Anticipated inheritance and gifts

It is possible for assets to be transferred to the prospective heirs during the lifetime of the testator. This is then referred to as an anticipated inheritance, which frequently occurs by way of gifts.

 

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Germany is set to be faced with a wave of inheritances in the coming years, with estimates suggesting that trillions of euros worth of assets are to be transferred. It is not necessary to wait until the testator’s death to transfer these assets. Depending on the individual circumstances, it might make more sense for the testator to transfer all or some of his assets during his lifetime.

 

An anticipated inheritance, as this is referred to, may offer several advantages. For instance, the prospective heirs are able to receive assets early on at a time when they need them, e.g. because of a desire to start a family or develop one’s professional career. Transferring assets during the life of the testator can also potentially give rise to tax advantages.

 

If the estate includes land, collections or business assets, these are often devastated as a result of succession. An anticipated inheritance can prevent this from happening as well as help to avoid disputes from arising among the heirs at a later date. That being said, the rules of succession law, in particular those concerning the right to a compulsory portion, should not be overlooked in cases involving an anticipated inheritance.

 

It is even possible for the future testator to benefit from a premature transfer of assets, e.g. if extensive renovation work is soon to be carried out on the house occupied by the testator, but the necessary capital is not available. If the property is transferred during the testator’s lifetime to his future children, they can bear the renovation costs. In doing so, it might be a good idea to seek contractual assurances regarding a right of residence for the remainder of the testator’s life (beneficial interest). There are also other types of clauses that can be agreed to in a contract. One of the central elements here is the so-called Rückfallklausel (subject-to-tax clause). If, for instance, a father transfers a property by way of a gift to his daughter who then dies before him, her statutory heirs or her heirs as stipulated in a will would then be entitled to inherit. If there is a Rückfallklausel, the property would return to the father.

 

Lawyers who are experienced in the field of succession law can provide comprehensive advice on whether transferring assets during the testator’s lifetime, a will or a contract of inheritance is the most appropriate solution.

 

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