March 1, 2022, 5:51 pm | Read time: 4 minutes

Gifting a property in Germany is straightforward if the house is personal property. The biggest advantage of transferring real estate during one’s lifetime is having control over its future and ensuring it’s in good hands. Lack of financial resources can also be a reason for transferring property to children. Gifting your house to your children while you’re still alive benefits both you and your descendants, especially since it can save on taxes. It’s important to discuss all conditions, wishes, and specifics not only within the family but also have them documented by a notary. For a gift contract to be valid, it must be notarized and entered into the property’s land register.

Gifting a House – Pros and Cons

Before deciding whether to sell, gift, or bequeath your property, you should be aware of the pros and cons. If you want the house to remain in the family, transferring it during the owner’s lifetime offers clear advantages. Especially when the recipient is your own child, you can save a significant portion of the inheritance tax thanks to gift tax exemptions.

Additionally, gifting during one’s lifetime reduces the total compulsory share claim after the homeowner’s death, thereby lowering the inheritance tax burden. However, for the recipient, the transfer of the house can pose a certain risk. Under certain circumstances, a gift can be revoked. If the former owner becomes insolvent or impoverished after gifting the property, they can reclaim their house.

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Tip for Owners: Tie Property Transfer to Conditions

In Germany, gifting must be conducted without compensation (§ 516 Paragraph 1 BGB), otherwise it would be considered a sale. To ensure your children don’t sell the property or to protect yourself from poverty in old age, you can tie the gift to certain conditions. These include:

• The recipient makes a one-time payment to the owner to prevent poverty in old age or pays off the remaining mortgage.
• The gift contract can grant the former owner a lifelong right of residence or a usufruct right.
• If you want to supplement your monthly income after gifting, you can agree with your children on a lifelong annuity in exchange for the gift.
• A property transfer can also be tied to the condition that the recipient takes care of the donor’s future elder care.

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What Does It Cost to Gift Property to Children?

Since a property gift must be notarized and entered into the house’s land register, costs are involved. As a rule of thumb: The higher the value of the property and land, the higher the incidental costs of the transfer. Typically, the owner bears these costs and should thoroughly inform themselves in advance.

If it’s a lifetime property transfer, an official gift contract notarized by a notary is required. The costs are governed by the Court and Notary Fees Act. For an average property value of 350,000 euros, these notary costs are about 1,500 euros. Additionally, transferring property to your children incurs fees for changing the house’s entry in the land register, averaging around 1,000 euros. Depending on the property’s value, gift tax may also apply.

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Gifting Property – Tax Exemptions for Transfers to Children

If the value of the gifted house exceeds the applicable exemptions, gift tax is due in addition to the costs for the land register entry and notary. This tax is based on the house’s value, with gift tax favoring close relatives like children, grandchildren, or siblings.

If you want to gift your property to your children, a current exemption of 400,000 euros per child applies. Including a usufruct right for the parents in the gift contract can further reduce the tax burden. This is especially beneficial for properties valued over 400,000 euros. Ideally, no taxes are due when gifting property to biological children.