Settling your estate: How to transfer your land, apartment and house

Transferring or bequeathing property – which is the better solution depends, among other things, on the costs. This is because fees and taxes are also incurred when transferring ownership. Normally, the beneficiary bears the financial costs of transferring ownership of a property, unless other specific arrangements have been agreed in the transfer agreement. The first financial expense is the notary’s fees when transferring a house or apartment. The notary is always involved when ownership of a property is transferred via a contractual agreement, regardless of whether it is a purchase or other form of transfer of ownership. It is therefore not possible to transfer a property without a notary. The exact amount of the fees for the notary’s services is regulated in the German Court and Notary Fees Act (GNotKG); the scale of costs is based on the value of the property. There are also fees for the entry in the land register. Here too, the scale of fees depends on the value of the property and can be found in the GNotKG.

It is advisable to commission a surveyor to draw up a market value appraisal so that you can use a realistic value of the property as the basis for calculating the costs. In addition to these costs, gift taxes are incurred when transferring an apartment or house. The amount varies depending on the value of the property, the degree of relationship and the tax class. Spouses, registered partners as well as stepchildren, adopted children and own children are in class I, siblings, nephews and nieces as well as children-in-law and stepparents are in class II and all non-related beneficiaries are in class III. Land transfer tax is payable on the transfer if a purchase agreement is concluded. However, life partners or direct descendants are exempt in the case of a gift. In principle, the gift is subject to a period of 10 years. During this period, taxes are due on the transfer. However, you can avoid the 10-year period and thus avoid paying tax if you remain living in the property yourself during this time.

If an owner wishes to transfer a house or apartment, it is possible to save on gift and inheritance tax by means of usufruct. In this case, the owner grants himself the right to transfer or give an apartment to someone else, but at the same time receives a lifelong right to use the property himself. The owner can specify the exact conditions and duration of the transfer of the house with right of residence in the contract. You can save on taxes through the usufruct via the gift tax allowances. The amount depends on the degree of kinship between the person making the gift and the person receiving the gift.

The closer the relationship, the higher the tax-free amount. If the value of the property transferred is below the upper tax allowance limit, the donee is not obliged to pay tax. These tax-free amounts can be used again every 10 years. The usufruct now comes into play with the tax-free amount, as the equivalent value of the usufruct is deducted when calculating the tax-free amount, which reduces the taxable value of the property. The age of the donor and their probable life expectancy are important in determining the equivalent value. The basis for their calculation is the mortality tables of the Federal Statistical Office.

There are various reasons for transferring a house during your lifetime. The main reason for transferring one’s own property is probably the desire to keep the property in one’s own family and to receive as few financial deductions as possible as a result of the transfer of ownership. As inheritance tax can be high, many owners want to avoid it by making a gift or transfer instead of an inheritance. In addition, it can make sense to transfer the house in advance in the event of long-term care in order to be able to access state support after the 10-year period has expired, as social welfare offices often require the sale of property before they will cover the costs of living in a care home.

Another case that is frequently encountered in practice is the transfer on divorce. As a rule, one spouse remains in the property with the children while the other partner moves out. This is associated with disadvantages that are compensated for with a payout. The partner who moves out can decide to transfer their share of the house. For example, if you move out and decide not to transfer half of the house to your wife, you can transfer ownership of the property to your children, provided they are of legal age.

The procedure for transferring a plot of land or property is prescribed quite precisely by law. First of all, a transfer agreement must be drawn up and notarized by a notary. This contract represents a legally binding commitment to the change of ownership, also known as conveyance. The notary then arranges for an entry to be made in the land register, which makes the transfer of ownership of the property legally effective. This procedure for transferring real estate is always the same, regardless of whether an owner-occupied or rented property is being transferred.

If the donor wishes to retain the rental income from a rented property, this can be secured via usufruct, as this extends not only to the right of residence but also to the economic use of the property. If only part of the rental income is to be retained, this is possible by granting a quota usufruct. In this case, the donor and donee agree on the amount of the respective share of the rental income. For the person receiving the gift, the amount of any rental income is important for their own tax return, as it is subject to income tax. In the case of a gift or inheritance, on the other hand, only an event-related tax return relating to this specific event needs to be prepared.