Inheritance Self-Help Group: Inherited money, what to do? Step-by-Step

Inheritance & Estate

You are not alone — and you have less time than you think.

The numbers speak for themselves: wealth transfers through inheritances and gifts regularly reach peaks beyond the 121-billion-euro mark in Germany. The current figure comes from the Federal Statistical Office. Hundreds of thousands of people face the same questions as you every year. Use this.

Important Deadlines: What You Need to Know Immediately

Before you think about investment strategies: An inheritance has strict legal deadlines. Those who miss these may inherit debts or pay unnecessary penalty interest.

The Five Critical Deadlines at a Glance

• 6 weeks — Deadline for renouncing the inheritance (from knowledge of the inheritance case and being called as an heir)
• 6 months — Extended renunciation deadline for foreign inheritance
• 3 months — Notification obligation to the tax office for inheritance tax
• 3 years — Deadline for the tax office to set inheritance tax
• 30 years — Statute of limitations for compulsory share claims (normally 3 years from knowledge)

Warning: Anyone who does nothing in the first weeks is automatically considered an heir — including all debts of the deceased.

First Steps After an Inheritance

The first and most important step after an inheritance is to remain calm — but not for too long. Many people feel overwhelmed by the new situation, especially if the inheritance is complex. You should take time to get an overview of the overall situation before making important decisions. A well-thought-out approach helps to optimally utilize the inheritance.

Checklist: The First 14 Days

1. Request multiple death certificates from the local registry office (at least 5 originals)
2. Have the will opened at the probate court, if available
3. Apply for a certificate of inheritance, if necessary
4. Review bank accounts, investment accounts, insurance policies, and contracts
5. Request land register extracts for existing real estate
6. Create an inventory of the estate (assets and liabilities)
7. If there is suspicion of over-indebtedness: Check the possibility of renouncing the inheritance
8. Contact a tax advisor and possibly a specialist lawyer for inheritance law

Check and secure documents

Secure all important documents such as wills, land register extracts, insurance policies, bank statements for the last twelve months, and ongoing contracts. These documents form the basis for all further steps and are crucial later for the inheritance tax declaration.

No hasty sale

Real estate, artworks, or other valuables should not be sold hastily. Have the value professionally assessed to ensure that you achieve the correct price. For real estate, a certified market value appraisal is often worthwhile — also for the correct determination of inheritance tax.

Seek professional advice

Experts such as tax advisors, specialist lawyers for inheritance law, or asset managers can help you clarify the legal and financial aspects of the inheritance. For inheritances over 500,000 euros, the advice becomes practically indispensable.

Tip: An inheritance self-help group can provide valuable guidance as a supplement — especially during the initial emotional phase.

Declining an inheritance: When is it worthwhile?

Not every inheritance is a gain. If the estate is over-indebted or contains more burdens than assets, you can decline the inheritance — but only within six weeks.

Reasons for declining an inheritance

• The deceased’s debts exceed their assets
• Rehabilitation-required real estate with high remaining debt
• Claims of third parties for compulsory portions that consume the estate
• Tax burden exceeds the value of the inheritance
• Strategic transfer to the next generation (generation leap)

How the decline works

The decline must be personally declared to the probate court or notarially certified. The fee depends on the estate’s value and usually ranges between 30 and several hundred euros. Important: A decline applies to the entire inheritance — picking cherries is not possible.

Note: If you are unsure about the debt situation, you can apply for a probate insolvency proceeding or a probate administration — your personal assets will then be protected.

Inheritance and taxes: Exemptions and tax classes

An inheritance brings tax obligations. The amount of inheritance tax in Germany depends on the family relationship and the value of the inherited assets. To avoid unpleasant surprises, you should know the exemptions and tax classes precisely.

