German retirement and pensions

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I just want to be able to get the citizenship, if I wanted to. 3 months X 85 = 255 euro is an ok exchange; assuming that's the bare minimum needed.

I promise, I won't pay more than that... Scout promise.

 

Plus, I was employed during this time, and shit loads of money is already, paid, just paying that extra 3 months is a reasonable investment I think.

 

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General question concerning elderly parents retirement planning. My parents are now retired in Germany and have a house. Are there any 'best practices' for how my parents can maximize their retirement and also potential ways in which we could keep the home in the family?

 

For example, should the home be 'gifted' or sold to the children with the parents allowed to live in the house for the rest of their lives? Or is it possible to create a trust which would protect the assets?

 

My general thoughts are that we want our parents to use all of their money and assets to prolong their quality of life and enjoyment of life as well as maintaining the best health care services that they can afford.  However, I have heard that if either one becomes incapacitated enough to need a 'nursing facility' that the general process is that they take whatever money, assets you may have until they are gone, and then you are supported by the health system. If this is the case, can we protect the assets so they are not lost?

 

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5 hours ago, brokenm said:

General question concerning elderly parents retirement planning. My parents are now retired in Germany and have a house. Are there any 'best practices' for how my parents can maximize their retirement and also potential ways in which we could keep the home in the family?

 

For example, should the home be 'gifted' or sold to the children with the parents allowed to live in the house for the rest of their lives? Or is it possible to create a trust which would protect the assets?

 

My general thoughts are that we want our parents to use all of their money and assets to prolong their quality of life and enjoyment of life as well as maintaining the best health care services that they can afford.  However, I have heard that if either one becomes incapacitated enough to need a 'nursing facility' that the general process is that they take whatever money, assets you may have until they are gone, and then you are supported by the health system. If this is the case, can we protect the assets so they are not lost?

 

 

Couple of info and thoughts here for you, @brokenm

 

1. trusts do not exist in the German legal system. Hence you can not safeguard or protect anything thru a trust as you would in USA or UK.

2. yes, the main risk for your parents and, in extension, to their children is that one or both of them could become a case for 24/7 long-term-nursing care. While both your parents have been paying (probably??? -depending on when they lived in Germany and since when they have been paying to the German social welfare system thru public health insurance or private German health insurance) into the compulsory "Pflegepflichtversicherung", their costs are met about halfway (depending on where they are living, because the costs for full-time nursing care vary a lot within Germany) from this insurance coverage. Which still leaves for one person an average gap of 1500-2000 EUR per month (!) that would not be covered by the nursing-care insurance.  In order to pay for this, at first any existing income (pension income, interest or rents earned, dividends etc) will have to be used. If that is enough, it can happen that certain assets belonging to them need to be liquidated, too. There are a lot of court proceedings and verdicts ongoing and recently passed that deal in detail with what can be demanded to be sold in order to get the money for the nursing-care and what not.

Now, if neither the income nor the assets of the parents are sufficient to cover the costs of nursing care, the state will step in and pay for it..for the time being. After some time they will then reach out to the direct-line children and demand to be repaid by them. If there are several children, they can just go after one and have them then share it out amongst them (which creates obviously a lot of tension among siblings in such a situation). So, even if you find a legally sufficient way to get the ownership of the property transferred to you, you'll be still potentially liable.  And any gifting would become a legal problems within the first 10 years if during this time your parents would become a case where expensive nursing care is required - i.e. the government could demand the money back because it would be considered unjust to make yourself poorer in order for the public/community to bear the financial burden. Same even if you buy the property from them for anything remotely below market-prices. 

 

So, what can you do?

1. ask your parents to get quotes for additional long-term nursing care insurance that covers the gap between public compulsory insurance and the real costs. It may not come cheap since they are already in retirement, but it beats the alternatives. They can go for a "Private Pflegeversicherung" or a "Privates Pflegetagegeld" and there are specialized insurance advisors to assist them with finding the right solution for them.  That way they can protect themselves - because if just one of them requires nursing care, the other one can be in a lot of financial trouble suddenly, too - and their children from the unpleasant consequences of having to pay for the nursing care eventually.

