ᐅ Inheritance for Unmarried Couples and the Subsequent Construction Project
Created on: 5 May 2020 10:11
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untergasse43
untergasse435 May 2020 10:11Good morning!
I would like to know how you assess the following scenario:
Man A and Woman B are currently living together unmarried, but marriage is already planned. Man A may inherit a plot of land from Person C, who is not related to him for tax purposes, before the marriage. He will have to pay inheritance tax of 30%.
Man A and Woman B want to build on the inherited land soon and live together in the house.
Man A and Woman B would like to both be recorded in the land registry and jointly finance the house construction. They both understand the property ownership aspects. However, the question concerns the taxes involved. Ideally, they want to share the inheritance tax from their existing equity. Therefore, they have the following questions:
Thank you very much for your answers
I would like to know how you assess the following scenario:
Man A and Woman B are currently living together unmarried, but marriage is already planned. Man A may inherit a plot of land from Person C, who is not related to him for tax purposes, before the marriage. He will have to pay inheritance tax of 30%.
Man A and Woman B want to build on the inherited land soon and live together in the house.
Man A and Woman B would like to both be recorded in the land registry and jointly finance the house construction. They both understand the property ownership aspects. However, the question concerns the taxes involved. Ideally, they want to share the inheritance tax from their existing equity. Therefore, they have the following questions:
- Would gift tax apply to Man A if Woman B gives him half of the inheritance tax payment and they both jointly cover the inheritance tax? The half share of the inheritance tax will very likely exceed the exemption limit of 20,000 euros for a gift.
- Would any kind of tax apply if Man A registers Woman B in the land registry and they share the inheritance tax payment?
- Would any kind of tax apply if Man A registers Woman B in the land registry but covers the entire inheritance tax alone?
Thank you very much for your answers
untergasse435 May 2020 11:10HilfeHilfe schrieb:
lawyerDefinitely. But until then, A and B would have liked to have some indication.So the first tip addresses the last question, and the answer would be "yes." At least a prior civil marriage would simplify everything because then fewer arrangements would be necessary.
For everything else, in theory, gift tax would likely apply if Mrs. B gives Mr. A half of the inheritance tax (after deducting the exemption). The fact that this can be handled indirectly is another matter. Then the man would pay the inheritance tax, and the woman would cover other expenses of the same amount. Since the inheritance tax is collected from Mr. A anyway, joint official payment would not be possible.
If both are to be listed in the land register, this could be considered a gift, and Mrs. B might have to pay tax on half of the property (the value minus the €20,000 (about $22,000) exemption). Only a tax advisor or possibly a notary can provide legally reliable advice on this. Everything would be simpler if you are married, which would basically be sufficient when "transferring" half of the share to the wife. A "sharing" of the inheritance tax could also be arranged, for example, through a private loan.
For everything else, in theory, gift tax would likely apply if Mrs. B gives Mr. A half of the inheritance tax (after deducting the exemption). The fact that this can be handled indirectly is another matter. Then the man would pay the inheritance tax, and the woman would cover other expenses of the same amount. Since the inheritance tax is collected from Mr. A anyway, joint official payment would not be possible.
If both are to be listed in the land register, this could be considered a gift, and Mrs. B might have to pay tax on half of the property (the value minus the €20,000 (about $22,000) exemption). Only a tax advisor or possibly a notary can provide legally reliable advice on this. Everything would be simpler if you are married, which would basically be sufficient when "transferring" half of the share to the wife. A "sharing" of the inheritance tax could also be arranged, for example, through a private loan.
...Notary/Tax advisor...
In general, if B is entered in the land register without a purchase contract, it is considered a gift. This applies before the marriage when the exemption amount is lower.
Marriage only changes the situation in a second step. Even if the two are already married at the time of inheritance, only A inherits. And only A is the owner. If A allows B to be registered, the first point applies again.
P.S.: Inheritance tax can only be shared internally between them. Externally, A is always responsible for payment. If A recovers the money elsewhere, that is a separate matter.
Edit: In my opinion, the cleanest and simplest solution is for B to acquire/buy half of the property from A. Of course, the capital must be available for this. Alternatively, a gift after the marriage due to the exemptions is an option. Then these exemptions are fully utilized for 10 years.
In general, if B is entered in the land register without a purchase contract, it is considered a gift. This applies before the marriage when the exemption amount is lower.
Marriage only changes the situation in a second step. Even if the two are already married at the time of inheritance, only A inherits. And only A is the owner. If A allows B to be registered, the first point applies again.
P.S.: Inheritance tax can only be shared internally between them. Externally, A is always responsible for payment. If A recovers the money elsewhere, that is a separate matter.
Edit: In my opinion, the cleanest and simplest solution is for B to acquire/buy half of the property from A. Of course, the capital must be available for this. Alternatively, a gift after the marriage due to the exemptions is an option. Then these exemptions are fully utilized for 10 years.
untergasse435 May 2020 11:25Thank you!
face26 schrieb:That is clear, perhaps it was phrased a bit unclearly. The issue concerns the money flow from B to A.
P.S.: Inheritance tax can only be shared internally. Externally, person A is always responsible for paying it. If they obtain the money from elsewhere, that is a separate case.
untergasse43 schrieb:
Thank you!
That’s clear, it might have been a bit vaguely phrased. It’s about the money flow from B to A.Money transfer without consideration is always a gift.
If the consideration is recorded in the land registry, it becomes very risky, as that would be a purchase, which is not possible without a notarized purchase agreement for real estate.
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