer is structured. Under Article 23 of Law No. 9,532/1997, gifts and transfers on death may be made either at the asset’s historical cost or at its fair market value. If the transfer is made at historical cost, no capital gains tax is triggered for the transferor, and the recipi - ent inherits the transferor’s tax basis (carry-over basis). Alternatively, if the transfer is made at fair market val - ue, the difference between the fair market value and the historical cost is subject to capital gains tax in the hands of the transferor, while the recipient receives a stepped-up tax basis equal to the fair market value. Regardless of the income tax election, gratuitous transfers are generally subject to inheritance and gift tax (ITCMD), which is normally assessed on the fair market value of the transferred asset under the appli - cable state legislation. Onerous transfers of real estate may also be subject to municipal real estate transfer tax (ITBI). The ability to choose between historical cost and fair market value is an important estate planning tool, particularly for highly appreciated assets, as it allows taxpayers to balance the immediate capital gains tax cost against a higher tax basis for future disposals. 2.6 Transfer of Assets: Vehicle and Planning Mechanisms Brazil does not provide a broad tax exemption for intergenerational transfers. Estate planning therefore focuses on reducing future tax costs, preserving con -
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