Is there a difference between inheritance tax and gift tax?
December 11, 2022 | 40,00 EUR | answered by Wilhelm Ackermann
Dear tax advisor,
My name is Quentin Schröder and I have a question regarding inheritance tax and gift tax. My father recently passed away and left me a substantial inheritance. Now I am wondering if I have to pay inheritance tax on this inheritance and if there is a difference compared to gift tax.
During his lifetime, my father had already made some larger gifts to me, including a property and a car. I am wondering if these gifts also factor into the calculation of inheritance tax or if they are treated separately.
I am concerned that I could lose a significant portion of my father's estate due to inheritance tax and would like to know if there are ways to reduce this tax burden. Are there any exemptions or other tax benefits that I can rely on?
Thank you in advance for your assistance and advice. I look forward to your response.
Sincerely,
Quentin Schröder
Dear Mr. Schröder,
Thank you for your inquiry regarding inheritance tax and gift tax. First of all, my heartfelt condolences on the loss of your father. It is understandable that you are concerned about the tax implications of his estate.
Inheritance tax and gift tax are two different types of taxes, but they are closely related. Inheritance tax is due when you as the heir receive assets or other property from your deceased father. Gift tax, on the other hand, is due when you receive larger gifts during the lifetime of the donor.
In your case, since your father has already made larger gifts to you during his lifetime, these gifts will be taken into account when calculating the inheritance tax. There is a tax-free allowance for gifts, which can be used every 10 years. If the gifts exceed the tax-free allowance, gift tax is due. These gifts will then reduce the taxable acquisition within the framework of inheritance tax.
There are also tax-free allowances for inheritance tax, which depend on your relationship to the deceased. As a child of your father, you have a tax-free allowance of 400,000 euros. Only when the value of the inheritance exceeds this amount, inheritance tax is due. You may also be able to claim additional tax-free allowances, for example if you have inherited a specific family business.
To reduce the tax burden, there are various options. One of them is to utilize tax-free allowances and tax brackets to minimize the amount of taxes you have to pay. You may also consider selling or transferring certain assets that would lead to tax liabilities. Timely planning can help minimize the tax burden.
It is advisable to seek advice from an experienced tax advisor to fully exploit all options for reducing the tax burden. I am available for a detailed consultation and can help you find the best possible tax solution for your inheritance.
I hope I have answered your questions comprehensively. If you have any further questions, please do not hesitate to contact me.
Best regards,
Wilhelm Ackermann, Tax Advisor