Table: Exemptions and tax classes

Calculation example: Daughter inherits 750,000 euros

• Inheritance: 750,000 €
• Exemption (tax class I): 400,000 €
• Taxable gain: 350,000 €
• Tax rate: 15 % (tax class I, up to 600,000 €)
• Inheritance tax: 52,500 €

Special regulation: Self-occupied property

If spouses or children inherit the family home and continue to live in it for another ten years, it remains completely tax-free — for children up to a living area of 200 square meters. Those who move out earlier lose the exemption retroactively.

More details on inheritance tax classes can be found in the specialist portal.

Note: A tax advisor is indispensable for assets beyond the exemptions — the consultation costs are usually between 0.3 and 1 % of the tax savings.

Heirs’ community: When multiple people inherit

When multiple people inherit together, an heirs’ community is automatically formed. This is one of the most common sources of conflict in German inheritance law — and one of the main reasons why self-help groups are so in demand.

Typical conflict areas

• Should the property be sold, rented out, or used personally?
• How will the household goods be divided?
• Who will manage the estate?
• How will compulsory portions be fulfilled?

Solutions

1. Settlement agreement among heirs — consensual division, notarially certified
2. Withdrawal — one heir is paid out and leaves the community
3. Mediation — often cheaper than a court process in deadlocked conflicts
4. Partition auction — last option in complete blockage (often with value loss)

Insider tip: A partition auction regularly results in proceeds 20 to 40 % below the market value. An out-of-court agreement is almost always more economical.

Inherited property: Sell, rent out, or use it yourself?

In most larger inheritances, a property is the most valuable component. The decision on what to do with it shapes your financial future for decades.

Decision matrix

More on this: Buying and holding real estate.

Investing the inheritance: Real estate, ETFs or savings account?

Many heirs face the question of how they can use the inherited wealth meaningfully. A good investment strategy is crucial to preserve or increase the value of the inheritance. Diversification minimizes risks — focusing on one asset class maximizes them.

Investment strategy based on inheritance amount

• Investing 1 million — Strategies for seven-figure wealth
• Investing 10 million — Family office level

Example allocation: 500,000 euros inherited

• 50,000 € (10 %) — Money market account as emergency fund and liquidity buffer

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]]> https://lukinski.com/selling-an-apartment-in-a-community-of-heirs-one-of-them-does-not-want-to-sell-what-to-do/ Wed, 22 Mar 2023 07:29:58 +0000 https://lukinski.de/selling-an-apartment-in-a-community-of-heirs-one-of-them-does-not-want-to-sell-what-to-do/ Selling an apartment in the case of a community of heirs – When the deceased leaves a house or a condominium, the heirs are faced with the question of what to do with the property. Often, they decide to sell it. However, selling a home through a community of heirs can be a complex matter that presents numerous challenges. Find out here how the sale of a jointly inherited apartment works, what you need to consider regarding the certificate of inheritance and what to do in case of disputes and conflicts within the community of heirs. Also: a summary of your rights and obligations.

Rights and obligations of the community of owners

A community of heirs arises when several persons become co-heirs to the estate of a deceased person. As members of the community of heirs, the co-heirs have various rights and obligations.

Rights: disclaim inheritance, sell inheritance & dissolution

The rights include, among others, the right to use the inheritance and the right to sell the inheritance share. Each co-heir has the right to sell his or her share of the inheritance, whereby the other co-heirs have a right of first refusal. There is also the right to dissolve the community of heirs if the community of heirs no longer functions or there is a dispute about the inher itance.

In addition, the co-heirs are permitted to disclaim the inheritance under certain circumstances if they do not wish to accept it or if this would mean that they would have to assume the decedent’s debts. The disclaimer must be made within a certain period.

The rights at a glance:

• Reject inheritance
• Right to use
• Right to sell the inheritance
• Right of first refusal
• Right to dissolve the co-ownership community

Duties: Rental agreements, management & Co.

