Do you want yours? Inherit propertyearly and conscientious planning is absolutely necessary. In this way, the remaining spouse, but also children and granddaughters, can potentially be spared high inheritance taxes and disputes Community of heirs avoid. There are a few things that are important to consider when it comes to anticipated inheritance.
Anticipated inheritance as an alternative to classical inheritance
If you do not take precautions to arrange your circumstances in the event of your death, legal succession comes into force. The relatives then form a community of heirs and the estate is divided among them. If agreement cannot be reached, the property usually has to be sold. A division auction is also possible.
To avoid this, you have the option of writing a will and clearly stating who gets what. However, another viable option is to transfer the property during your lifetime, passing it on as a gift as part of an anticipated inheritance. Here it is important to have the transfer notarized and to have the transfer of ownership recorded in the land register. It is equally important to record all agreements made with those involved in detail in the donation agreement. You should not rely on verbal agreements.
By the way: The donor has the option of reserving the full right of use (“usufruct”) for life.
How you can save inheritance tax with anticipated inheritance
The legislature provides for a uniform tax allowance for gifts and inheritances, which depends on the degree of relationship. The relevant provisions of the Inheritance and Gift Tax Act state that it is available again every ten years. Donations and inheritances that occur within this period to the same constellation of people are added together. If there are more than 10 years between the gift and the inheritance, you can use the allowance multiple times.
For example, if you transfer the property to your own child, the exemption amount is €400,000. For grandchildren it is €200,000. Gift tax is only due if the market value of the object is above the tax-free amount. If you plan for the long term, you benefit from the fact that the allowances can be used again after ten years. A property can also be passed on in sections. If you transfer part of the property every ten years, you can use the allowance each time.
The allowance is also applicable to each of the parents. This allows everyone to transfer their share of their own property tax-free up to the specified exemption amount. Children can therefore receive a total of up to €800,000 from their parents every ten years free of gift tax.
Think about your own protection
One principle should always be observed when making a gift. You shouldn't give away anything that is necessary for your own security or that you want to keep for yourself. Attention should therefore be paid to solid contract design. For example, despite a gift, you can keep the usufruct open, which can include, among other things, living and renting. In certain cases, such as an attempted sale or the unexpected death of the beneficiary, a reclaim is reserved. However, an arbitrary reclaim of the gift is not possible. Likewise, the property can no longer be borrowed or sold. It is therefore important not only to pay attention to the taxes, but also to design the donation agreement in a legally secure manner in your own interest. Normally it cannot be changed unilaterally later.
A calculation example
The importance of good planning for early inheritance can be illustrated with a short calculation example.
Let's assume that a mother gave her daughter half of a property worth €400,000 in 2015 and left the other half to her six years later after her death. In this case, the daughter has to pay tax on €400,000 because both purchases are added together.
If the tax rate is 15%, inheritance tax of €60,000 will be due in the event of an inheritance. However, if at least ten years pass between the gift and the inheritance, no taxes are due on the acquisition, as the tax exemption can be claimed again in the event of the inheritance.
It becomes clear here how important it is to take action early on. Depending on how large your assets are, the tax exemption can be used more often. It is also important to ensure that the allowances that each child has with each parent remain unused. If the assets are distributed unequally between both parents, the richer parent could give something to the poorer parent (spousal allowance), which the latter then gives away or inherits to the children. This allows each parent to use the allowances.
The advantages of an anticipated inheritance at a glance
An anticipated inheritance offers a number of advantages, which are briefly mentioned here at the end:
- Avoiding high inheritance taxes
- The property remains in the family property
- Property that has become too large with age can continue to be used sensibly
- Your own living situation can be insured for unforeseen cases
- Disputes within the community of heirs can be avoided
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