What role do lifetime gifts play in inheritance tax?
February 9, 2024 | 40,00 EUR | answered by Alwin Widmann
Dear Tax Advisor,
My name is Sophia Bergmann and I am facing an important decision regarding my inheritance tax. My father passed away a few years ago and left me a substantial amount of wealth. Now I am wondering what role lifetime gifts play in relation to inheritance tax.
During his lifetime, my father already gave assets to me and my siblings as gifts, which were documented by a notary at the time. I am aware that gifts are generally tax-free as long as they stay within the exempt amounts. However, I am wondering if these gifts will be taken into account when calculating the inheritance tax after my father's passing.
I am concerned that lifetime gifts could increase the tax burden on my father's inheritance. Are there ways to structure these gifts in a tax-efficient manner to avoid double taxation? Or are there specific regulations that need to be considered when calculating the inheritance tax?
I would greatly appreciate it if you could explain to me how lifetime gifts affect inheritance tax and what measures I can take to avoid any tax disadvantages.
Thank you in advance for your support.
Sincerely,
Sophia Bergmann
Dear Mrs. Bergmann,
Thank you for your inquiry regarding the effects of lifetime gifts on inheritance tax. I understand your concern regarding possible double taxation and will therefore explain in detail how lifetime gifts are taken into account when calculating inheritance tax.
Generally, gifts given during one's lifetime are tax-free as long as they stay within the exemption thresholds. These exemptions can be utilized every 10 years. So, if your father has gifted assets to you and your siblings during his lifetime, these gifts have already been taken into account for tax purposes and therefore reduce the taxable acquisition in the event of inheritance.
When calculating inheritance tax after the passing of your father, the lifetime gifts will be included in the calculation. However, there is no double taxation as the gifts were already taxed during his lifetime, and only the remaining taxable acquisition will be taxed in the event of inheritance.
There are various ways to optimize lifetime gifts to avoid double taxation. One option is to structure the gifts in a way that they stay within the exemption thresholds and remain tax-free. Lifetime gifts can also be planned to reduce the tax burden in the event of inheritance.
It is advisable to seek advice from an experienced tax advisor or notary to carry out tax-optimized gifts and avoid potential tax disadvantages. An expert can explain exactly which measures are sensible in your individual case and how you can optimize your tax situation.
I hope that my explanations are helpful and I am available for further questions.
Best regards,
Alwin Widmann