2. get a lawyer in Germany specialized on estate/gifting laws to check, if and what steps can be taken to protect the property in such a case. It could well be that at least if one of them is still living there, that it is protected against selling..or not. Hence a solid legal advice is clearly required here.

3. your parents should also set up a number of authorization documents with a specialized lawyer or advisor for the case of one or both being incapacitated to rule and decide about their own life (dementia, coma etc) or finances. If they have, for instance, a joint bank account, it does happen now more and more often that if one is confined to long-term-nursing care and mentally unable to take care of finances, the courts nominate an external person as fiduciary to take over the finances. Which then suddenly means that the remaining spouse has no direct access to their bank accounts and finances anymore.

There is a package of decisions/documents to set up in such a way that they are publicly notarized and available like a "Patienteverfügung" (which rule under which conditions, for instance, life-extending medical treatment shall be curtailed because without that the doctors have to keep the machines running even if you know that your parent would not have wanted that), a "Vorsorgevollmacht" which authorizes the other spouse or a child or any other third person to take over the legal responsibility for the financial and social welfare if one becomes unable to take care of this anymore

 

So, you guys have a lot on your agenda to talk about. These are usually very unpleasant talks as the oszilate around topics that we all like to avoid rather than face. But they are nescesarry and part of "estate planning" in Germany.

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Thank you Starshollow. Very helpful. 

 

It it also seems that some individuals sell their home to their children at a reduced rate with wohnrecht. Is there a minimum value that these can be ‘sold’? Does it have to be fair market value?

Das lebenslange Wohnrecht oder Wohnrecht auf Lebenszeit beschreibt ein einmal erteiltes Wohnrecht ohne Befristung. Es endet erst mit dem Tod des Berechtigten.
Es endet nicht bei einem Verkauf des Gebäudes oder der Vererbung desselben.

Häufig wird eine solche rechtliche Konstellation verwendet, wenn die Eigentumsübertragung zwischen Eltern und Kindern vorweggenommen werden soll, um für den Erbfall mögliche Erbschaftssteuern durch die Nutzung von sich wiederholenden Freibeträgen zu senken.

Die Eltern erhalten in dem Fall, dass sie ihre Immobilie schon zu Lebzeiten auf die Kinder übertragen, das Recht, die Wohnung bis zum Lebensende weiter zu nutzen.

 

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On 21.3.2019, 13:56:21, brokenm said:

Thank you Starshollow. Very helpful. 

 

It it also seems that some individuals sell their home to their children at a reduced rate with wohnrecht. Is there a minimum value that these can be ‘sold’? Does it have to be fair market value?

Das lebenslange Wohnrecht oder Wohnrecht auf Lebenszeit beschreibt ein einmal erteiltes Wohnrecht ohne Befristung. Es endet erst mit dem Tod des Berechtigten.
Es endet nicht bei einem Verkauf des Gebäudes oder der Vererbung desselben.

Häufig wird eine solche rechtliche Konstellation verwendet, wenn die Eigentumsübertragung zwischen Eltern und Kindern vorweggenommen werden soll, um für den Erbfall mögliche Erbschaftssteuern durch die Nutzung von sich wiederholenden Freibeträgen zu senken.

Die Eltern erhalten in dem Fall, dass sie ihre Immobilie schon zu Lebzeiten auf die Kinder übertragen, das Recht, die Wohnung bis zum Lebensende weiter zu nutzen.

 

well, if  set this up, the value of the property is (on the outside) greatly reduced because nobody would buy it at market prices if the tennants cannot be evicted until they die. That is one way to "poison the well" , financially speaking. 

But you'll need a good lawyer AND a good tax advisor for this in order to make it audit-proof for the Finanzamt and, in case something happens to them in the first 10 years after selling the property to their children - Sozialkassen/ämter.  But it could be a way to do this.

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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