Give away or bequeath a property?

As an owner, you may often think about whether you should bequeath your property or give it away during your lifetime. Giving away can sometimes have advantages. However, not everyone saves the same amount. That's why property owners should know when and how it pays to make a gift.

Whether it's a gift or an inheritance - the tax authorities ask you to pay in both cases. And not only that, the tax rate and tax allowances are the same in both cases. They depend on the degree of kinship of the beneficiary in the case of both gifts and inheritances. For example, an allowance of 500,000 euros applies to spouses in all cases, 400,000 euros for children, and the scale continues up to 20,000 euros for friends, siblings or even non-registered partners. The remaining part of the property value is subject to a tax rate of between 7 and 43 percent - depending on the value of the property. An important exception: Married owners can transfer their owner-occupied property to their spouse completely tax-free, regardless of how much it is worth. This rule also applies equally to properties that are given away or inherited.

Gift as a tax-saving model?

So how can you save tax by making a gift? In some cases this is possible, whereby two aspects play a role. Firstly, the above-mentioned tax allowances for gifts do not just apply once, but every ten years. You can therefore give away your property "in installments" and ensure that the partial value transferred in each case is below the tax-free amount. In this way, it is possible to transfer over decades without a tax deduction, although this requires very long-term planning, which is rarely realistic. A second aspect is that an early valuation can have tax advantages. By the time you die, the value of the property could have risen sharply, which would mean that your heirs would have to pay higher inheritance tax.

Avoid inheritance disputes, ensure the property remains in the family

While tax savings are more of a special case, the decisive arguments for a gift are to be found elsewhere. A decisive motive: you want to ensure that the property remains in the family for the long term. If you bequeath, it can easily happen after your death that the community of heirs cannot agree on the division of the inheritance. You can record your wishes in detail in a will, but this cannot prevent an inheritance dispute with certainty. Nor can it prevent the possibility that your heirs will have to sell the house in order to pay out all the beneficiaries and pay inheritance tax. A gift is often the better alternative here. You can attach special conditions to it that preclude the sale of the property. It is also advisable to secure a usufruct right for the property. The house will then belong to the recipient, but you can live in it for the rest of your life, and even if you no longer wish to live in the property yourself, you can rent it out.

Would you like to know whether it is wiser in your case to bequeath or give away your property? Get in touch with us! We will be happy to advise you.

Do you need more information?

https://www.bmjv.de/DE/Themen/FamilieUndPartnerschaft/Erbrecht/Erbrecht_node.html

https://www.test.de/Erbrecht-Zehn-Irrtuemer-rund-ums-Erbe-5398189-0/

https://de.wikipedia.org/wiki/Erbe

Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.

Photo: © artisticco/Depositphotos.com