How does inheritance tax work in Germany?

Inheritance tax (together with gift tax) regulates what goes to the tax authorities when assets are transferred. The decisive factors are tax brackets, allowances and types of assets that benefit. Important: Gifts count – and you can utilize many allowances every ten years. This allows you to plan over time and distribute assets cleverly.

• Legal basis: ErbStG + valuation law
• Tax classes I-III depending on relationship
• Allowances: e.g. € 500,000 (spouse), € 400,000 (children)
• Ten-year rule for gifts
• Benefits: Business assets, family home
• Progressive tax rates depending on class & level

Helpful links & sources:

• Federal Ministry of Finance – Inheritance and gift tax
• §Section 16 ErbStG Allowances
• Wikipedia: Inheritance tax in Germany

Tax brackets & allowances: The basic buffer

The tax class depends on the proximity to the testator. In class I (spouses, children, grandchildren), the tax-free amounts are significantly higher than in class II (e.g. siblings) and III (unrelated third parties). In addition, there are special pension allowances (e.g. for spouses). Result: A large proportion of normal inheritances already remain tax-free due to allowances. Only the surplus is taxable.

Family home & deferrals: Protection for your home

The owner-occupied family home can remain tax-free if acquired by a spouse or children under certain conditions (e.g. continued use, holding periods). In the case of real estate or companies, a deferral is also possible if the tax payment would otherwise jeopardize the assets. This provides time for financing or restructuring without having to sell immediately.

• §13 ErbStG Family home
• Family home information sheet (NRW)

Business assets: tax exemption of 85% or 100%

In the case of an inherited business, the standard exemption (85%) or the option exemption (100%) applies if the requirements are met (payroll, holding periods, administrative asset ratios). This is politically desirable: company successions should secure jobs and not fail due to the tax burden. For large estates, this is THE lever for tax reduction.

• IHK Munich: Business assets and tax exemptions

Erbe & Nachlass

Why do you save when you inherit a lot? … and how?

Large inheritances systematically take advantage of preferential treatment. Assets are structured in such a way that as much as possible falls into favored “drawers”: business assets, residential property (family home), usufruct concepts and deferred gifts. This lowers the assessment basis – and therefore the effective tax rate. Studies and government responses show: On average, major heirs often only pay low single-digit percentages.

• Effective load often only a few percent
• Reason: Exemption + allowances + design
• Gift instead of inheritance (time plays for you)
• Usufruct: transfer values, retain use
• Foundation solutions & family divisions
• Protect substance: Deferral/partial payments

Helpful links & sources:

• Süddeutsche Zeitung – Inequality through inheritance tax
• ZEIT – Large heirs pay less
• Wikipedia: Tax statistics on inheritances

Real estate GmbH: strategically shifting the tax burden

Many families rely on a so-called Immobilien-GmbH, especially for large real estate assets. Real estate is transferred to the business assets. The advantage: company shares often benefit from exemption rules of up to 85% or even 100%. In addition, shares can be transferred in stages over generations – often combined with gifts and usufruct rights.

Family foundation: Permanent tax optimization

A family foundation pools assets and ensures continuity over generations. As the foundation does not die, there is no traditional inheritance tax. Instead, lower current taxes apply. This model is often used for assets in the double-digit million range in order to secure long-term substance and avoid high one-off charges.

Designing with time: utilizing the ten-year cycle

If you start early, you can distribute assets via gifts at ten-year intervals. This allows you to increase your tax-free allowance several times. Example: A parent can transfer €400,000 tax-free per child every ten years – with two children, that’s €800,000 per round. Over 20 or 30 years, this results in a very high tax-free transfer without inheritance risk at the end.

Usufruct & residential rights: Give away value, keep control

With a reserved usufruct , you transfer a property, for example, but secure rental income or the right of use. This reduces the tax value of the gift because the capital value of the usufruct is deducted. You remain financially secure – and at the same time make more efficient use of tax-free allowances.

