Ruling secures tax refunds for beneficiaries and reinforces the legal separation between inheritance and private retirement assets
Brazil’s Supreme Federal Court (STF) has upheld its 2023 ruling that state governments may not levy ITCMD — the tax on inheritance and gifts — on amounts received by beneficiaries of private pension plans (VGBL and PGBL) following the plan holder’s death.
In a unanimous decision, the Court denied the State of Rio de Janeiro’s request to limit the effects of the ruling, meaning that taxpayers may claim refunds for ITCMD amounts previously paid on these benefits.
The Case and STF’s Legal Reasoning
The original ruling came in December 2023, in Extraordinary Appeal (RE) No. 1.363.013, which was reviewed under General Repercussion Topic 1,214. The STF declared unconstitutional the provisions of Rio de Janeiro State Law No. 7,174/2015 that subjected VGBL and PGBL private pension plans to ITCMD.
The Court reaffirmed that these pension plan proceeds are not part of the deceased’s estate, but rather represent insurance-like benefits, with a contractual beneficiary clause — a distinction also recognized by the Superior Court of Justice (STJ) and other state courts.
In the latest ruling, Justice Dias Toffoli, the case’s rapporteur, emphasized that both federal law and existing jurisprudence support this position. He cited:
- Article 794 of the Civil Code, which states that life insurance does not form part of the estate;
- Article 79 of Federal Law No. 11.196/2005, which allows the withdrawal of private pension funds without probate.
Rejection of the State’s Request for “Modulation of Effects”
The State of Rio de Janeiro had requested modulation of effects — a mechanism that would limit the retroactive application of the decision to avoid refund obligations. The state claimed that refunding ITCMD collected in past years could harm its fiscal recovery program and disrupt public services.
The STF rejected this argument, ruling that the unconstitutionality of the tax must have full retroactive effect. As a result, taxpayers are entitled to claim refunds for all ITCMD paid on private pension distributions — not just future cases.
Implications for Taxpayers and Estate Planning
This decision consolidates a nationwide legal precedent: states cannot impose ITCMD on benefits received from VGBL and PGBL pension plans. Key consequences include:
- ✅ Beneficiaries may now seek tax refunds via administrative or judicial channels;
- ✅ States and the Federal District must amend their tax laws to eliminate unconstitutional ITCMD rules on private pensions;
- ✅ The ruling confirms the legal and tax distinction between inheritance and pension benefits, strengthening the case for private pension plans as tools for estate and succession planning.
Final Thoughts: Legal Certainty for Beneficiaries and the Private Pension Market
The STF’s decision provides legal clarity and fiscal fairness for beneficiaries, reinforcing the view that private pension funds are not inherited assets, but contractual entitlements.
For lawyers, financial advisors, and taxpayers, this ruling underscores the importance of strategic succession planning — especially when choosing investment vehicles like VGBL and PGBL to protect heirs from unnecessary tax burdens.