What is the difference between a gift and a gift causa mortis?
October 9, 2022 | 50,00 EUR | answered by Ella König
Dear tax consultant,
My name is Jakob Stamm and I am currently in a situation where I need to deal with the topic of inheritance tax. My parents want to give me a larger sum of money to financially support me. However, I have heard of different terms such as gift and gift in contemplation of death and I am unsure about the exact difference between these two.
For background information: My parents are already in advanced age and want to ensure that I can receive parts of my future inheritance in case of their passing. Therefore, they are considering giving me a gift now. However, I want to make sure that I fully understand the tax implications of this decision to avoid unexpectedly high taxes.
My concern is that I may have to pay higher taxes in the case of a gift in contemplation of death compared to a conventional lifetime gift. Additionally, I am unsure if there are specific tax exemptions that I can utilize in either of these options.
Therefore, my question to you as an expert: What is the exact difference between a gift and a gift in contemplation of death? What are the tax implications of these two options and which option would be advisable in my case to minimize inheritance tax?
Thank you in advance for your support and I look forward to your expert advice.
Sincerely,
Jakob Stamm
Dear Mr. Stamm,
Thank you for your inquiry regarding the topic of inheritance tax and gifting. It is understandable that you would like to delve into this complex topic in your current situation in order to make the best decision for yourself and your family.
To answer your question, I would like to first explain the exact difference between a gift and a gift in contemplation of death. With a gift during lifetime, your parents transfer a portion of their assets to you while they are still alive, for example in the form of money or real estate. This gift is subject to gift tax, which can vary depending on the amount of the transferred assets and your relationship to the donors.
A gift in contemplation of death, also known as anticipated inheritance, is also made during your parents' lifetime, but with the difference that the transfer only becomes effective upon their death. This means that while you have a claim to the transferred portion of the assets during their lifetime, you only become the owner after your parents pass away. This form of transfer is also subject to gift tax, but the value of the transferred assets is taxed at the time of your parents' death.
In terms of tax implications, it is important to note that both gifts during lifetime and gifts in contemplation of death are subject to exemptions. These exemptions vary depending on the relationship between the donor and the recipient. In Germany, for example, there are exemptions of €400,000 for children and €20,000 for grandchildren.
In your case, where your parents are already of advanced age and wish to transfer parts of their future inheritance to you, I would recommend seeking professional advice. An experienced tax advisor can help you calculate the tax implications of both options and find a tailored solution for your individual situation. It is important to carefully consider all aspects in order to minimize inheritance tax and avoid legal pitfalls.
I hope this information has been helpful to you and I am available for any further questions you may have.
Sincerely,
Ella König
Tax Advisor
