Knowledge · Guide · German law applies
Gifting or bequeathing.
When wealth exceeds your own housing needs, the question becomes complex enough to be sorted out in its own right. It is not only a tax question — its ultimate measure is family peace, not the tax optimum.
Updated: June 2026 · General orientation, not legal or tax advice in the individual case (§ 3 RDG, § 4 StBerG)
First, the answer
For tax purposes a gift is arithmetic. In family terms it is a gesture — and gestures within families last longer than any tax saving. A clearly settled house is a form of love. There is no reason to hurry; what has to be settled can be settled step by step.
Allowances as the playing field
The allowances under § 16 ErbStG are the simplest and most effective instrument — provided you have the time to use them across decades. Per child and per parent €400,000, for spouses €500,000, for grandchildren (where the child is still living) €200,000 — and they become available afresh every ten years (§ 14 ErbStG). A mother who gifts €400,000 every ten years transfers €1.2 million tax-free over thirty years; with the father in parallel, twice that. The lever grows weaker with each year of waiting.
Allowance and time when gifting
The statutory tax-free allowances (§ 16 ErbStG) apply afresh every ten years. This illustration shows how a handover can be spread over time.
A rough estimate is enough.
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General legal position
Allowance and time
—statutory allowance (§ 16 ErbStG), usable afresh every ten years
In an inheritance, by contrast, the same allowance applies only once. That is exactly the lever when gifting: begin early and use the allowance several times over the years.
The allowances under § 16 ErbStG are public law — this is the general legal position, not a calculation of your individual case. The tax rate on any excess, special cases (such as parents, grandparents or a retained usufruct) and your specific arrangement belong with tax advice.
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§ 198 BewG — the valuation report as a lever
For residential property the tax office applies a standardised value that often sits 15 to 30 % above the real market value. With a qualified report (€1,500–3,500) you can replace that standardised value (§ 198 BewG) and lower the assessment base. A tax adviser checks whether this is worthwhile in your particular constellation — where the difference in value is small, the effort may outweigh the benefit.
Usufruct and a right of residence
If you wish to transfer the property yet keep living in it or using it: a right of residence (§ 1093 BGB) secures the living, a usufruct (§§ 1030 ff. BGB) additionally secures the income. Both reduce the value of the gift — a usufruct over 20 years often by 40 to 60 %. Note: whoever retains the right can no longer decide freely about the house without involving the new owner.
The gift as a family model
Disclose the equal treatment of the children openly and compensate through equalisation payments or set-off against the inheritance share — a “quiet” gift is one of the most frequent sources of disputes among heirs. Gifts with conditions (a minimum holding period, a reservation of consent) are drafted cleanly by a notary. Independently of this, § 528 BGB applies: if the giver falls into hardship after the gift and cannot bear care costs themselves, the social welfare office can reclaim a proportion of the gift within ten years — see When care draws nearer.
Larger structures and the reform horizon
With several properties or shareholdings, a family civil-law partnership (Familien-GbR) (which simplifies stepwise transfers) or a family holding company (from the high single-digit million range upwards) becomes relevant — a tax adviser and a specialist inheritance-law lawyer work this out together. And: whoever gifts today gifts under today’s law; a later reform does not act retrospectively. Whoever waits for a reform risks less favourable conditions.
Family peace as the ultimate measure
There are constellations in which a tax optimum of €18,000 or €50,000 costs the family more than the tax would. Three signs that the family question matters more: a child feels passed over; a planned condition would be barely fulfillable; or you yourself grow uncertain whether enough wealth remains for a later case of care. In all three cases a pause of two weeks is worthwhile before the gift contract is signed.
Key terms, clearly explained
- Allowances (§ 16 ErbStG)
- Amounts that can be transferred free of tax per line of kinship — children €400,000 per parent — afresh every ten years.
- § 198 BewG
- The option of replacing the tax office’s standardised value with a valuation report and so reducing the assessment base.
- Usufruct (Nießbrauch)
- The right to use a thing and draw its income without being its owner (§§ 1030 ff. BGB) — it reduces the value of a gift noticeably.
- Family-home relief (Familienheim-Begünstigung)
- An inheritance-tax relief for the owner-occupied home where a spouse or child continues to use it themselves for ten years — otherwise it lapses retroactively (§ 13 ErbStG; for children up to 200 m² of living space).
Frequently asked questions
- Gifting or bequeathing — which is more favourable?
- Often the gift, because the allowances can be used afresh every ten years — but only if enough time remains and your own liquidity can bear it. The family question often weighs more heavily here than the tax optimum.
- Can I give the house away and still stay in it?
- Yes — through a right of residence or a usufruct. Both additionally reduce the taxable value of the gift. In return, however, you give up the free decision over the house.
- Should I wait for the inheritance-tax reform?
- A transfer notarised today applies under today’s law; later reforms do not act retrospectively. Whoever waits rather risks less favourable conditions — a tax adviser will let you know if a concrete ruling is taking shape.
- What if I myself later need care?
- Then the social welfare office can reclaim a proportion of a gift made in the past ten years (§ 528 BGB). Only make a gift if enough liquidity remains for a later case of care.
- How do I protect a child with a disability in the inheritance?
- Through a will protecting a disabled heir: prior and subsequent inheritance with execution of the will secure the estate for the child without the social-welfare authority reaching it. This arrangement belongs in the hands of a specialist inheritance lawyer, who clarifies it separately.
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