When is it worth making a gift during one's lifetime?
October 24, 2022 | 60,00 EUR | answered by Eiko Hoffmann
Dear tax advisor,
My name is Sandra Schröter and I am currently considering whether it would be beneficial for me to make a gift during my lifetime. I am 45 years old, married, and have two children. My husband and I own a home and have accumulated some wealth. We would like to pass on some assets to our children during our lifetime to help them financially or to take advantage of tax benefits.
However, I am currently uncertain if making a gift would be advantageous for us. I am worried that transferring assets prematurely could lead to tax disadvantages or that we could face financial difficulties in our old age. Additionally, I am not sure what gift tax exemptions and rates apply and how a gift would impact our personal and financial situation.
Could you please explain to me in which cases it is worth making a gift during one's lifetime and what benefits or risks are associated with it? Are there specific gift tax exemptions or rates that I should consider? What would be the impact of a gift on our financial situation in old age? What options for securing or optimizing a gift could you advise me on?
Thank you in advance for your assistance.
Sincerely,
Sandra Schröter
Dear Mrs. Schröter,
Thank you for your inquiry regarding gift tax. It is understandable that you want to gather detailed information before making such an important decision as a lifetime gift. I am happy to provide you with some information and advice on this matter.
A lifetime gift can be beneficial in various cases. On one hand, you can financially support your children or other beneficiaries during your lifetime and provide them with a financial foundation for the future. This can be particularly advantageous if your children, for example, need financial assistance for education or if you want to enable them to purchase a home.
Furthermore, there are also tax advantages that can be utilized through a gift. Specific tax-free allowances apply to gifts, up to which no gift tax is incurred. The allowance for children is currently €400,000 every 10 years. Spouses have an allowance of €500,000. If your children or spouse are still minors, this allowance can be increased even further. If the value of the gift exceeds these allowances, gift tax will be due. The gift tax rates depend on the relationship between the parties involved and the amount of transferred assets.
It is important to be aware of possible risks before making a gift. An early transfer of assets could potentially lead to financial difficulties in your later years. Therefore, the gift should be carefully considered and planned. One way to secure yourself could be granting a usufruct right, which ensures you a lifelong right to reside in your home.
In conclusion, a lifetime gift can bring both advantages and risks. I am available for a personal consultation to analyze your individual situation and recommend the best possible solution. Please do not hesitate to contact me for further questions or to schedule an appointment.
Kind regards,
Eiko Hoffmann