Why “stupidity tax”? Planning mistakes cost real money

If you don’t plan at all, you give away allowances, lose exemptions (e.g. due to failure to meet deadlines) or slip into higher rates due to an unfavorable structure. Advice helps to close gaps: from the structuring of matrimonial property regimes to wills, division arrangements and pre- and post-inheritance through to foundations. The difference between “doing nothing” and “smart planning”: often tens of thousands to millions.

50 million € inheritance Example calculation + tax optimization

Der Spiegel reports: “Rich company heirs often only pay 1.5% tax”. Is that possible? Yes. Clever planning reduces the tax burden. Without planning, you quickly pay almost €15 million in tax on a €50 million inheritance. With clever planning, the tax burden falls to 1-5%. Studies, laws and examples clearly show that those who optimize early on save millions. This is precisely why inheritance tax is often referred to as the “stupid tax”.

• 50 million € inheritance Example calculation

Avoid inheritance tax? My conclusion

You can rarely avoid tax completely – but you can manage it. The key: start early, stagger gifts, qualify beneficiary asset types, comply with holding and payroll rules and use the family home correctly. The greater the assets, the greater the leverage – and the more expensive mistakes become. Get tax and legal advice in good time, document everything properly and plan in variants (inheritance, gift, foundation). This will turn the “stupid tax” into an avoidable cost trap – and you will get more out of your inheritance.

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Box privilege: save taxes when selling real estate

Nesting privilege: a term worth knowing!

Although I have been using the holding model in the real estate industry for years, I only recently came across the term “nesting privilege”. The bottom line? Only 1.54% tax on real estate sales! If you’re wondering, let me introduce you to the world of real estate holding in this short article.

The taxation of a real estate GmbH

A GmbH is subject to corporation tax, the solidarity surcharge and trade tax, which results in an effective tax rate of approximately 30%.

However, if you set up your GmbH in the context of real estate projects, you can benefit from the extended reduction in trade tax.

In this case, you only pay 15.83% tax on rental income and lease fees.

The same low tax rate also applies to the sale of real estate. However, care must be taken here to avoid falling into the category of commercial property trading. You may sell a maximum of three properties within five years, otherwise the tax rate rises to 30%.

The share deal offers an even more tax-efficient option for real estate sales.

Real estate holding company: Reduce the tax burden to 1.54%

By cleverly structuring your GmbH, you can reduce the tax burden on the sale of real estate to just 1.54%. A little more striking:

1.54% Taxes on sale

This concept, known as a share deal, benefits from a holding structure and the nesting privilege. Your business structure consists of two limited liability companies. One of the companies acquires the real estate, while the second limited company acts as the parent holding company. If you now want to sell your property, the holding company transfers the shares in your real estate GmbH to the buyer.

The nesting privilege comes into play here

If a corporation sells shares in another corporation, 95% of the profits remain tax-free.

This means that your effective tax rate on the profit from the sale of the property is only 1.54%.

More about GmbH & asset-managing GmbH

Learn more about the GmbH here

• GmbH: Simply explained
• Asset-managing limited liability company

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Book real estate coach or not?

Just google “real estate coaching”, you will get ads and hundreds of websites that want nothing but your money! You can see that already in the structure of so-called landing pages. These are websites that offer hardly any info, but only a “button” to “enter”, “buy” or to “get free info”:

Here you will learn:

1. Recognize serious (unserious) coaches
2. You get 3 concrete tips for good coaches

For:

• Real estate beginners
• Homeowner:inside
• Entrepreneur:inside
• Financial freedom and passive income
• Real Estate Sales
• …

Coaching for entrepreneurs – example

An example instead of a thousand words – If you already turn over 1 million euros a year and instead of ~ 25% you only pay ~15% tax, through the right legal form and corporate structure, such as family foundation, the effect is enormous.

• 1 million turnover, 100,000 profit at 25% = 25,000 euros tax burden
• 1 million turnover, 100.000 profit at 15% = 15.000 Euro tax burden ( 10.000 Euro more profit / year )

If the costs of coaching are now 2,000 euros for 1 day in a master class – why not! Scaled to 5 million turnover, assuming 500,000 euros profit already 50,0000 euros more at the end of the year.

