Gift box in the shape of a house made of brown cardboard. - ©© BrianAJackson/Depositphotos.com

Settling your estate while you're still alive: gifting real estate?

Have you ever thought about how you want to pass on your property? Will your heirs be able to afford inheritance tax, or will they perhaps have to sell the property? Is there a risk of disputes among your heirs? In order to find a solution that suits you, it is advisable to settle your real estate inheritance early, for example through a gift.

Settling your estate during your lifetime offers various advantages and allows you to organize your estate according to your wishes and avoid potential disputes among your heirs.

Gifts

In a gift, the owner transfers the property to one or more heirs during their lifetime. This simplifies the transfer process, as the property does not become part of the actual estate and therefore does not have to go through a lengthy and costly inheritance process.

Gift tax

Taxes may be payable when real estate is gifted. The amount of tax depends on the value of the property and the recipient's allowance. The amount of the allowance in turn depends on the relationship between the parties. Gift tax rates are staggered and increase with the value of the gift. The exact tax rates can vary depending on the state, but are generally between 7 and 30 percent. Seek advice from an experienced tax expert in your area.

The allowances

The following allowances apply in Germany:

Spouses and registered partners: €500,000
Children and stepchildren: €400,000
Grandchildren and great-grandchildren: €200,000
Parents and grandparents: €100,000
Siblings: €20,000
Other beneficiaries (e.g., non-relatives): $20,000

The value of the property

A local real estate agent can determine the current value of your property. They are familiar with the applicable procedures and take into account current developments in the real estate market that influence property values.

Protect yourself as the donor

However, it is important to note that regulating real estate inheritance during your lifetime can also present some challenges. As the donor, you should protect yourself, for example by having a right of reclaim contractually stipulated so that you can get the property back if your beneficiary becomes insolvent and is forced to sell the property. In addition, you can impose further conditions:

Right of residence
Right of usufruct
Prohibition of rental, resale, etc.
Obligation to care for the donor (also to protect against revocation by the state in the event of long-term care)

It is also advisable to seek professional legal and tax advice to avoid potential risks. For all questions relating to real estate, it is advisable to consult an experienced local real estate expert.

Are you unsure about the best solution for your inherited property? Contact us! We will be happy to advise you.

Notes

For reasons of readability, the generic masculine form is used in this text. Female and other gender identities are expressly included where necessary for the meaning of the text.

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: © BrianAJackson/Depositphotos.com

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