The duties of the co-heirs include, among other things, the assumption of tenancy agreements if the decedent was a tenant of an apartment or house at the time of his or her death. The co-heirs also have an administrative duty towards the inheritance. They must manage the inheritance properly, maintain it and, if necessary, carry out maintenance measures.

Another important duty of the co-heirs is the payment of the estate’s liabilities. The co-heirs are jointly liable for the decedent’s liabilities and must ensure that these are paid. In doing so, they must also take into account the taxes of the inheritance.

Your duties summarized:

• Assumption of leases
• Management duty
• Payment of the estate liabilities

Prerequisite for apartment sale

In order to sell an apartment from a community of heirs, all heirs must therefore agree to the sale. A sale can only take place jointly and by mutual agreement. This requires close cooperation and agreement between the heirs to ensure smooth administration of the inheritance.

Heirs must agree on the sale of the apartment

However, in practice, it can often be difficult to agree on a joint sale. There are often emotions and memories associated with the property, which can make the issue sensitive for some heirs.

It is therefore not uncommon that individual heirs do not yet want to or cannot agree to a sale. In some cases, this can lead to disagreements and disputes regarding the inheritance. We will now take a closer look at the options available.

Dispute & conflict in the community of heirs

If the community of heirs disagrees on the sale of the apartment, it may be difficult to find an amicable solution. If all heirs refuse their consent to the sale, the property cannot be sold.

In this case, there are various ways in which the community of heirs can proceed.

Allow inheritance share to be paid out by co-heirs

One possibility is that a single co-heir pays off the other co-heirs and thus becomes the sole owner of the property. If a co-heir wishes to pay off the other co-heirs, the value of the property and the shares of the co-heirs must first be determined. An expert or surveyor can be consulted for this purpose. Then the share of each co-heir is calculated on the basis of the value of the property. The co-heir who wishes to pay out the other co-heirs must then pay out the corresponding share to the other co-heirs in order to acquire their shares in the property.

This is how the payment of an inheritance share works:

• Determination of the real estate value
• Calculation of the share of inheritance
• Payment to co-heirs is made

Sell inheritance share to third party

However, it may happen that the other heirs do not agree or are unable to acquire the selling heir’s share. In this case, the selling heir can sell the share to a third party. The prerequisite for this is that the co-heirs have been granted a two-month right of first refusal and that the sale of the inherited share is only possible as a whole. Therefore, if you decide to sell the part of your inheritance, this refers not only to the apartment, but also to the rest of the inheritance.

Partition auction by district court

The partition auction in the community of heirs by the district court is usually the last resort. If the heirs do not agree, an heir can apply for a partition auction. The district court will then auction off the property in order to subsequently divide the proceeds among the co-heirs. However, this route is often associated with high costs and usually results in significantly lower proceeds than a private sale.

The partition auction at a glance:

• Last resort in case of dispute
• Settlement by local court
• Division of the proceeds between the heirs
• Disadvantage: High cost & low purchase price



Procedure: Sell inherited apartment

When several heirs have inherited an apartment and decide to sell it, they must follow certain steps in order to carry out the sale in a legally correct manner. This requires good planning and coordination within the community of heirs, as well as the involvement of an experienced notary to ensure that the sales process runs smoothly.

Here are the most important points in advance:

1. Consent to sale by entire community of heirs
2. Marketing of the property
3. Preparation of the purchase contract at the notary
4. Payment of the purchase price and settlement

Approval for sale

First, the community of heirs must agree that the apartment is to be sold. All heirs must agree to this. Once an agreement has been reached, a joint resolution must be passed that regulates all aspects of the sale, such as the sale price, the division of the proceeds among the heirs and who will carry out the sale.

Marketing of the property

After the community of heirs has decided to sell the apartment, the property must be offered on the market. For this purpose, a real estate agent can be hired to evaluate the apartment, prepare real estate exposés and take over the marketing. Alternatively, the heirs can sell the apartment themselves by placing advertisements or using online platforms.