A simple example! If we stay here, other benefits are added such as allowances, etc..

Now you are probably already starting to rake!

It doesn’t always have to be the Masterclass, but you should pay attention to a few things to find good and reputable real estate coaches. Or you can just have a look at my recommendations.

Coaching for beginners: learning to get started

The most blatant experience I’ve had myself was in Berlin, a 21-year-old Teinehmerin. She had previously set up a fund in Switzerland, and now she wanted to get into the real estate business. Extremely interesting person! She then started as a tipster, so without investing or brokering herself. Now she is 22 years old and has built up a wealth of knowledge and asks punky questions, wow. Whether it’s BGF calculation, tenant lists, and skepticism of overly generous calculations. Impressive what becomes possible with the right ambition and training.

Real Estate Coaching in Germany

Here you will find once again my list of recommendations in Germany:

• Alex Fischer – my allround tip
• Real Estate Coaches

Serious real estate coaching: What to look for?

For me there are only two quality criteria

1. experience

2. success

Why does success come second? Anyone can have a “one trick pony” that you can talk about for years. But who creates continuous success? Here you can find good coaches.

Experience and success count!

How do you find good real estate coaches? These are my 3 tips!

1. Tip – Participant voices in quantity and quality
2. Tip – North Data Online Check in 1 minute
3. Tip – My Coach Recommendations

Participant comments: Quantity and quality – Tip 1

Trust in what? Participant testimonials are good, but they can also be fake, especially if it’s purely text-based.

• Many participant voices
• Ideally in video format with clear name
• On the spot from coaching or after, not only from “home”.

Falsify opinions of participants: This is how it works

I myself am an SEO, so I (also) deal with online marketing and search engine optimization. Nothing is easier to “fake” than opinions of participants. Especially now with AI (artificial intelligence) and programs like ChatGPT.

Example?

These aren’t real reviews, but they look convincing! Especially if you do not expect it.

“My name is Markus and I booked the real estate coaching a few months ago. I had already bought my first apartment and wanted to learn how to scale my real estate portfolio. The coaching was absolutely amazing! The coach helped me optimize my strategies and showed me how to successfuly invest in more condos. Thanks to the coaching, I was able to grow my portfolio to 12 condos and exceed my financial goals. I am so grateful to the team at Online Coachings for Real Estate and highly recommend them!”

Sorry for the long example, but that’s exactly how it goes!

So, what to do?

North Data Check: What can your coach do? – Tip 2

Tip, just check the person with North Data. Here you can already see whether it is, for example, a sole proprietor or a person with several companies, ideally also asset management or real estate GmbHs or family foundations.

This is what you should look for when checking:

• Extensive structure, not “just” a UG or GmbH
• “Real estate limited companies” (asset management for real estate)
• Asset Management
• Family Foundation

Background check online: 2 examples

The more professional and comprehensive the setting, the better.

Example: Small entrepreneur, “only” a UG.

Solid real estate investor with smart corporate structure and investments:

Advantages and disadvantages

Let’s honestly summarize again the advantages and possible disadvantages (depending on the coach you work with), the pros and cons:

Check: How to find good real estate coaches

Let’s summarize the 3 tips once again:

1. Tip – Participant voices in quantity and quality
2. Tip – North Data Online Check in 1 minute
3. Tip – My Coach Recommendations

Example: thousands of participants, huge community (100,000+) can’t be wrong (photo: Alex Fischer Event).

Real Estate Coaching in Germany

Here you will find once again my list of recommendations in Germany:

• Alex Fischer – my allround tip
• Real Estate Coaches

Der Beitrag Real Estate Coaching Experience: To book a coach or not?! My opinion erschien zuerst auf ℄ Real Estates.

Master Course at a Glance: “Financial Intelligence

You are still thinking about whether it is worth booking a coaching? Read here everything important about the contents of the master course “Financial Intelligence” including course overview, conclusion, experience and final evaluation!

First of all, the most important question:

Who is the master course for? Typical problems

Do you know these problems? If so, you should read on.

