Anyone who wants to pass on their money to children, grandchildren or partners should plan the gift carefully. With the right allowances and a strategic approach, you can not only save taxes and comply with laws, but also avoid family disputes.
Legal gray area: When cash gifts become illegal
Giving away cash is generally legal in Germany, but under certain circumstances it can constitute tax evasion (Section 370 AO) or money laundering (Section 261 StGB). The donation becomes illegal if it results in a tax evasion or a tax advantage and thus taxes are evaded (Section 370 AO). According to Section 30 Paragraph 1 ErbStG, donations must be reported within three months unless notarized. If these sums are concealed, there are high penalties: in the case of tax evasion, the measure ranges from high fines to prison sentences of up to five years, and in particularly serious cases even up to ten years. In addition, the Money Laundering Act (AMLA) applies to amounts over 10,000 euros: banks are obliged to require proof of origin when depositing such sums. If this cannot be provided or if the money comes from illegal sources, you face a prison sentence of three months to five years for money laundering (Section 261 Paragraph 1 StGB).
Giving as a gift instead of bequeathing it: advantages and reasons
In principle, a gift can function like an early inheritance. It offers the opportunity to transfer assets to children, grandchildren or even spouses during your lifetime. Many parents decide to make a gift to support their children with larger investments or to provide financial security for the family. Others want to use a gift to regulate the division of assets during their lifetime and avoid possible inheritance disputes among the children. The clearer the goal of the donation, the easier it is to plan and implement the path there, according to the savings bank.
Use allowances cleverly
Donations are subject to gift tax. However, the tax office grants generous allowances that depend on the degree of relationship. Spouses or registered life partners can gift each other assets worth up to 500,000 euros tax-free. The limit is 400,000 euros for children, 200,000 euros for grandchildren and 20,000 euros for parents or grandparents. This is regulated in Section 16 ErbStG. Gift tax only applies above these amounts. A key advantage over inheritance is that these allowances can be used again every ten years. For example, a grandfather can give his granddaughter 150,000 euros without incurring taxes. Ten years later he can transfer another 150,000 euros, also tax-free.
Tax classes and tax rates
The amount of gift tax is determined by two factors: the degree of relationship and the value of the gift. Basically, the closer the relationship, the cheaper the tariff. The tax is subject to a progressive graduated tariff in accordance with Section 19 ErbStG. This means that the tax rate increases within the respective tax bracket the higher the taxable amount is.
Class I taxpayers, such as children or grandchildren, pay between 7 and 30 percent. In class II (including siblings, nieces, nephews) the rates range between 15 and 43 percent, while for people without close ties in class III the rates range from 30 to 50 percent. Although the conditions are similar to those of an inheritance, the decisive advantage of the donation, as the Sparkasse reports, lies in strategic planning. By repeatedly using the allowances every ten years, the tax burden can be massively reduced or even avoided entirely.
Donation agreement and notification to the tax office
Even though many gifts are given informally, it is advisable to conclude a gift agreement for larger assets. This regulates the rights and obligations of the donor and recipient and ensures legal clarity. In addition, donations must be reported to the responsible tax office within the first three months. How t online reported, forms are available for reporting to the tax office, which must be filled out jointly by both parties. The type of asset – whether cash, securities or company shares – must be stated in detail. However, a report is not necessary if the donation has already been officially certified by a court or a notary.
Editorial team finanzen.net