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Regulated Estate: Overwrite a house and save on taxes

Transferring a house to the future heirs ahead of time offers advantages for both sides: the recipient can save taxes, the donor secures himself. What you have to consider.

Regulated Estate: Overwrite a house and save on taxes
Regulated Estate: Overwrite a house and save on taxes

The parental home is more than just a property. Beyond the value of the building, it conveys security and security to those you grew up there. Fortunately, in the event of inheritance, residential property is given preferential tax treatment. But there are good reasons to pass your house or apartment on to the next generation while you are still alive. "It is a good feeling to have successfully arranged the succession for an important part of the assets," says Paul Grötsch, Managing Director of the German Forum for Inheritance Law e.V. An early donation, which is openly discussed with children and spouses, creates clear relationships. This avoids disputes among the heirs. Practical motives also play a role: administrative tasks are assigned to all children. Above all, families can save taxes if they give away real estate instead of bequeathing it.

Tax bonus with conditions

In the event of inheritance, the legislature has provided tax breaks for residential properties. Spouses can inherit an owner-occupied family home tax-free regardless of size and value. If a property is bequeathed to children, the tax exemption applies to a maximum of 200 square meters of living space. "Whether husband or child, for the tax bonus, the heir must live in the property for at least ten years after the inheritance," says the Munich specialist lawyer for inheritance law. During this time, he may neither rent nor sell a house or apartment or only use it as a second home. The heirs only benefit from the tax advantage if they move in immediately - no later than six months after they inherited the property.

Overwrite house: Exemptions for inheritance and gift tax

If you want to overwrite your house, it makes sense to exhaust all possible tax allowances - because only the amount above must be taxed. For example, you can save on inheritance tax if you overwrite the house during your lifetime. In the case of a “normal” inheritance, the spouse or registered partner can receive up to EUR 500,000 tax-free, and each child EUR 400,000. Inheritance tax is due for higher amounts of money or material assets. Although the same tax exemptions (usually) apply to a donation, they can be used up to the full every ten years.

Exception family home

But you also have other options to save on inheritance tax. Special rules apply if the gift is the property you use yourself. Married people are allowed to transfer the house to their partner for free (apart from notary fees), even if it is worth more than half a million euros. In the event of a divorce, bankruptcy of the recipient or if the recipient is the first to die, the parties involved can agree notarial recourse clauses. A little stricter rules apply to inheritance: the surviving spouse is always exempt from tax if he lives in the family's previous home for another ten years. Children inherit the home previously used by the testator tax-free, provided that they comply with the ten-year period and the living space does not exceed 200 square meters. Larger properties are proportionally subject to inheritance tax. However, all of this only matters if the allowances are exceeded.

Secure yourself when you overwrite the house

Some would like to give the youngsters a hand. However, the giver can also protect himself by asking for something in return, for example help with care. Or he reserves a right of residence. However, he is then not allowed to rent the house, unless the notarial contract expressly provides for this. "In the notary contract it should be clearly regulated in which rooms the right of residence exists, who bears which costs and whether the beneficiary may only live there with his family or leave the rooms to other people," explains Anton Steiner from the German Forum for Inheritance Law in Munich.

Ask a lawyer for advice

If you own a house, it is good to think about who you want to leave the house to early on. The house transfer offers you tax advantages during your lifetime. You can also avoid disputes among the heirs. However, since overwriting a house also brings with it some legal pitfalls, it makes sense to seek advice from a lawyer. The initial assessment is usually free of charge.

State supports donation

The tax office is generous when owners give something to their loved ones. If an owner-occupied property is transferred to the spouse or registered partner, there is no gift tax. In the case of a gift, a child has an exemption of 400,000 euros. This corresponds to the tax exemption in the event of inheritance. But with the donation, the tax allowances are granted every ten years. “It can therefore make sense to transfer a property piece by piece: for example 50 percent now and 50 percent in ten years,” advises Grötsch.

Overwrite and inherit the house

Overwriting part of the house and inheriting it in another part is another option. If you wait ten years after the transfer before you bequeath the house, you can make full use of the tax exemptions.

Alternative usufruct

The donor can secure more extensive usage rights with a usufruct. He can either be granted a lifelong right of residence or can keep the rental income when renting out the house. Then it is up to him to sign rental agreements or to increase the rent. He also pays the usual maintenance costs, such as garbage collection and water. The right of usufruct must be notarized and entered in the land register. The usufructuary can neither inherit nor transfer the right; it ends with his death at the latest.

Usufruct helps save

Income tax treats the usufructuary as a beneficial owner. He pays taxes on the rental income and can continue to write off the acquisition and production costs. He can also deduct the other expenses for the property as income-related expenses, provided he has borne them. Nevertheless, the model should be carefully considered. "The anticipated succession is not without risk," warns specialist lawyer Dr. Anton Steiner. Anyone who overwrites a house can no longer sell it or remodel it without a permit. Usufruct has another effect: it reduces the value of the gift because the recipient cannot use the property straight away. In some cases, it also enables a tax-saving transfer.

Calculation example

A widow owns a single-family house near Düsseldorf worth around 800,000 euros. Your daughter lives and works in Hamburg. If the mother now gives half of the house to her daughter, she can bequeath the other half tax-free, provided she lives for at least ten years. "Without anticipated succession, an inheritance tax of 60,000 euros would have to be paid for this property," Grötsch calculates. The distant daughter will hardly be able to move into the inherited house immediately and permanently in order to avoid the inheritance tax. Donors should reserve a right of usufruct. On the one hand, to protect yourself. In addition, the usufruct reduces the value of the property, so that more ownership can be transferred tax-free.

Overwrite the house in the family

Agnes Fischl, specialist lawyer for inheritance law at Haus und Grund Munich, explains: “Many people want their own property to stay in the family even after death. One way can be to found a family company. It comes into play when capital and real estate assets are prematurely transferred to descendants and are to be preserved in their entirety. The social contract that parents and children discuss together regulates future cooperation. If the tax values ​​are above the respective tax exemptions, parents can gradually transfer company shares over and over again. "

Shaping the family company

The establishment takes place as a company under civil law (GbR) or as a limited partnership (KG). The KG is particularly useful when minors are involved. The assets to be transferred will be brought into the new family company. The company law regulations protect the assets from being broken up and specify who can join the company as a successor. The donor retains full power of disposal over the transferred objects through appropriate wording in the contract. Individually coordinated agreements are possible.