What are the tax implications of gifting to my children?
February 15, 2022 | 40,00 EUR | answered by Tina Ullmann
Dear tax advisor,
my name is Alice Krüger and I am currently in the process of planning and organizing my finances. In this context, I am considering giving a larger sum of money to my children. However, I am unsure of the tax implications such a gift could have and how I can potentially optimize it.
I am currently retired and mainly receive income from my pension. My assets consist mainly of savings and some valuable items. Since my children are very dear to me and I would like to financially support them, giving a gift is an attractive option for me to provide them with financial assistance.
My concerns mainly revolve around the possibility of having to pay high taxes and my assets shrinking significantly as a result. Are there ways to reduce the tax burden or make the gift more tax-efficient? What tax aspects must I definitely consider when giving a gift to my children?
I greatly appreciate your expert advice and thank you in advance for your help.
Sincerely,
Alice Krüger
Dear Mrs. Krüger,
Thank you for your inquiry regarding the tax implications of gifting to your children. I am pleased that you are thinking about financially supporting your children and I will do my best to assist you in planning and organizing your assets.
A gift to your children can indeed have tax implications, as gifts are generally taxable. However, there are also ways to reduce the tax burden or make the gift more tax-efficient. An important tax provision you should consider in your case is the exemption allowance. Each parent can gift their children up to a certain exempt amount every 10 years tax-free. Currently, this exempt amount is 400,000 euros per child. If the gift exceeds the exempt amount, your children will have to pay taxes on the excess amount.
One way to make the gift more tax-efficient would be to stagger the gift over a longer period of time to optimize the exempt amount. You can also use tax-optimized gift contracts to reduce the tax burden. It is advisable to seek advice from an experienced tax advisor to find the best solution for your individual situation.
When gifting to your children, you should also consider other tax aspects. This includes documenting the gift to prevent possible disputes. You should also check if your children need to declare the gift as income and if any additional tax obligations arise.
In conclusion, I recommend seeking comprehensive advice before making a gift to your children. An experienced tax advisor can help you optimize the tax aspects and assist you in planning and organizing your assets.
I hope this information is helpful to you and I am happy to answer any further questions you may have.
Best regards,
Tina Ullmann
