High Inheritance Taxes Draw Criticism from Majority, Argued to be Exorbitant
Saidi Sulilatu, Editor-in-Chief of Finanztip, sheds light on the intricacies of inheritance and gift taxes in Germany.
According to a recent representative survey by Finanztip, 54% of Germans think inheritance tax is too high. This sentiment is shared by 56% of Germans who expect to receive a cash fortune, while 44% anticipate inheriting a property. However, it's important to note that half of the Germans have not yet dealt with the topic of inheritance, with only 33% having a will in place.
The Federal Statistical Office released a press release on September 3, 2024, titled "Set Inheritance and Gift Tax 2024 Increased by 12.3% to 13.3 Billion Euros." This marked a new high in the set inheritance and gift tax, a figure that has been on a steady rise.
In an effort to help Germans navigate this complex topic, Finanztip has released an E-Paper titled "Inheriting Correctly - Avoiding Mistakes." The E-Paper provides information on ten typical inheritance scenarios and can be downloaded for free at finanztip.de/epaper-erben-und-vererben.
One strategy to save on taxes is through strategic gifting. Almost always, the same allowances that apply to inheritances can be used again every ten years for gifts. For instance, a grandmother can give 400,000 euros to her daughter tax-free, who can then give it tax-free to her son. Similarly, two parents can give their house worth 800,000 euros simultaneously in two equal parts tax-free to their child.
Another option is a life tenancy, which allows previous property owners to stay in their own home and reduces the market value of the property and thus also the gift tax. If parents give a property with usufruct, they can continue to use it without paying rent until the end of their lives.
If a child moves into the inherited property for ten years, the inheritance tax is waived if the living area does not exceed 200 square meters. This strategy can be particularly useful for those looking to save on taxes while ensuring their children have a place to call home.
It's crucial to remember that no one is obliged to pass on the inheritance in the notary contract, otherwise the tax office could reject the chain gift. The exact amount of inheritance tax can be calculated online with a Finanztip calculator.
With higher assets, taxes can be saved by giving a gift during one's lifetime, which allows the transfer of assets to be spread over time. The inheritance tax has three tax classes with allowances: 500,000 euros for spouses, 400,000 euros per child, 200,000 euros for most grandchildren, 100,000 euros for parents, great-grandchildren and grandparents, and 20,000 euros for most others.
Despite the complexities surrounding inheritance and gift taxes, Finanztip's E-Paper aims to simplify the process and help Germans make informed decisions about their estates. For those who wish to learn more, the E-Paper is available for free download at finanztip.de/epaper-erben-und-vererben.
It's essential to remember that everyone's situation is unique, and professional advice should be sought when making decisions about inheritance and gifts. Finanztip Consumer Information GmbH, a company of the Finanztip Foundation, encourages everyone to take the time to understand their options and make the best decisions for their future.