Preparation of the purchase contract at the notary

Once a buyer has been found, a notary appointment must be arranged in which the purchase contract, conveyance and land register amendment are carried out. The purchase contract regulates all details of the sale, such as the purchase price, the time of transfer of ownership and all other conditions. The conveyance is the formal declaration by the seller that he is transferring ownership of the property to the buyer. The land register amendment is the registration of the buyer as the new owner of the apartment in the land register.

Payment of the purchase price and settlement

After all formalities have been completed, the buyer must pay the purchase price. As soon as the purchase price is received, the land register change is carried out and the buyer is registered as the new owner of the apartment.

Applying for a certificate of inheritance: This is what matters

In the course of the sales process, the heirs must provide proof that they own the inherited house. Often, a certificate of inheritance is required for this, as the deceased owner is still registered as the owner in the land register. The certificate of inheritance can be applied for at the probate court, but it is not necessary in every case. Alternatively, succession can also be proven by a European certificate of probate or a disposition of property upon death in accordance with Section 35 (1) GBO, provided this is contained in a public document (e.g. a notarial will) and the record of the opening of the disposition is submitted.

Land register registration in the event of a speedy sale

It is advisable for the heirs to have their ownership position entered in the land register before the sale, if necessary, as the land register becomes incorrect after the death of the testator. The heirs are generally obliged to correct the land register and enter them as the new owners. This can be particularly important if the sale takes place years later. In this case, the land register correction should be made as soon as possible and at the latest within two years of the inheritance. The process is usually free of charge within this period.

No transcription necessary in case of later sale

However, if the house sale takes place promptly after the death of the decedent, a land register adjustment is not normally required. In this case, ownership can be proven, for example, by presenting the certificate of inheritance and the buyer can be entered directly in the land register.

The most important things summarized:

• Certificate of inheritance proves new ownership of the apartment
• Alternative: Proof by European Certificate of Succession
• Community of heirs must register as new owners
• Exception: sale takes place shortly after the inheritance takes place

Conclusion: Sale of apartments of a community of heirs

In summary, a sale of an apartment by a community of heirs can be a complex process. For this reason, it is especially important that you and your co-heirs are familiar with your rights and obligations. After the community of heirs has agreed on the sale, the heirs must prove their ownership of the inherited apartment. A certificate of inheritance can be requested for this purpose, but there are also alternative means of proof such as the European certificate of inheritance or a disposition of property upon death. It may also make sense to correct the ownership position in the land register in order to avoid problems in the event of a subsequent sale.

]]> https://lukinski.com/sell-apartment-against-life-annuity-right-of-residence-for-life/ Thu, 09 Mar 2023 03:50:04 +0000 https://lukinski.de/sell-apartment-against-life-annuity-right-of-residence-for-life/ Selling your apartment for an annuity – The annuity gives you financial stability without having to give up your home. This is especially important as there are many people who value their home and independence and prefer to live independently for as long as possible. When deciding whether to sell an annuity or an entire home, there are a number of things to consider, from eligibility requirements to taxation. For this reason, we have summarized the most important facts about life annuities for you here.

Sell apartment against annuity

Many seniors face a financial dilemma. In some cases, neither savings nor pensions are sufficient to cover ongoing living expenses. In other cases, health problems can cause care costs to rise. The only way out: selling their own home.

But for many older people, their home is more than just a roof over their heads. It is their home, where they have lived for decades and which is familiar to them. Selling their apartment can mean being torn from their familiar surroundings and having to move into an unfamiliar environment.

In such cases, selling for an annuity can be an attractive option. By selling your home for an annuity, you can continue to live in your home and supplement your monthly pension payments.

How the real estate pension works

The life annuity is an agreement between the seller and the buyer in which the seller transfers ownership of his property to the buyer in return for a lifelong annuity. The amount of the annuity is determined when the contract is signed and depends on various factors, such as the value of the property, the age and life expectancy of the seller, and current interest rates.

