Real estate often represents the most significant asset within an estate. However, acquiring a property is not solely linked to ownership rights; it also involves far-reaching decisions, obligations, and potential conflicts. Ms. Sandra Leifeld, a legal expert at Schwäbisch Hall, sheds light on central misconceptions in the context of real estate inheritance and gifting. She emphasises that beyond mere land registry entries, future use, financing questions, and tax aspects must be considered as a whole. Early planning thus creates more room for manoeuvre and reduces the potential for conflict.
A common misconception is that no inheritance tax is due within the family. However, this is only partially true. The actual tax liability depends on the property value, the degree of kinship, the personal allowance, and the corresponding tax class. For spouses, the allowance is EUR 500,000, for children EUR 400,000, and for grandchildren usually EUR 200,000. For other relatives such as siblings, nieces, nephews, and unmarried partners, the allowance amounts to EUR 20,000. If this is exceeded, inheritance tax is incurred, the amount of which depends on the tax class and the difference to the allowance. It is advisable to determine the property's value early on and calculate the potential tax burden preventively.
Tax Privileges and Asset Value Definition
The assumption that moving into an inherited house automatically leads to tax savings is also incorrect. A tax exemption for the family home is tied to three conditions: the deceased must have lived in the property, the heir must immediately designate it for self-occupancy, move in, and then use it themselves for ten years. For children, the tax exemption is also limited to a living space of 200 square metres. A delayed move-in or a premature move-out can result in retroactive taxation. Ms. Leifeld advises testators to consider the heir's actual possibility of use in estate planning and heirs to plan their move-in promptly and observe the self-occupancy period.
The valuation set by the tax office does not necessarily have to be accepted. The tax office determines property values using standardised procedures. If the determined value is higher than the actual market value, heirs can prove a lower value with a qualified appraisal. This is particularly relevant in cases of significant renovation needs, an unfavourable location, or existing third-party rights, such as a right of residence or usufruct. Such rights can reduce the market value. Before commissioning an appraiser, the potential tax savings should be weighed against the appraisal costs. Furthermore, an inherited property is not automatically a gain. It can entail significant obligations such as loans, land charges, running costs, and renovation requirements. An inheritance can be renounced within six weeks of learning of the death and one's heir status; otherwise, the inheritance is accepted with all liabilities.
Importance of a Will and Early Planning
The belief that everything is sensibly regulated without a will is incorrect. Without a last will and testament, the statutory order of succession applies, which does not reflect individual wishes. Unmarried partners inherit nothing in this case. Also, equalisation among siblings must be stipulated in a will to avoid communities of heirs and resulting conflicts. Ms. Leifeld underlines that early regulation through a will or inheritance contract creates clarity for all involved parties.
- —Gift allowances can be used again every ten years.
- —Staged transfers can reduce the subsequent tax burden.
- —Rights of residence or usufruct secure use or rental income for the transferor.
- —Such rights reduce the tax-relevant value of the gift.
The assumption that a gift is only worthwhile shortly before inheritance is wrong. The opposite is tax-advantageous. Gift allowances can be claimed again every ten years. Early, gradual transfer can significantly lower the subsequent tax burden. Rights of residence or usufruct secure continued use or rental income for the original owner and can simultaneously reduce the tax-relevant value of the gift, further reducing the burden on the next generation. Ms. Leifeld advises owners to consider what they need themselves, who should receive the property, how other relatives will be considered, and which solution remains viable for at least ten years before making a gift. Such comprehensive and proactive planning preserves flexibility and ensures an orderly transfer of assets.
