In the next few years, many working people will enter their well-deserved retirement. The children are out of the house. Life is to become more relaxed and yet not boring. Hobbies will be intensified, bigger trips are on the agenda. Then the question usually arises as to what will happen when you are no longer there. Therefore, it makes sense to deal with one's own will, a living will and a health care power of attorney. If one deals with these topics, the question often arises as to whether the (partial) transfer of assets to the children does not already make sense. Tax issues and in particular the allowances for tax-free transfers play an important role here. And can I protect and safeguard myself for old age even though I am already transferring real estate, for example?
If a transferor wants to transfer real estate to his or her children, but still wants to manage and rent it out himself or herself, usufruct comes into consideration. If the transferor does not want to do this, i.e. wants to withdraw from the administration of the real estate, a right in rem (§ 1093 BGB) or the granting of recurring payments, such as the payment of a pension, is more likely to be considered.
Usufruct splits the asset into substance and right of use (e.g. in the case of land, §§ 1030-1057 BGB). The usufructuary (or the usufructuary) has the right to draw all benefits from the encumbered object. The usufructuary (the new owner) must, within the framework of a proper economy, ensure that the property is maintained, i.e. also carry out repairs, renewal, etc. of the property. If a usufruct is granted to a natural person, it is not transferable (§ 1059 sentence 1 BGB) and also not inheritable (§ 1061 BGB). The usufruct expires upon the death of the usufructuary (§ 1061 sentence 1 BGB).
Usufruct can be granted not only to an entire plot of land, but also to a heritable building right or to residential or part ownership (cf. § 1066 BGB). Different variations are possible. It may make sense to agree on the reversal of the gift (and thus of the usufruct) in the event of
(1) the predecease of the donee(s), (
2) the sale or encumbrance of the transferred object without the consent of the transferor, or
(3) a substantial deterioration in the financial circumstances of the donee.
Whoever gives away a property that is encumbered with a usufruct saves gift tax. This is because the value of the real estate per se is not taken as a basis, but rather the value of the usufruct is deducted from this value over the expected duration of the usufruct.
Right in rem to a dwelling
One possibility for the transferor to secure himself after the transfer of the real property is the creation of a right in rem to a dwelling (§ 1093 BGB). In contrast to usufruct, the right in rem is limited to the fact that the transferor may only use the dwelling for residential purposes. Tenancy law provisions do not apply. The transferor may stipulate that he or she is to benefit from a payment made on a regular basis. In the case of a right of occupancy, the beneficiary may not, in principle, transfer rooms to third parties. Normally, he or she is only responsible for the cosmetic repairs in the flat. The housing right can be structured in such a way that the donee has to bear the costs for electricity, water, sewage, heating, refuse collection and ordinary or extraordinary maintenance. The housing right is secured in the land register by a limited personal easement (§§ 1090 ff. BGB).
Finally, the transferor may waive recurring benefits from the donee. This can take the form of an annuity. In this case the transferee undertakes to pay the transferor a monthly amount for his lifetime. The parties may expressly agree to increase this annuity if, for example, the circumstances of both contracting parties relevant to maintenance have changed. The annuity is secured in the land register by the creation of a real charge in accordance with § 1105 BGB. The entry can be made in value-secured form. These benefits can be agreed in such a way that they may be adjusted.
Everyone should plan the succession of property carefully. In the case of transfers of real estate during one's lifetime, there are various possibilities for the transferor to still be able to use the economic advantage of the real estate. Which arrangement is the right one depends on the individual case and requires close consideration and competent advice
Düsseldorf, 14 March 2023,
Dr. Dieter Jasper, lawyer