In return for the annuity, the seller retains the right to live in the property for life. This means that he can continue to live in and use the property. This allows you to continue to stay in your familiar surroundings and still provide yourself with financial security.

The life annuity in summary:

• Apartment is sold to annuity provider
• Monthly annuity payment instead of purchase price payment
• Registration of a lifelong right of residence

Requirements: Age & property value

In order to receive an annuity, certain requirements must be met. To ensure a calculable financial risk for providers, many set a minimum age for sellers. This is usually between 60 and 65 years. In addition, unencumbered real estate is usually preferred and the minimum value of the property is also usually fixed, as it guarantees a minimum real estate annuity. Here, one can be guided by the individually set value of the provider. As a rule, providers demand a minimum pension of 150 to 250 euros per month.

The requirements at a glance:

• Minimum age of the seller: 60 years and over
• Minimum payout: from 150 euros per month
• Property free from encumbrances

Taxes: Income tax on income share

In the case of the real estate life annuity, only the income share is taxed, as annuity payments are classified as “other income” under the Income Tax Act. The share of income is influenced by various factors, in particular by age at the time the contract is concluded, and can be deducted from tax as a special expense. The taxation share decreases continuously with increasing age at the time the contract is concluded. This means that older persons generally have to pay less tax than younger persons.

Life annuity or traditional apartment sale?

In addition to the annuity, you can also opt for a traditional sale of your home. The advantages of a complete sale: You receive the agreed purchase price paid out in one go. The sale price is usually higher than with a life annuity, but you lose all ownership rights to your home.

As mentioned above, the life annuity allows you to continue living at home while freeing up your real estate assets. In addition, you save the cost of moving and do not have to buy a new apartment or pay rent.

Here are the advantages at a glance:

• Life annuity: no need to move out & release of real estate capital.
• Traditional sale: payment of the full purchase price

Conclusion: Secured into old age

Overall, the sale of an apartment for a life annuity offers older people an attractive alternative to the traditional sale of an apartment. The life annuity makes it possible to convert the sale proceeds into a monthly pension that is paid out until the end of one’s life, thus guaranteeing a regular income in old age. At the same time, one must be aware that by selling the property, all ownership rights are transferred to the buyer. For this reason, it is important to take enough time in advance to weigh up the respective advantages and disadvantages and to make the best decision for yourself.

]]> https://lukinski.com/apartment-sell-right-of-residence-advantages-special-features/ Wed, 08 Mar 2023 07:42:20 +0000 https://lukinski.de/selling-an-apartment-with-a-right-of-residence-how-does-it-work-advantages-special-features/ Sell apartment with right of residence — the sale of one’s own property under the reservation of a lifelong right of residence is one of the most powerful instruments of testamentary succession. Properly structured, this allows a family to save six-figure amounts in gift and inheritance tax, while the seller spends their old age in their own four walls. Improperly structured, it can lead to disputes over maintenance costs, unexpected tax liabilities, and problems when reselling. In this guide, you will learn how the right of residence works legally, how the specific value reduction can be calculated, what the decisive difference to the usufruct is, and which twelve points must be clarified before the notary appointment.

The Right of Residence Explained

When it comes to Real Estate as a Retirement Provision, the term right of residence quickly comes up. The right of residence under § 1093 BGB entitles a favored person to live in a property or part of it themselves — even if the property belongs to someone else. It is a real right, meaning it is inseparably linked to the plot of land and survives any change in ownership.

Limited, lifelong, paid, unpaid

Right of residence can be flexibly structured. In practice, four variants dominate:

• Lifelong & unpaid — the classic option for transfers within the family
• Lifelong & paid — the entitled person pays a reduced rent, often when selling to an investor
• Limited & unpaid — e.g. five years until the planned move to a nursing home
• Deferred condition — Right of residence begins only upon the death of the spouse or at a specific date

Right of residence vs. Right of use — the decisive difference

Whoever plans to sell with long-term housing security must clearly distinguish between these two instruments. They are often confused — but the economic consequences are significantly different.