• Lack of financial knowledge
• Debts and financial burdens
• Fear of financial insecurity
• Lack of strategies for wealth accumulation
• Lack of knowledge about investment opportunities
• Limited financial planning
• Lack of understanding of taxes and legal aspects
• Restricted access to financial instruments
• Emotional blocks and fears

These issues can hinder progress toward financial goals. A specialized course can help provide knowledge, identify strategies, and give participants the confidence and tools to improve their financial situation and achieve financial freedom.

What to do? Learn from professionals.

Master Course Overview: Topics and Learning Fields

This is what you will learn in the Masterclass, all important topics and your learnings in the seminars.

You will learn this and more in the “Financial Intelligence” Master Course. Here are 3 important topics briefly explained, from the course of Alex Fischer, which I would like to introduce briefly:

Distinction between investments and expenditures

A fundamental insight taught in this course is the distinction between investing and spending. It is important to understand that investments are designed to build wealth and achieve financial freedom over the long term, while spending tends to satisfy short-term needs. By understanding this distinction, participants can learn to use their money more wisely and pursue long-term financial goals.

Use of the laws of money

The course will focus on the fact that money follows its own laws. By understanding and applying these laws, participants can improve their financial situation. This means that they become aware of how they earn, spend and invest their money. By using the laws of money, they can change their attitude towards money and optimize their financial results.

Building a solid credit rating

Another important topic in the course is building a solid credit score. Participants learn how to improve their relationship with banks to obtain better credit opportunities. This includes understanding the factors that affect credit scores and learning behaviors that build a positive relationship with banks. A good credit score opens up opportunities for investment and allows participants to become more financially independent.

These three topics are central aspects of the course and provide participants with valuable knowledge and practical advice to improve their financial situation and achieve long-term success. By applying these concepts, participants can achieve their financial goals and build a solid foundation for their financial future.

Conclusion Master Course: My Experience

You are still thinking about whether it is worth booking a coaching? Read here everything important about the contents of the master course “Financial Intelligence” including course overview, conclusion, experience and final evaluation!

Alex Fischer ‘s Master Course is no ordinary course on money and finance. It is a transformative journey that delves deep into your innermost being and taps into your deepest emotions. With a passionate approach to the topic of financial independence, you will not only gain practical knowledge in this course, but also gain a new perspective on money and its impact on your life.

From distinguishing between investing and spending to using the laws of money for your personal success, this course covers important topics that can revolutionize your financial life. It offers valuable insights, practical advice, and proven strategies to improve your financial situation, change your mindset about money, and achieve your financial goals.

Get inspired and motivated by this unique master course that has the potential to change your life forever. Take control of your financial future and open the door to financial abundance and independence. This course is the key that can make your financial dreams come true. Invest in yourself and take this course to unleash your financial potential and live a life of financial freedom.

My evaluation of the Masterclass

From my experience from the master course, I would conclude with:

4.8 / 5.0 stars

More coaching from Alex Fischer?

Presented, detailed, with content, chapters, learning fields, with conclusion and evaluation. Everything you need to know.

• AF Coachings & Seminars
• Alex Fischer: Who is that?

Individual Masterclass Coaching:

• Leadership Power Coaching
• Homeowner Coaching
• Real Estate Investor Coaching
• Career Power Coaching
• Tax coaching

Over 10,000 participants in the coaching sessions:

Real Estate Investor Mindset:

Risk Minimization:

Der Beitrag Alex Fischer’s “Financial Intelligence” Master Course: Coaching, Experience, Content erschien zuerst auf ℄ Real Estates.

Because, investing in water can not only help you invest in an important resource, but also contribute to sustainable economic growth and responsible resource use.

UN Conference in New York

This year’s UN conference in New York focused on a pressing question: What happens when water becomes scarce? Numerous German politicians were on hand to get an idea of the current situation and to discuss possible solutions.

When water becomes scarce: Causes

German Environment Minister Steffi Lemke was particularly committed to the event, calling for more decisive global action against the water crisis. As measures, she proposes a modern and safe infrastructure by 2050 to combat water shortages.

