Are you wondering whether it’s better to give away your assets during your lifetime or leave them as an inheritance after your death? A gift allows the recipients to thank you personally and avoids potential family tensions. Furthermore, transferring assets early can offer tax advantages. However, an anticipated inheritance should be carefully considered, as it has both advantages and disadvantages.
What does anticipated inheritance mean?
Anticipated inheritance is not explicitly defined in the German Civil Code, but it is mentioned in connection with farm transfers in agriculture. Legally, it refers to the transfer of assets from the future testator to the future heirs, often in the form of gifts. This can include significant assets such as real estate. ” It’s important to know that such gifts do not automatically change the statutory order of inheritance – this requires specific arrangements such as a waiver of inheritance ,” explains lawyer István Cocron.
Combining gift and waiver of inheritance
Often, a waiver of inheritance is agreed upon as part of an anticipated inheritance arrangement. This means that the child receiving the gift receives their share of the inheritance during the donor’s lifetime and is excluded from inheritance after the donor’s death. Such a waiver must be formalized by a notarized contract.
Compulsory share regulations and gifts
Even in cases of anticipated inheritance, claims to a compulsory share can play a role. A disinherited child is still entitled to a compulsory share, which amounts to half of the statutory share of the inheritance. Gifts made during the testator’s lifetime are only taken into account if the testator expressly stipulates this. To avoid disputes, it should be clearly stipulated how gifts affect inheritance and compulsory share claims.
When is an anticipated inheritance arrangement advisable?
• Transferring responsibility : If you can no longer or no longer wish to take care of a property, transferring it to the next generation can be a sensible option.
• Secure family peace : Early distribution of assets can prevent inheritance disputes, as all parties involved know who receives what.
• Individual support : You can provide targeted support to children, for example when buying a house or starting a business.
• Reduce compulsory share : Gifts made more than ten years before the inheritance can reduce compulsory share claims.
• Save on inheritance tax : A long-term gifting strategy allows you to use tax allowances multiple times, e.g. every ten years.
Important precautions when transferring assets
• Financial security : Keep a reserve to remain flexible and independent, especially for care costs.
• Protection from creditors : Prevent gifted assets from falling into the wrong hands if your child experiences financial problems by means of contractual agreements.
• Equal treatment of heirs : Clarify how gifts are credited towards the inheritance or compulsory share.
Contractual provisions
• Reversion clauses : Such clauses allow for a transfer back, for example in the event of the recipient’s insolvency or the sale of the gifted assets without the donor’s consent.
• Crediting of compulsory share : The gift agreement can stipulate that the gift will be credited against the compulsory share.
• Annuity payments : A gift can be linked to a monthly annuity to secure the donor’s livelihood.
Conclusion
“ Anticipated inheritance offers many advantages, such as tax savings and the avoidance of inheritance disputes. However, it requires careful planning and clear contractual agreements to minimize potential disadvantages, ” says attorney Cocron. Notaries and lawyers can help you make the best decisions for your individual situation.