Feature	Right of residence (§ 1093 BGB)	Right of use (§ 1030 BGB)
Own use	Yes	Yes
Rent out possible	No (only with consent)	Yes, rental income belongs to the entitled party
Value reduction	Low	Higher (often full market rent as a basis)
Tax depreciation	Owner	Right of user (when rented out)
Typical application case	Own apartment in old age	Apartment building, return objects
End	Death or term	Death or term

Rule of thumb: Whoever just wants to continue living there chooses the right of residence. Whoever wants to remain flexible and possibly rent out or move, without losing the right, chooses the usufruct.

For whom is the right of residence worthwhile?

The typical scenarios

A lifelong right of residence is mainly agreed upon in four scenarios in practice:

• Parents to children — anticipated inheritance, use of gift tax allowances every ten years
• Spouses to each other — security for the longer-living partner in separate property arrangements
• Sale to investors — so-called “sale on a pension basis” or “real estate life annuity”
• Sibling inheritance — one heir takes over the property, the other receives the right of residence

The right of residence is ideal for close relatives, spouses, parents & grandparents.

When it is not worthwhile

Little sense makes a right of residence if the entitled person intends to move anyway in the foreseeable future, if the property would have to be sold below market value because the market is weak, or if the owner needs external financing — banks assess properties burdened by a right of residence significantly more conservatively and often require a priority entry in the land register.

Value Calculation: What is the value of the right of residence?

The central question in every negotiation. The capital value of the right of residence is determined according to § 14 of the Real Estate Transfer Tax Act and reduces the purchase price or the assessment base for gift tax.

The Formula

Annual value (local cold rent × 12) × life annuity factor = capital value of the right of residence

The life annuity factor is derived from the statistical life expectancy of the entitled person and is updated annually by the Federal Ministry of Finance. Simplified: The younger the entitled person, the higher the factor — and the greater the value reduction.

Calculation example — condominium in Munich

• Market value of the apartment: 850,000 €
• Local cold rent: 1,800 €/month = 21,600 €/year
• Beneficiaries: 72-year-old woman, life annuity factor approx. 9.8
• Capital value of right of residence: 21,600 € × 9.8 = 211,680 €
• Reduced selling price (to daughter): 850,000 € − 211,680 € = 638,320 €

As the daughter has a gift tax exemption of 400,000 €, a significantly lower tax applies to the difference between the reduced value and the exemption than without the right of residence. With a strategic division over ten years, the tax burden can often be reduced to zero.

Rule of thumb for quick calculation

Age of beneficiary	Life annuity factor (approx.)	Value reduction for 1,500 € monthly rent
60 years	13.1	235,800 €
70 years	10.5	189,000 €
75 years	8.9	160,200 €
80 years	7.2	129,600 €
85 years	5.5	99,000 €

Advantages for the entire family

Properties with registered right of residence are only sold on the open market at a significant discount, because they are unattractive to external buyers. For this reason, they are usually passed on within the family — and there, they fully realize their tax and emotional impact.

Advantages at a glance — Who benefits how?

Actor	Concrete Advantage
Seller / Donor	Lifetime housing security, liquidity from sale, no moving stress
Heir / Buyer (Child)	Reduced purchase price, use of gift tax exemption, early transfer of ownership
Family as a whole	Wealth remains within the family group, clear regulations prevent inheritance disputes
Tax optimization	Exemptions can be used every ten years (400,000 € per child, 500,000 € spouse)

What is additionally tax relevant and affects the future owner: AfA Real Estate.

What needs to be considered

Decide to sell your apartment with a registered right of residence, several aspects must be clearly regulated. Whoever is careless here creates potential for disputes for decades.

