If you sell your property while you are still alive, you can relieve your children of inheritance tax. This is how families should do it.
Many property owners would like their house or apartment to remain in the family. But with the current high prices, inheritance can be expensive. However, there is a way out of the tax trap: one gift during lifetime. Because the tax allowance for gifts can be used every ten years – instead of just once as with inheritance.
Giving away a property instead of inheriting it – in five steps
Any child can from any parent tax free inherited 400,000 euros. Anything beyond that is taxable. With high house and apartment prices, a significant sum can quickly accumulate. The Geldratgeber Finanztip therefore recommends dealing with the topic at an early stage real estate gift to deal with.
Step 1: Discuss in the family
Talking about the death of a loved one is difficult for most families. But if you want to avoid arguments and money worries in the family, important questions should be clarified as early as possible.
Perhaps one of the children would like to go to the property of parents move in? Or is there another person in the family who is interested? Under certain circumstances, the offspring has given the high real estate prices and rising interest rates I don’t have the financial means to buy a property myself anyway.
Homeowners can gift their property to anyone, including nephews, nieces or siblings. But then usually gift tax due because the allowance for such relatives is only 20,000 euros.
Your own retirement should also homeowner plan with foresight: When donating, you can lifetime right of residence arrange. With a so-called usufruct The property can also be rented later. For example, accommodation in a nursing home can be financed.
Step 2: Determine the market value
Before families tackle a gift, it is best to appraisal catch up. The recipient may have to submit this later to the tax office when it comes to determining the gift tax goes.
That Tax office only recognizes the report if it comes from a publicly appointed and sworn real estate expert – this is a protected designation, and only such reports are considered independent and impartial.
Step 3: Plan the gift
Once the value of the property is certain, homeowners can prepare the donation. A notary will plan this in detail. The costs for a notary are around one percent of the property value.
The same applies to donations allowances as with inheritance: 400,000 euros per parent can be given away tax-free to each child. The case is simple when father and mother own a house worth 800,000 euros equally. Everyone gives their half tax-free to their child.
Would the family focus solely on the Legal succession left, the daughter would later have to pay inheritance tax. Because if a spouse dies, the last surviving spouse and the daughter would each inherit half, i.e. both 200,000 euros. If the mother then also dies, the daughter inherits a total of 600,000 euros. This would put her 200,000 euros above her allowance. She would have to pay eleven percent tax on this amount, i.e. 22,000 euros.
who sole owner is, the property can too gradually transferred: First the child gets one half as a gift and then ten years later the other half – all tax-free. The exempt amount can be exhausted every ten years. With a property worth 800,000 euros, the child saves 60,000 euros in inheritance tax.
Step 4: The notary completes the donation
A property can only be purchased with a notary notarized contract. A lifelong right of residence or usufruct for the parents can also be anchored there. This is also another way of saving on gift and inheritance tax, because a right of residence reduces the value of the property.
Parents should also ensure justice among the children if the house should not be given to all together. Families can contractually agree that the child receiving the gift will later inherit less than the others. It is also possible to agree on a severance payment for the siblings.
In any case, the outgoing should be empty children sign a statement that they are on waive any claims to the house. Otherwise, they could claim compensation if the parents die earlier than ten years after the donation.
Finanztip advises parents who give gifts to also think about their own financial security: with a contractually anchored one right of recovery If necessary, a gift can be reversed – for example, if the parents unexpectedly find themselves in financial difficulties. Then they become owners again and can mortgage the house at the bank or even sell it.
Step 5: Check the tax assessment
If the donation is sealed, the notary reports this to the tax office. Then the recipient gets one tax notice. If everything went right, the gift tax should be 0 euros.
Sometimes, however, the tax office overestimates the value of the property. According to the tax assessment, gift tax would then apply. In this case, the gift recipient should objection against the tax assessment put in Finanztip advises enclosing the report of the real estate expert – the tax office must recognize this report.
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