Is there a difference between gift tax and inheritance tax?
February 28, 2024 | 55,00 EUR | answered by Bernd Schreiber
Dear tax advisor,
My name is Bernhard Schäfer and I have a question regarding gift tax and inheritance tax. I have heard that there is a difference between the two types of taxes, but I am not sure what exactly this difference is.
My father is planning to gift me a larger sum of money, and I am concerned about whether and to what extent this is relevant for tax purposes. I am wondering if I have to pay tax on the gift and if this is different from an inheritance.
So far, I have not delved deeply into the topic and am therefore somewhat unsure about my tax obligations. I want to ensure that I handle everything correctly and legally and avoid any unexpected tax demands.
Could you please explain to me what the exact difference is between gift tax and inheritance tax, and whether I should be concerned about any tax consequences from a gift from my father? Are there possible solutions to minimize or avoid taxes?
Thank you in advance for your help and advice.
Yours sincerely,
Bernhard Schäfer
Dear Mr. Schäfer,
Thank you for your inquiry regarding gift tax and inheritance tax. I am pleased to be able to assist you with your concerns.
First of all, it is important to understand that gift tax and inheritance tax both fall under the category of inheritance and gift taxes, but they tax different situations. Gift tax is due when a gift is made to someone, meaning when assets or money are transferred without consideration. In contrast, inheritance tax is due when assets pass to another person after the death of an individual.
The exact difference between gift tax and inheritance tax is that gift tax is due during the lifetime of the donor, while inheritance tax is only levied after the death of the decedent. In your case, if your father wants to gift you a significant sum of money, gift tax would be relevant.
The amount of gift tax depends, among other things, on the amount of the gift, the relationship between the donor and the recipient, and the state in which the gift is made. However, there are tax-free allowances up to which gifts remain tax-free. These allowances vary depending on the relationship between the donor and the recipient. It is important to familiarize yourself with the tax regulations before making a gift to avoid unexpected tax liabilities.
There are ways to minimize or avoid taxes on a gift. For example, gifts can be made at certain intervals to maximize the tax-free allowances. Additionally, making a gift subject to a usufruct reservation or including tax-optimized gift contracts can help reduce taxes.
It is advisable to consult with a tax advisor or notary early on to understand the tax implications of a gift and take measures to minimize taxes if necessary. I am happy to provide you with comprehensive advice and assist you in planning and implementing a gift.
I hope my explanations have been helpful to you. If you have any further questions or require guidance, please do not hesitate to contact me.
Best regards,
Bernd Schreiber
