Interview on inheritance tax
“We are busy with asset transfers on a piecemeal basis”
12/18/2022 3:36 p.m
The demand from notaries is high: from the coming year, inheritance and gifts can become more expensive. In an interview, notary Marc Ströbele explains for whom a real estate transfer still makes sense this year and how he ensures that nothing happens in a hasty manner.
From 2023, many fear higher inheritance and gift taxes. Are people just running into the notary’s office to quickly transfer their property?
Marc Ströbele: Yes, the demand is huge. I have twice as many cases as usual. This morning alone I accepted three new donation requests. By the end of the year, my team and I will be busy with asset transfers almost non-stop. Many parents want to transfer their property to their children, but also grandparents to their grandchildren.
That sounds stressful…
As a rule, donations are actually smoother and well prepared. The tax consultant is involved and carries out the property valuation. These cases are less hot-buttoned than the current ones. In the current cases, the question is what the property is actually worth. We can hardly determine the real estate values at the moment. Expert reports or opinions from the expert committee are hard to come by because there is not enough time. Values are estimated and assumed, which is associated with a certain risk.
How hard can you push the tempo so that everything still runs correctly?
I make sure that nothing is given without thought. As a rule, I always draw up transfer agreements on the basis of a previous discussion in which the parties involved sit at the table with me. It must be clear to them that the property is released from their ownership with the donation, even if they reserve the right to use it economically, i.e. usufruct. The risks associated with a gift must also be clear: if parents secure the usufruct right to the property, they should get on well with the children. Of course, we are also talking about fallback clauses, which parents can use to reclaim the property under certain conditions.
How do you ensure that a transfer doesn’t happen in a rush?
When people come to me and say, “Please, this has to happen quickly!” I say that nothing works without a conversation. If necessary, half an hour is enough for this, but only then do I draw up the draft contract. And this should then be left with the client for a few days so that they can check it in peace. At the end comes the certification. In cases in which I am now conducting the initial talks, I usually certify the donation contracts between the years. So there are at least two weeks between them. However, there is no reflection period for donations, as there is in consumer or purchase contracts.
Does that mean you can still make a donation by the end of the year?
Yes. We step on the gas. What is becoming increasingly narrow are chain gifts, for example within the family. When spouses transfer property to one another, they cannot transfer it to children in the same deed. That would be tax abuse. This means that the spouses must have the opportunity to reconsider whether they want to continue the transfer. In such cases, the first transfer step would have to happen before Christmas. The second step should then take place between the years. The change in inheritance tax is particularly relevant for buildings that are valued using the income and material value method.
What is your impression – will it be significantly more expensive?
We assume that real estate values will increase by 20 to 30 percent. But I wouldn’t necessarily say that it will inevitably be really more expensive for heirs and recipients. You have to be more precise when it comes to donations in the future, so that allowances are not exceeded. In the context of asset succession, donors can no longer easily and unplannedly transfer real estate to the next generation. Otherwise higher taxes could actually be incurred.
For whom does it make sense to transfer a property now?
I would say that properties should now be transferred for which I can already assess the values relatively well and without further expert opinions. Things get complicated when it comes to special properties that are difficult to value. This could be commercial real estate, for example. I would be careful, because in these cases it is often not possible to estimate the value exactly. If you assume a value that is too low, there may be a gift tax that you did not expect. The decision to transfer the assets should have existed beforehand. There is no point in giving away a property now just to save on taxes. That will be regretted.
How can real estate be transferred in the most tax-efficient way possible?
Frequent constructs are so-called family pool companies. For example, real estate is brought into a limited partnership or a partnership under civil law. Those who are later to be involved receive shares in the company and thus also have shares in the property. A classic transfer option between spouses is the marital property system. Real estate can also be transferred tax-free in this way. Another option is the matrimonial home swing: Here, for example, the husband transfers the home he uses to his wife tax-free. If he later buys back the marital home, the purchase price goes to her. The point of this is that in the end I transfer an amount of money that is not actually tax-exempt, for example one million euros, to the other spouse tax-free. But you can’t do that too often, the tax authorities take a close look at this.
What is your advice to those considering a gift before the end of the year?
It is important to know what values you can assume for real estate, for example. If you have no idea or only an approximate idea, it will be complicated for you. To those who were planning to do this in principle and have a feeling for the resilient real estate value, one can certainly say: Now is a good time. From next year, a transfer is not excluded. Only then do you have to examine it more closely and think more carefully. But that works too.
Laura Eßlinger spoke to Marc Ströbele
The interview is up first Capital.de published