Gaining Advantages from Prompt Charitable Giving
In the realm of anticipated inheritance, usufruct has emerged as a popular instrument that allows owners to transfer wealth while retaining comprehensive use of that wealth. This legal right can be established on various items, transferred rights, and even the entire estate, as stated by Notary Nina Bomhard from Hengersberg, Bavaria.
Usufruct may be applied to real estate, business and business shares, art collections, classic cars, jewelry, valuable household items, and the entire estate. For movable assets like a car, jewelry, and art, an agreement between the donor and beneficiary, even verbally, and handover is sufficient, although a written agreement is advisable for evidentiary reasons. On the other hand, for real estate, an agreement in a form suitable for the land register and the entry of the usufruct in the land register is required. Beneficiary and usufructuary must involve a notary.
The value of the usufruct right is determined by the age of the donor. A younger donor has a higher usufruct value due to a longer lifespan and longer usufract period. In the optimal case, beneficiaries may not have to pay any gift tax if the value of the usufruct right offsets the remaining value of the gift.
Usufruct is nothing more than a gift tied to a counter-performance. This means that the recipient of a wealth transfer (such as a house and business) is not exempt from gift tax, but usufruct rights reserved for the donor can reduce the value of the gift and thus the tax.
Entrepreneurs can transfer their business and business shares early to successors, retaining the usufruct right. Transferring wealth at an early age can significantly reduce the gift tax. For example, transferring a rental house at age 60 can help future heirs offset about 40% of the value relevant for gift tax.
However, it is rare that the full tax advantage of usufruct can be exploited due to complex calculations. The tax office assumes that the usufructuary will reach the age of the statistical life expectancy. If the usufructuary dies shortly after agreeing to a usufruct, the tax advantage is also lost.
Key benefits and considerations include tax reduction via valuation, retention of use, applicability conditions, complexity and legal formalities, and impact on heirs and business succession. Usufruct arrangements affect how heirs are taxed and may influence business continuity in family businesses, as valuation rules may reduce taxable estate size and facilitate succession planning.
In summary, using usufruct can be an effective tool to reduce inheritance tax by splitting ownership rights, but it requires attention to legal conditions, property characteristics, and adherence to regional tax rules to maximize benefits and avoid complications.
Community members considering early business succession may find vocational training valuable, as the usufruct of business shares can help finance such training, minimizing personal-finance burdens. During the usufruct period, families can benefit from retaining control over the business while reducing the gift tax liability, which can follow extensive inheritance tax obligations.
