The Child Receives the Annuity, but the Parent Carries the Tax

A pre-1992 family policy can split the benefit, withholding and tax burden across different hands.

Imagine an annual statement arriving for an annuity that benefits a grandchild. Wage tax has been withheld. The remaining money is intended for the child, yet the income belongs in a parent’s box 1 return.

That is the tension in a Belastingdienst Knowledge Group position published on 25 September 2026. It concerns payments from a Pre-Brede Herwaarderingslijfrente, an annuity governed by the Dutch regime that applied before 1992, where a minor child or grandchild receives the benefit.

Under this arrangement, the payments are allocated to the parent with the highest personal earned income. The payer also withholds wage tax.

It sounds like a narrow tax question. Its wider lesson is that ownership, benefit, cash and tax can follow different people inside one family.

An old contract with current consequences

The age of the policy matters. Pre-Brede Herwaarderingslijfrenten belong to a different regime from annuities created under current income-tax rules. Their treatment remains shaped by historic provisions preserved through transitional law.

That makes the original contract more than old paperwork. The policy date, endorsements, beneficiary wording and later changes can still determine the current tax result. A current provider label or a family description rarely tells the whole story.

The Knowledge Group treats the payments as taxable periodic benefits under article 3.100 of the Wet inkomstenbelasting 2001. For the allocation between parents, it applies a historic rule through the current box system.

The comparison uses box 1 income, excluding taxable owner-occupied-home income and income from assets made available to another person or entity. The parent who appears to earn more in ordinary family conversation may therefore differ from the parent identified by this tax calculation.

Classification comes first. This outcome belongs to a particular type of pre-1992 policy and its transitional regime.

Three different tax moments

The annual payment creates the first tax moment. The provider withholds wage tax, while the annual return reconciles the gross payment, the withheld amount and the parent to whom the income is allocated.

The family arrangement can create a second question. Granting a child rights to payments, changing a beneficiary or transferring a policy right may carry gift-tax consequences. The legal arrangement and the value transferred shape that part of the file.

For 2026, a grandparent may give a grandchild €2,769 under the annual gift-tax exemption. Gifts from the same donor are added together during the calendar year, and partners generally count as one donor.

Where a return is required for a 2026 gift, the Belastingdienst must receive it before 1 March 2027. For grandchildren and further descendants, gift tax is 18% on the taxable amount up to €158,669 and 36% above that amount.

The value of a right to future annuity payments can differ substantially from the cash paid in one year. That distinction matters when little or no large sum visibly moves through a bank account on the date of the family arrangement. The published position does not calculate the value of a specific policy right.

The household bears the mismatch

Return to the family receiving that annual statement. The money may be reserved for school fees, future housing or the child’s savings. The parent carrying the box 1 income may have no intention of spending it. Still, that parent’s final income-tax position reflects the annuity.

Withholding softens the immediate burden, but the final outcome may require more household cash. For an entrepreneur, that pressure can affect salary expectations, dividend timing or the cash left outside the company.

Here, private administration meets business governance. Company money should not quietly become the answer to a family tax bill without a conscious decision. A director-major shareholder may experience the company and household as one economic life, but the legal and accounting boundaries remain real.

The useful question is simple: what are we promising to the child, what tax burden sits with the parent, and which cash source will carry the difference?

That question is more useful than treating the word gift as though it has one tax meaning and one payment date.

A coherent family record

A sensible review begins with chronology rather than tax software. When was the policy concluded? What did the original terms say? Which endorsements followed? When did the minor acquire an entitlement, and what changed at that point?

Then comes reconciliation. Gross payments, wage tax withheld, the annual provider statement, bank movements and the income-tax return should describe one consistent arrangement. Where different names appear, the records should explain why.

Difference is not itself an error. An unexplained difference is where avoidable trouble begins.

The gift-tax question belongs alongside this work, but in its own file. Annual income-tax allocation concerns recurring payments. Gift tax concerns the value transferred and the relationship between donor and recipient. Each follows its own calculation and calendar.

Old financial products rarely become difficult because families acted carelessly. They become difficult because documents, people and rules age at different speeds.

A grandparent sees provision. A child sees a future benefit. A provider sees a policy and a withholding duty. The tax return sees statutory attribution. Good governance allows all four perspectives to coexist without pretending they are identical.

The September position gives a clear answer for one historic-policy arrangement. Its broader lesson is quieter. Before a family allocates the benefit of an old policy, it needs to understand who carries the income, the reporting and the cash consequence.

Generosity remains generosity. It works better when the administration respects where the tax actually lands.

The data, sourcing, and analysis behind this article were conducted by Linda Pavan Geraedts. AI was not used to identify sources, build the factual basis, or produce the analytical judgment contained here. AI was used only as a drafting aid. The final English text was personally reviewed, edited, and approved by Linda Pavan Geraedts before publication.

References

• Standpunt gepubliceerd over de belastbaarheid van termijnen van Pre Bre Herwaarderingslijfrente in geval van schenking aan minderjarig (klein)kind | Kennisgroepen Belastingdienst
• Belastingdienst Kennisgroepen - Income-tax attribution of legacy annuity payments to a minor
• Belastingdienst - Why the policy’s historic regime still controls the result
• Belastingdienst - Gift-tax exposure and annual thresholds for a grandparent’s gift
• Belastingdienst - Gift-tax rates and filing calendar for 2026 transfers
• Belastingdienst - Filing deadline for a gift-tax return
• Belastingdienst - When a gift-tax return is required
• Belastingdienst - Gifting a life-insurance policy or benefit