Can I gift my severance pay tax-free to my children?
November 25, 2023 | 40,00 EUR | answered by Lorenzo Zimmermann
Dear tax consultant,
My name is Edith Gerdes and I am facing an important decision regarding my severance payment. I recently lost my job and the company is offering me a severance payment. Since I am already of retirement age and financially secure, I would like to pass on a portion of this severance payment to my children. However, I am concerned about the tax implications of this gift.
Can I gift my severance payment to my children tax-free? Are there specific tax-free amounts that I need to consider? How will the gift affect my tax burden? Are there possibly other ways to pass on my severance payment to my children in a tax-efficient manner?
I look forward to your expert advice and thank you in advance for your help.
Sincerely,
Edith Gerdes
Dear Mrs. Gerdes,
Thank you for your inquiry regarding the tax implications of gifting your severance package to your children. It is wise of you to seek information beforehand to avoid any unpleasant surprises.
In general, it is possible to gift your severance package to your children tax-free. However, there are certain tax-free allowances that you should consider. In Germany, there is a tax-free allowance of 400,000 euros for gifts to children every 10 years. This means that you can gift your children money up to this amount without incurring any taxes. Any amounts exceeding this allowance would be subject to gift tax.
It is important to note that gifting your severance package to your children can have an impact on your tax liability. For example, if you gift a portion of your severance package to your children, your taxable income will decrease accordingly. This can potentially result in a reduction of your overall taxes.
There are also other ways to pass on your severance package to your children in a tax-efficient manner. One option could be to spread the gifts over several years to make full use of the tax-free allowances. Another option could be to gift assets such as real estate or securities, as these may be tax-favored under certain circumstances.
In such cases, it is advisable to seek advice from an experienced tax advisor to optimize the tax implications of the gift. I am happy to provide you with a detailed consultation and assist you in making informed decisions.
Best regards,
Lorenzo Zimmermann
