It is estimated that roughly half of all inheritances now include real estate. To avoid disputes over the inheritance, many people prefer to take care of this while they are still alive. Real estate, money, and businesses can be transferred to heirs early on. However, there are also pitfalls.
If you haven't specified your inheritance in a will, the law decides the order of succession. Heirs are then spouses, children or grandchildren, parents, or siblings. If the inheritance goes to three children, for example, it would be divided among them. Each child would receive one-third. While money is relatively easy to divide, dividing real estate among three people is more complicated. Inheritance often presents significant challenges. Even if the heirs are in agreement, the probate process is time-consuming and laborious.
That's why more and more Germans are transferring their inheritance while they're still alive. In official terms, this is called "anticipated inheritance." This allows you to 1. decide who receives what, and 2. reduce inheritance tax and the compulsory share. However, it's best to seek advice from a real estate professional. Anticipated inheritance is particularly useful if the property is to be transferred to specific individuals, such as a spouse or children. This way, you can, for example, give your children a smooth start to their professional lives or provide financial security for your spouse.
The preliminary inheritance is not a simple gift. If the mortgage is not yet paid off or there are outstanding debts, these will also be transferred. Furthermore, a transfer is usually subject to conditions. If you transfer all your assets – whether money or real estate – during your lifetime, you are essentially relinquishing control of your livelihood. Therefore, it is crucial to secure your future by retaining rights to the assets. You are entitled to use and manage the transferred assets. This is known as the right of usufruct. It is therefore advisable to address all conceivable interests and your rights to the assets in the transfer agreement.
If you transfer your property to your future heirs prematurely, a lifelong right of residence for the transferor is usually stipulated in the contract. This prevents your apartment from being sold or rented out as long as you live there. It is also advisable to include reversionary rights in the contract. These rights allow you to reclaim the transferred property and regain ownership. This is important if your heir wants to sell the property or is in debt. Should personal bankruptcy loom, you can reclaim your inheritance. This ensures that the inheritance is not entirely lost.
To avoid losing track of things as a testator, it is advisable to consult a real estate professional. They can advise you on how best to secure your real estate inheritance.
Are you wondering what to do with your inherited property? Contact us. We'd be happy to advise you.
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