Buying property in Germany - Transferring money from US

50 posts in this topic

10 hours ago, jeba said:

@PandaMunichJust out of curiosity: Would you be able to claim the €400 k threshold twice if you receive the first €400001 from your dad and another €400001 from your mother?

 

Yes, of course, the tax-free allowance for gift/inheritance tax is 400k€ per relationship "parent --> child".

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On 10/29/2021, 4:44:59, PandaMunich said:

 

Yes, of course, the tax-free allowance for gift/inheritance tax is 400k€ per relationship "parent --> child".

 

Thank you all for your help and assistance here - really appreciated. 

 

Based on the link you provided, it is not clear to me if the 400k euro between a Parent -> Child is reset every year. 

 

If my parent would like to send me 550k euros, is it recommend to first send 400k euros this year in 2021, and then the remaining 150k euros in 2022? 

 

My understanding is that for 10 years, the maximum tax free gift amount is 1.6m Euros. 

 

 

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1 minute ago, endsee said:

Based on the link you provided, it is not clear to me if the 400k euro between a Parent -> Child is reset every year. 

You did not read the link attentively:

"After 10 years, the tax-free allowance resets.
Which is why wealthy families start transferring assets to their children as soon as they are born, and continue doing so every 10 years."

 

3 minutes ago, endsee said:

If my parent would like to send me 550k euros, is it recommend to first send 400k euros this year in 2021, and then the remaining 150k euros in 2022? 

No.

They should send you the second instalment of 150k€ after more than 10 years have elapsed since the last gift, i.e. at some point in 2032.

 

5 minutes ago, endsee said:

My understanding is that for 10 years, the maximum tax free gift amount is 1.6m Euros. 

Wherever did you get that idea?

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8 minutes ago, PandaMunich said:

Wherever did you get that idea?

 

He could theoretically get €1.6 million over 10 years by receiving €400k from each of his parents and €200k from each of his grandparents (assuming they're still alive).

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21 minutes ago, PandaMunich said:

You did not read the link attentively:

"After 10 years, the tax-free allowance resets.
Which is why wealthy families start transferring assets to their children as soon as they are born, and continue doing so every 10 years."

 

No.

They should send you the second instalment of 150k€ after more than 10 years have elapsed since the last gift, i.e. at some point in 2032.

 

Wherever did you get that idea?

 

Understood, sorry for my misunderstanding there. 

 

That is unfortunate to hear as it seems that if I were to receive 550k euro, then 150k euro will be taxed at 11% as I am in Tax Class 1 - according to the link here https://www.german-probate-lawyer.com/en/detail/article/taxation-of-gifts-in-germany-4250.html essentially 16,5k euros will be taken for tax. 

 

 

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13 minutes ago, endsee said:

 

Understood, sorry for my misunderstanding there. 

 

That is unfortunate to hear as it seems that if I were to receive 550k euro, then 150k euro will be taxed at 11% as I am in Tax Class 1 - according to the link here https://www.german-probate-lawyer.com/en/detail/article/taxation-of-gifts-in-germany-4250.html essentially 16,5k euros will be taken for tax. 

 

 

 

That is correct, if it all came from the same parent. If you have any other surviving relatives, you could eliminate that tax burden by "sourcing" the gifts through them. As I mentioned, you can receive €200k from each grandparent or even €20k from each sibling, cousin, aunt, and uncle, and other distant relative you have.

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18 minutes ago, endsee said:

That is unfortunate to hear as it seems that if I were to receive 550k euro, then 150k euro will be taxed at 11%

My heart bleeds for someone who is receiving over half a million euros they've never done anything to earn, and has to pay 16.5k tax.

 

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41 minutes ago, endsee said:

That is unfortunate to hear as it seems that if I were to receive 550k euro, then 150k euro will be taxed at 11% as I am in Tax Class 1.

Don’t move to the Netherlands then: a child can inherit €20K tax-free from the parents only. With €550K you talk roughly about €93K tax. 

