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Three ten-year deadlines at a glance - there's also a lot to think about when making gifts!
People who give away assets during their lifetime often think of tax advantages. But in fact, three different ten-year periods - in tax law, in gift and social security law and in the law on compulsory portions - determine whether a gift really has the desired effect in the end. A surprising finding for many, which shows that asset transfers are often less a spontaneous act of generosity than a strategic instrument of life and estate planning.
„Time is a decisive factor when making gifts,“ says Tobias Bresselau von Bressensdorf, Managing Director of the Chamber of Notaries in Saxony. „Although many people have heard of the ten-year periods relevant to gifts, they fail to recognize their requirements or even their effects. Early planning and proper advice are therefore essential.“
Compulsory portion law: The long shadow of the estate
In compulsory portion law, the earlier assets are given away, the greater the risk of later claims to a supplementary compulsory portion. This is because the compensation claims of uninherited relatives „melt away“ by 10 percent per year and are therefore completely settled after ten years. „However, the time limit only begins to run when the donee actually receives full, or at least predominant, economic power of disposal,“ explains Bresselau von Bressensdorf. Reservations such as usufruct or a right of residence can prevent the period from starting. In the case of gifts between spouses, the clock only starts to run when the marriage is dissolved. As a result, many gifts reduce claims to a supplementary compulsory portion much later than expected - or not at all.
Gift and social law: When the gift can be reclaimed
It also becomes complex with regard to the possible need for social assistance. Gift law stipulates that a donor who becomes needy within 10 years of the gift can reclaim the gift. The tricky thing is that if the donor makes use of social benefits for care or living expenses in the meantime, the decision on reclaiming the gift does not lie solely with the donor. Rather, the social benefits provider can transfer the right of reclaim to itself. What is transferred today out of good intentions may therefore be available again tomorrow. Only after this ten-year period has expired is a reclaim generally excluded.
„If the need for care is foreseeable, you should weigh things up carefully. After all, your hard-earned assets should give you some room for maneuver in old age,“ says Bresselau von Bressensdorf. In individual cases, passing on the costs of care to the general public while transferring the assets to the children can also raise concerns under social welfare law.
Tax law: allowances that renew themselves - but take time
In tax terms, however, the ten-year rule opens up room for maneuver. The personal allowances for inheritance and gift tax are available again every ten years. „If you start early and transfer assets in stages, you can use them several times. This is the main reason why gifts are an important instrument for tax optimization today,“ concludes Bresselau von Bressensdorf.
Why act now?
A gift can make sense from a tax, social and civil law perspective. Those who plan early are in a better position: less tax burden and more protection against reclaims and compulsory portions. However, due to the different legal requirements, not every gift automatically leads to the desired success.
„This is exactly where notarial advice comes in,“ emphasizes Bresselau von Bressensdorf. „It helps to harmonize individual goals with the legal framework - and to structure gifts in such a way that the donor's motives are implemented while taking into account the interests of the recipient.“
More information and images on this and other topics can be found on the website of the media association of the chambers of notaries at: