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Give away or bequeath real estate?

As a property owner, you may often wonder whether you should leave your property to your heirs or give it away during your lifetime. Giving away property can sometimes have advantages. However, not everyone saves the same amount. That is why property owners should know when and how giving away property is worthwhile.

Whether it's a gift or an inheritance, the tax authorities will ask you to pay in both cases. And not only that, the tax rate and tax allowances are the same in both cases. When giving gifts or bequeathing assets, they depend primarily on the degree of kinship of the beneficiary. For example, spouses are always entitled to an allowance of €500,000, children receive €400,000, and the scale continues down to €20,000 for friends, siblings, and unregistered partners. The remaining portion 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 the property they use themselves to their spouse completely tax-free, regardless of its value. This rule also applies to both gifted and inherited property.

Gifting as a tax-saving model?

So how can you save taxes by making a gift? In some cases, this is possible, whereby two aspects play a role. On the one hand, the tax allowances mentioned above for gifts do not apply just once, but every ten years. This means that you can gift your property "in installments" and ensure that the transferred value remains below the exemption limit. in this way, it is possible to transfer the property without any tax deductions over a period of decades, although this requires very long-term planning, which is rarely realistic. A second aspect is that an early valuation can have tax advantages. The value of the property could rise significantly before you die, which would mean higher inheritance tax for your heirs.

Avoid inheritance disputes and ensure that the property remains in the family

While tax savings are more of a special case, the decisive arguments in favor of a gift are to be found elsewhere. One key motive is that you want to ensure that the property remains in the family in the long term. If you leave your property to your heirs, it is quite possible that after your death, the community of heirs will not be able to agree on how to divide the inheritance. You can set out your wishes in detail in a will, but this does not guarantee that there will be no inheritance disputes. Nor can it prevent a situation where your heirs have to sell the house in order to pay out all the beneficiaries and pay inheritance tax. A gift often offers a better alternative here. You can attach special conditions that exclude the sale of the property. It is also advisable to secure a right of usufruct for the property. The house then belongs to the recipient, but you can continue to live there for the rest of your life, and even if you no longer wish to live there yourself, you can rent it out.

Would you like to know whether it is wiser to bequeath or gift your property in your case? Contact us! We will be happy to advise you.

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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 case.

Photo: © artisticco/Depositphotos.com
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