How can one design a donation in an optimal way for tax purposes to minimize inheritance tax?
July 26, 2024 | 50,00 EUR | answered by Ella König
Dear tax advisor,
My name is Alwin Bittner and I am faced with the challenge of structuring a gift in the most tax-efficient way to minimize inheritance tax. My parents would like to gift me a larger sum of money to support me financially and to pass on some of their wealth to me during their lifetime.
Currently, I am unsure of the best way to structure this gift in order to pay as little inheritance tax as possible. I have heard that there are different options available to save on taxes, but I am unsure of which ones would be suitable for me and how to implement them.
My parents own a single-family house and a larger amount of savings that they would like to pass on to me. I am worried that I may have to pay high taxes on the gift and could end up losing a significant portion of the money.
Could you please provide me with specific guidance on how to structure a gift in the most tax-efficient way to minimize inheritance tax? What legal requirements do I need to consider and what steps are necessary to reduce the tax burden?
Thank you in advance for your help and support.
Best regards,
Alwin Bittner
Dear Mr. Bittner,
Thank you for your inquiry and your interest in an optimal tax planning for your planned gift. It is understandable that you are concerned about possible tax payments and are looking for ways to minimize them. I am happy to provide you with an overview of some planning options that can help you reduce inheritance tax.
First of all, it is important to know that under certain conditions, gifts can be tax-free. In Germany, there is an annual tax-free allowance of 400,000 euros per child that parents can gift to their children. This allowance is renewed every 10 years, so over time your parents can gift larger amounts to you tax-free.
One way to optimally structure the gift for tax purposes is to spread the assets over several years. By having your parents gift you smaller amounts over a longer period of time, you can make optimal use of the allowance and minimize the tax burden. The gift of assets such as a single-family home can also be tax advantageous, as the market value is used as the basis for calculating inheritance tax, not the actual purchase price.
Furthermore, your parents can optimize the gift for tax purposes by establishing lifetime usufruct or use rights on properties. This allows the parents to retain the use of the property while you are already listed as the owner in the land register. By combining different transfer forms, the tax burden can be further reduced.
However, it is important to seek comprehensive advice before making the gift in order to comply with all legal requirements. A tax advisor or lawyer specializing in inheritance and gift tax can assist you in planning and implementing your gift, helping you to make optimal use of potential tax savings.
I hope this information is helpful and gives you an initial insight into the possibilities of tax-efficient gift planning. If you have any further questions or require individual advice, I am at your disposal.
Best regards,
Ella König