Duration and Expiry of the Right of Residence

A right of residence can be time-limited or lifelong — it expires either at the end of the agreed period or with the death of the entitled person. The owner can only unilaterally revoke it in exceptional cases (such as gross misconduct). The entitled person can voluntarily renounce their right of residence at any time — for example, when moving into a nursing home. Merely not using it does not automatically lead to its expiry: After 30 years of non-use, the right of residence can be removed from the land register without the consent of the entitled person.

• Duration is notarially determined in advance
• Revocation only in exceptional cases
• Renunciation by the entitled person is always possible
• Expiry automatically upon death of the entitled person
• Cancellation after 30 years of non-use

Costs and Burdens — who pays what?

The most common point of contention after a change of ownership. Without a clear regulation in the notarial contract, the statutory distribution applies — and this is often unsuitable. Standard practice:

Position	Right of Habitation Holder	Owner
Electricity, water, heating (consumption)	Yes	No
Beauty repairs	Yes	No
Land tax	Negotiable	Standard
Condominium fees (management)	Pro rata (consumption costs)	Pro rata (maintenance)
Roof, facade, heating system	No	Yes
Building insurance	No	Yes

Recommendation: List this division point by point in the contract — general formulations such as “Holder bears the ongoing costs” regularly lead to conflicts.

Inheritance by third parties not possible

The right of residence is personal and not inheritable. It ends with the death of the person entitled to it — heirs or successors cannot continue it, unless this is explicitly stipulated differently in the original agreement (which is the exception). After death, the owner regains full control and can sell, rent out, or use the property themselves.

Move-in to a nursing home — what happens then?

An often underestimated practical case. If the entitled person moves permanently into a nursing home, the right of residence remains in place initially — the apartment, however, remains empty. Three options:

• Renunciation by the entitled person — clean, but final
• Agreement on renting out — rental income often covers nursing home costs
• Social services reimbursement — if the person is in need of care and receiving social assistance, the social services office may take the right of residence into account as an asset or demand its capitalization

Tip: Include a so-called “tenant compensation clause” in the contract — it regulates that the owner must make a reduced monthly payment to the entitled party as long as the right of residence remains formally in place upon moving out.

Notarial Certification and Registration in the Land Registry

The right of residence must be notarially certified and registered in the land registry (Section II) in order to be legally effective as a real right against any future owner. During the notary appointment, the notary ensures that all formalities are followed. Registration in the land registry makes the right of residence publicly visible and protects the entitled party against any future buyer.

Necessary for security:

• Notarial certification of the contract
• Registration in Section II of the land registry
• Clear description of spaces, rights of joint use, cost distribution
• Provision for the case of moving out/entering a care home

Checklist: Clarify before the notary appointment

• Will a right of residence or a usufruct be more suitable?
• Which rooms are included in the right of residence (entire apartment or only parts)?
• Co-use rights for garden, basement, garage, attic regulated?
• Current local cold rent determined as a basis for evaluation (rent index/expert opinion)?
• Life annuity factor calculated based on age?
• Detailed cost allocation (consumption, maintenance, land tax, insurance)?
• Nursing home clause and tenant compensation regulation included?
• Gift tax exemptions optimized with a tax advisor (10-year rule)?
• Priority in the land register established (before or after bank mortgages)?
• Renovation obligations and cosmetic repairs defined?
• Right of first refusal for the family considered?
• Agreement on the possibility of mutual termination against compensation?

Apartment with existing right of residence

]]> https://lukinski.com/apartment-building-sell-taxes-speculation-tax-own-use-heritage/ Mon, 06 Mar 2023 07:43:04 +0000 https://lukinski.de/selling-multi-family-house-taxes-speculation-tax-for-owner-occupancy-inheritance-co/ Sell an apartment building – Control – Do you want to sell your apartment building? This not only involves the usual costs for control, notary and land registry office, but also some control payments. Find out here which controls you have to consider when selling your apartment building. Additionally: How you can save on controls and what matters when selling an inherited apartment building. Questions? Write to me or call, completely non-committal: Contact us.

