What happens if the recipient passes away before me?
December 13, 2022 | 50,00 EUR | answered by Fred Wittik
Dear tax advisor,
My name is David Heinze and I have a question regarding gift tax. Several years ago, I transferred a property to my son to support him financially. Now I am concerned about what would happen if my son were to pass away before me.
Currently, my son is healthy and well, but as we know, life can sometimes take unexpected turns. If my son were to pass away before me, would the property revert back to me as the donor? And what would be the tax implications for me? Would I have to pay gift tax again?
This situation is causing me concern as I am unsure of how to proceed in such a scenario. Are there any ways to minimize tax risks if the recipient passes away before me? Or are there any precautions I can take to avoid this situation?
I would greatly appreciate it if you could help me and provide possible solutions. It is important to me that I am well informed and know how to act in case of such an event.
Thank you in advance for your assistance.
Sincerely,
David Heinze
Dear Mr. Heinze,
Thank you for your question regarding gift tax in relation to the transfer of a property to your son. It is understandable that you are concerned about what would happen if your son were to pass away before you and what tax implications this could have for you.
In general, a gift is irrevocable. This means that the transferred property will permanently remain in the possession of your son, even in the event of his premature death. In this case, the property would not automatically revert back to you as the donor. However, you may need to pay gift tax again if the property is transferred to you as part of the inheritance.
Gift tax is generally only levied once when a gift is made. So if your son were to pass away before you, there would usually be no additional gift tax. However, the property could be transferred to you as part of the inheritance, and estate taxes could apply, depending on the amount of the estate and the relationship.
To minimize tax risks, you could include a reversion clause in the gift contract. This clause would stipulate that the property reverts back to you in the event of your son's premature death. This would ensure that the property does not become part of your son's estate and therefore no estate tax would apply. However, you should seek professional advice as reversion clauses can be tax complex.
Another option is to make a gift with a reservation of usufruct right. This means that you retain the right to use the property and derive income from it during your lifetime. This can have tax benefits and simplify the transfer of the property in the event of your son's death.
It is advisable to seek advice from an experienced tax advisor in such cases to develop individual solutions that meet your personal needs and tax situation. I hope this information has been helpful and I am happy to answer any further questions you may have.
Sincerely,
Fred Wittik
