How can gifts to minors be optimized for tax purposes?
March 13, 2024 | 65,00 EUR | answered by Fred Wittik
Dear Tax Advisor,
My name is Emma Richter and I am currently dealing with the topic of gift tax in relation to minors. I plan to gift money or assets to my minor children and grandchildren in order to financially secure them and provide them with a good future. However, I am unsure of how to optimize these gifts tax-wise in order to pay as little gift tax as possible.
My current situation is as follows: I have a certain amount of wealth that I would like to pass on to my minor family members. However, I am aware that gifts to minors are treated differently for tax purposes than gifts to adults. I am worried that through thoughtless gifts I may have to pay unnecessarily high taxes and could potentially lose a large portion of my wealth as a result.
Therefore, my question to you is: How can gifts to minors be optimized tax-wise? Are there specific tax exemptions or benefits that I can use to minimize gift tax? What tax pitfalls should be considered when making gifts to minors and how can I avoid them?
I would be very grateful if you could provide me with specific tips and recommendations on how to optimally structure my gifts to minors from a tax perspective. Thank you in advance for your help.
Sincerely,
Emma Richter
Dear Mrs. Richter,
Thank you for your inquiry regarding gift tax in relation to minors. It is understandable that you are concerned about how to financially secure your children and grandchildren without having to pay unnecessarily high taxes. Therefore, I will provide you with some tips and recommendations on how to optimize gifts to minors from a tax perspective.
First and foremost, it is important to know that gifts to minors are generally taxed in the same way as gifts to adults. This means that there are also exemptions that are annually exempt from gift tax. Currently, the exemption for children is 400,000 euros and for grandchildren 200,000 euros every 10 years. So, if you stay within these exemptions, you do not have to pay gift tax.
One way to optimize gifts to minors from a tax perspective is to spread the gifts over several years. By making regular smaller gifts, you can more effectively use the exemption and minimize the tax burden. Additionally, you may also consider tax-optimized asset transfers such as a gift with a usufruct reservation or a gift subject to a usufruct.
It is important, however, to be aware of the tax pitfalls when making gifts to minors. One of them, for example, is gifting real estate to minors, as there are often additional tax aspects to consider. You should also consider that gifts to minors may need to be approved by the family court in order to ensure that the child's interests are protected.
In any case, I recommend seeking advice from an experienced tax advisor before making gifts to minors to ensure that your gifts are tax-optimized. I am also available for a personal consultation and can help you plan your gifts to minors in the best possible way.
Best regards,
Fred Wittik, Tax Advisor