In fact, water scarcity is already a major problem in many regions of the world. Droughts, pollution and often poor supplies of clean water are just some of the causes. Agriculture and industrial material carriers are also often partly responsible for increased water consumption. To counteract the water shortage, the raw material water must be redistributed. Innovative technologies and responsible use are essential for this.

What was NYC specifically about?

Let’s start with António Guterres’ opening speech and then move on to the content of the conference.

Opening speech by António Guterres

Opening address by António Guterres, UN Secretary-General, at the 1st plenary session of the UN Water Conference 2023.

Water Conference: Contents

Water plays an important role in the Sustainable Development Goals and in the health and prosperity of people and the planet. Yet progress on water-related goals and targets falls alarmingly short of expectations, putting the entire sustainable development agenda at risk. That’s why United Nations Secretary-General António Guterres is calling for a bold water agenda that gives the vital element the attention it deserves.

3 pillars of development

Water is a fundamental component of all aspects of life and is inextricably linked to the three pillars of sustainable development. It integrates social, cultural, economic and political values and supports the achievement of many sustainability goals through close links with climate, energy, cities, environment, food security, poverty, gender equality and health, among others.

The conference, hosted by the governments of Tajikistan and the Netherlands, will feature six plenary sessions and five multi-stakeholder interactive dialogues. In addition, a number of special events and side events will be organized by member states, the UN system and other stakeholders.

Results of the conference

The outcome of the conference will be a summary of the conference events and new commitments, pledges and actions by governments and all stakeholders to achieve SDG 6 and other water-related goals and targets that will be summarized in the Water Agenda.

Investing in water: shares

International companies buy wells to secure fresh water access.

But, can you invest in “water” with less money?

Investments in “water stocks” that are involved in water treatment, distribution and purification are rising in perception. These companies benefit from large deals and contracts related to providing clean water for consumption.

Veolia: water treatment and purification

An example of a company that specializes in water treatment and purification is Veolia from France. The company also offers water recycling services, which makes it possible to use water several times.

Water Works: water treatment and purification

Water Works in the USA is also a major player in water distribution and purification. The company operates a large number of water treatment plants and supplies clean water to millions of people in the USA.

Xylem: pumps, filters and meters

Xylem Water Solutions & Technologies, also from the USA, is a leading manufacturer of pumps, filters and measuring equipment for monitoring water quality and salinity. The company is also active in the development of innovative solutions for water utilization.

Evoqua: Made in Germany

Another company specializing in water treatment and purification is Evoqua, formerly part of Siemens. The company offers a wide range of water treatment solutions, including membrane filtration, disinfection and chemical treatment.

List: 4 “Water shares

4 companies you should know:

• Veolia (France)
• Water Works (USA)
• Xylem (USA)
• Evoqua (Germany)

Investing in water: ETF

Another way to invest in water is to invest in water ETFs (exchange traded funds). Here are some examples:

IShares Global Water ETF

The iShares Global Water ETF comprises 50 international stocks from the water industry. The ETF offers investors access to companies active in water treatment, distribution and purification.

Invesco Water Resources ETF

The Invesco Water Resources ETF is another water ETF that offers investors access to companies that operate in the water industry. The ETF includes companies from various industries such as agriculture, energy and infrastructure that are relevant in terms of water use and resources.

L&G Clean Water ETF

Another water ETF is the L&G Clean Water ETF, which focuses on companies that specialize in providing clean water. The ETF includes companies from various industries, including water treatment, distribution, purification and technology.

Water ETFs can be a great way to invest in the water sector as they offer broad diversification and are an easy way to bet on global growth potential in the water industry.

List: 3 “Water ETFs

3 ETFs you should know:

• IShare gloal Water – 50 shares international from sector
• Invesco Water Resources ETF
• L&G Clean Water

Not investment advice or a recommendation to buy.

All information provided here does not constitute investment advice or a recommendation to buy. All statements are my general published opinion. I have obtained the information from my experience as a private investor. This experience report cannot and is not intended to replace personal investment advice from professionals.

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