Höhlenmensch30 Aug 2021 13:50Over the years, unfortunately (and not only in my case), the value/prices for houses and land have risen to unprecedented levels.
Therefore, the property I live in (house with land) now has a value exceeding 400,000 € (approximately 440,000 USD).
This means that the tax exemption for inheritance is exceeded.
I now intend to transfer ownership of the above-mentioned property to my son.
(A guaranteed lifelong right of residence will, of course, be contractually agreed upon.)
Now to the question:
Should I sell the property to my son (no actual money needs to change hands),
or should I gift it to him?
Are there advantages or disadvantages to either option, or is it financially the same?
What about notary fees?
Has anyone done this before?
Maybe someone knows more than I do, so
... thank you in advance ...
Therefore, the property I live in (house with land) now has a value exceeding 400,000 € (approximately 440,000 USD).
This means that the tax exemption for inheritance is exceeded.
I now intend to transfer ownership of the above-mentioned property to my son.
(A guaranteed lifelong right of residence will, of course, be contractually agreed upon.)
Now to the question:
Should I sell the property to my son (no actual money needs to change hands),
or should I gift it to him?
Are there advantages or disadvantages to either option, or is it financially the same?
What about notary fees?
Has anyone done this before?
Maybe someone knows more than I do, so
... thank you in advance ...
N
nordanney30 Aug 2021 14:02Höhlenmensch schrieb:
This causes the tax exemption limit in the case of inheritance to be exceeded.Only if the son does not use the property himself.Höhlenmensch schrieb:
Therefore, I now intend to transfer the above-mentioned property to my son.
(further guaranteed lifelong right of residence will of course be contractually agreed)The right of residence has a value that can significantly reduce the value of the house. Is it still over €400,000 (about $430,000) after that?Höhlenmensch schrieb:
Should I sell the property to my son (actual money does not necessarily have to change hands?)
or should I gift it?
Are there advantages or disadvantages, or is it financially the same?Gifting can have a negative impact on your care benefits—keep the 10-year period in mind. Höhlenmensch schrieb:
What about the notary fees?It doesn’t matter.If the property has unfortunately already skyrocketed in value, there is also option C: simply pay the tax on this windfall ;-)
This is not exactly my area, but couldn’t you gift him shares of the land and then wait 10 years before transferring the rest or handling the inheritance?
We have already heard stories here of very unhappy "heirs" who have to let dad or grandpa stay in the property indefinitely, keyword: right of residence. What was meant kindly can also become a burden. Such properties are hard to sell, difficult to use as loan collateral, but all the obligations fall on the next generation. Their creditworthiness for their own purposes can be negatively affected.
This is not exactly my area, but couldn’t you gift him shares of the land and then wait 10 years before transferring the rest or handling the inheritance?
We have already heard stories here of very unhappy "heirs" who have to let dad or grandpa stay in the property indefinitely, keyword: right of residence. What was meant kindly can also become a burden. Such properties are hard to sell, difficult to use as loan collateral, but all the obligations fall on the next generation. Their creditworthiness for their own purposes can be negatively affected.
If it is sold cheaply (e.g., 1€), the tax authorities consider the difference to the market value as a gift, so it doesn’t help much in saving taxes.
@nordanney is correct in saying that the value of the right of residence is deducted. Calculating this is somewhat complex, but it can be understood (I have done this several times recently for condominiums).
Note: Have a usufruct registered, not just a right of residence. With a usufruct, you would also receive the income (from rent) even if you no longer live in the house yourself, but, for example, are in a nursing home. It is beneficial to have some money to enjoy yourself a little then ;-)
P.S. Is the son of legal age?
@nordanney is correct in saying that the value of the right of residence is deducted. Calculating this is somewhat complex, but it can be understood (I have done this several times recently for condominiums).
Note: Have a usufruct registered, not just a right of residence. With a usufruct, you would also receive the income (from rent) even if you no longer live in the house yourself, but, for example, are in a nursing home. It is beneficial to have some money to enjoy yourself a little then ;-)
P.S. Is the son of legal age?
guckuck2 schrieb:
but all the obligations fall on the offspring This can be addressed in a well-drafted notarized agreement. In the case of usufruct, I understand that it includes all rights and obligations related to the property (including costs). And if the testator no longer wants to take care of things at some point (obligations!), the usufruct can also be terminated.
Höhlenmensch31 Aug 2021 15:05Thank you for the feedback.
@nordanney
Regarding point 1: I thought everything above the tax exemption amount had to be taxed.
If he uses the property himself and it is worth, for example, 600,000 (600Ts), would he then not have to pay tax on the 200,000 (200Ts)?
In summary, it seems best to gift the property completely.
Due to the right of residence and the resulting decrease in value, the exemption amount of 400,000 (400Ts) could potentially be undercut.
There is also gift tax, but the same rules probably apply as with inheritance tax (400,000 exemption).
Is there any information on the remaining value decrease caused by the restricted right of residence (approximately in %)?
A small note—yes, there are also family situations where details like usufruct rights do not matter.
The advice regarding personal creditworthiness is good but no longer relevant (retired). The son is an adult and would also like to build on the property.
Because of this, he and hopefully I will reach the 10-year limit.
For this reason, I intend to address this now regarding the 10-year period!
Are notary fees fixed according to a fee schedule, or are they negotiable?
Does the reduction in value due to the right of residence also apply here? Since the value is probably the basis for the fee?
Regards from someone hoping to live a long life but already thinking ahead.
You never know.
@nordanney
Regarding point 1: I thought everything above the tax exemption amount had to be taxed.
If he uses the property himself and it is worth, for example, 600,000 (600Ts), would he then not have to pay tax on the 200,000 (200Ts)?
In summary, it seems best to gift the property completely.
Due to the right of residence and the resulting decrease in value, the exemption amount of 400,000 (400Ts) could potentially be undercut.
There is also gift tax, but the same rules probably apply as with inheritance tax (400,000 exemption).
Is there any information on the remaining value decrease caused by the restricted right of residence (approximately in %)?
A small note—yes, there are also family situations where details like usufruct rights do not matter.
The advice regarding personal creditworthiness is good but no longer relevant (retired). The son is an adult and would also like to build on the property.
Because of this, he and hopefully I will reach the 10-year limit.
For this reason, I intend to address this now regarding the 10-year period!
Are notary fees fixed according to a fee schedule, or are they negotiable?
Does the reduction in value due to the right of residence also apply here? Since the value is probably the basis for the fee?
Regards from someone hoping to live a long life but already thinking ahead.
You never know.