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16 minutes ago, LukeSkywalker said:

Don’t move to the Netherlands then: a child can inherit €20K tax-free from the parents only. With €550K you talk roughly about €93K tax. 

 

In Iceland they would pay 52k in taxes if it's inherited.  If it were a gift rather than inheritance, you can either do pre-paid inheritance which is 10% tax but no tax free limit or you give it as a gift in which case it's taxed like income.

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1 hour ago, dstanners said:

My heart bleeds for someone who is receiving over half a million euros they've never done anything to earn, and has to pay 16.5k tax.

Resentment is like taking a poison and waiting for the other person to die.  

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50 minutes ago, LukeSkywalker said:

Don’t move to the Netherlands then: a child can inherit €20K tax-free from the parents only. With €550K you talk roughly about €93K tax. 

Can they gift it freely over time as in Germany?  It’s all about the rules.

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1 hour ago, BethAnnBitt said:

Resentment is like taking a poison and waiting for the other person to die.

No, you missed the point: when you have had a significant amount of good luck, it seems petty to complain about sharing such a relatively tiny proportion with the the public.  

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2 minutes ago, dstanners said:

No, you missed the point: when you have had a significant amount of good luck, it seems petty to complain about sharing such a relatively tiny proportion with the the public.  

No  I didn't miss your point at all.  I just think it's a cheap shot, especially when you have no knowledge of the details.  But, you're entitled to your opinion of course. 

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2 hours ago, BethAnnBitt said:

Can they gift it freely over time as in Germany?  It’s all about the rules.

Parents can give €100K as a gift, tax-free, only if it used to buy a house or apartment. 
 

Annually, they can give €6604 per child tax-free. Germany is far more generous. In the Netherlands we also have capital tax.Ouch. 

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In the UK you can give as much as you like as long as you don't die within 7 years.  If you do, the value of the gift is brought back into account for Inheritance Tax, though the rate is tapered from 40% to 0% depending on how many of those 7 years you have survived.  Otherwise you can give up to £3,000 each year to anyone.

 

The Estate itself is tax-free if left to the spouse, or up to £500,000 is tax free if you are leaving things others and your house to direct descendants.  For a married couple, that means, when the second person dies, up to £1m is exempt from Inheritance Tax, depending on how much of the £500,000 was "used up" when the first person died. 

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5 minutes ago, GaryC said:

In the UK you can give as much as you like as long as you don't die within 7 years.  If you do, the value of the gift is brought back into account for Inheritance Tax, though the rate is tapered from 40% to 0% depending on how many of those 7 years you have survived.  Otherwise you can give up to £3,000 each year to anyone.

 

 

Good idea to check an insurance against this- yes, siblings did this in the UK.

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8 minutes ago, RedMidge said:

Good idea to check an insurance against this- yes, siblings did this in the UK.

I think that depends on how big the gift is (is it more than £325,000 from each person, in which case it may be wise) and whether you think the estate including the gift(s) would be over £500,000 for a single person to whom the transfer of unused spousal allowances does not apply (never married but with kid(s) to whom the home is given), or £1m for a married couple where everything on the first death goes to the spouse and then to the kid(s) on the second death.  The £325,000 or £500,000/£650,000/£1m (various options for tax-free amounts of the estate) would be reduced by the value of the gift(s) in question.  Bit complex but ultimately a question of maths and risk appetite.

 

I also wonder who would take out the insurance?  Inheritance Tax is a tax on the value of the deceased's net assets, payable by the Personal Representative(s), i.e. the Executor(s). That is, unless the gift ultimately falls to be taxed on the person who received it - and that is a whole other kettle of fish! 

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What about giving gifts as loans and doing nothing if the "borrower" forgets to repay?

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Because a gift is a gift and a loan is a loan.  If there is a loan outstanding at death, then in the UK at least, the outstanding balance of the loan is also an asset of the estate.  And if you write it off on your death bed, it is a gift.  

 

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