When is it worth making gifts during one's lifetime?
May 16, 2022 | 50,00 EUR | answered by Bernd Schreiber
Dear tax advisor,
My name is Greta Köhler and I have a question regarding gift tax. In my case, I am considering whether it is worth making gifts during my lifetime.
Here is the situation: I have a large fortune and would like to pass it on to my children. However, I am concerned about the possible tax implications of making a gift during my lifetime. I want my children to receive as much of my wealth as possible and I want to avoid high taxes.
Currently, all of my wealth is still in my possession. However, I am thinking about gifting parts of it to my children during my lifetime to help them financially and to ensure that they receive the inheritance in a tax-efficient manner.
My concerns are that high gift taxes could be incurred through the gift and that my children might end up receiving less of my wealth than I would like. Therefore, I am unsure if making gifts during my lifetime is worth it.
My question to you as a tax advisor is: When is it worth making gifts during one's lifetime? Are there specific factors or conditions under which a gift is tax advantageous? What are the options to minimize gift tax and ensure that my children receive as much of my wealth as possible?
Thank you in advance for your help and advice.
Sincerely,
Greta Köhler
Dear Mrs. Köhler,
Thank you for your question regarding gift tax. I understand your concerns regarding the tax implications of a lifetime gift and would like to help you make an informed decision.
First of all, it is important to mention that lifetime gifts can be quite advantageous from a tax perspective, especially when it comes to passing on a large amount of wealth to the next generations. Through gifts, you can transfer wealth tax-efficiently during your lifetime and thereby reduce the tax burden for your children.
There are various factors to consider in order to minimize gift tax and ensure that your children receive as much of your wealth as possible. Firstly, you can benefit from the tax-free allowances that apply to gifts. Currently, the allowance for children is 400,000 euros every 10 years. This means that your children can receive gifts up to this amount tax-free. Therefore, if you spread out the gifting of your wealth over several years in small increments, you can optimize the allowances.
Furthermore, you can also consider certain tax planning options to minimize gift tax. This includes, for example, taking advantage of tax benefits for specific types of gifts such as the transfer of real estate or business assets. Lifetime gifts with reserved usufruct or right of residence can also be tax advantageous.
However, it is advisable to seek individual advice in your specific case, as the tax implications of a gift depend on various factors, such as the value of the transferred wealth, the relationship between the donor and the recipient, and the type of gift.
Overall, lifetime gifts are often a sensible way to transfer wealth tax-efficiently and ensure that your children receive as much as possible. With individual advice, we can develop the best strategy for your situation together.
I hope this information has been helpful and I am available for any further questions.
Best regards,
Bernd Schreiber