Control when selling an apartment building

Read more here:

• Control when selling an apartment building



Which taxes apply when selling an apartment building?

Selling an apartment building can be associated with significant tax payments. At a glance:

Tax type	Due	Amount	Avoidable?
Speculation tax	When selling within 10 years	Personal income tax rate (up to 45%)	Yes, after 10 years
Trade tax	Commercial real estate trading	15–17% + municipal surcharge	Yes, with the right structure
Value added tax	Only if VAT option is chosen	19%	Yes, standard case tax-free
Corporate tax	When selling through a GmbH	15% + solidarity surcharge	–

Speculation tax on an apartment building

Also for multi-family homes, the 10-year speculation period (§ 23 EStG) applies. The period begins with the notarized purchase contract. Decisive:

• After 10 years: Capital gain from sale fully tax-free (private individual)
• Under 10 years: The prize is taxed at the personal income tax rate
• Self-Occupancy: For MFH, the 3-year self-occupancy rule applies only to the unit occupied by the owner, not to the entire building.
• Exemption: 600 € per year (§ 23 Abs. 3 EStG) – usually not relevant for MFH sales

Calculation of the capital gain

Formel: Selling price − purchase costs − additional costs − depreciation (depreciation Real Estate Depreciation: Depreciation & Rates) + taxable depreciation amounts

Important: Depreciation already deducted (AfA) is added back to the taxable profit upon sale (AfA recalculation). This significantly increases the effective tax burden.

Commercial Tax: When Does It Apply?

Private individuals who hold real estate as an investment generally pay no commercial tax. The situation becomes risky with the so-called Three-Property Threshold:

• Anyone who buys and sells more than three properties within five years is considered a commercial real estate dealer
• Consequence: All profits – even retroactively – become subject to commercial tax
• Commercial tax: approximately 15 % corporate tax + local surcharge (effectively 30–40 %)
• The 10-year speculation exemption is lost in commercial trading!

Solution: Hold each property for longer than five years or structure ownership through separate GmbHs/holding structures.

Asset Deal vs. Share Deal in the Sale of MFHs

When selling larger multi-family homes owned by a company, there are two sale structures:

	Asset Deal	Share Deal
What is being sold?	The plot/building itself	Shares in the GmbH/KG that holds the MFH
Purchase tax buyer	Full 3.5–6.5 % applicable	For <90 % acquisition: waived (structuring model)
Tax seller	Corporate tax on profit (15 % + solidarity surcharge)	Partial income procedure (60 % taxable)
Buyer preference	Possible to increase depreciation	Saving on purchase tax
Risk	Higher transaction costs	Liability for old debts

Saving taxes: Strategies for MFH sellers

• Wait 10 years: For privately held MFH the simplest way to achieve tax exemption
• Sell in a bad income year: For example, after retirement or in a loss year
• Offset losses: Losses from other property sales in the same year reduce the profit
• Transfer to children before sale: Gift to children in a lower tax class (observe holding periods!)
• Limited liability company structure: MFHs sold within the GmbH structure are subject to only 1.5 % effective tax when retained (§ 8b KStG) — complex structure, tax advisor necessary
• 1031-Exchange Analogue (DE: Reinvestment): No direct equivalent, but tax advisors can delay the tax burden through clever reinvestment planning

MFH Inheritance: Taxes when selling an inherited apartment building

If an apartment building is inherited and then sold, special rules apply:

• The speculation period starts from the deceased’s purchase date – not from the inheritance
• If the deceased bought the MFH more than 10 years ago: Sale after inheritance is tax-free
• If the deceased lived in the MFH themselves (only one unit): The 3-year rule applies to this unit
• Inheritance tax and speculation tax can apply simultaneously – independent of each other
• Exemptions for inheritance tax: 400,000 € (children), 500,000 € (spouse)

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