Giving away the house, but still living in it: Usufruct is a proven means of tax savings, especially when transferring real estate. But that’s also available at the depot.
If you have a lot to inherit, you should take care of passing on your assets to the next generation as early as possible. This is the only way to make the best possible use of tax allowances for inheritance and gifts. For example, if you have a well-stocked securities account, you can give it away while you are still alive without completely giving up the reins. The keyword is usufruct.
And it works like this: The donor transfers his deposit to the beneficiary, who thus becomes the new owner. However, the income from the deposit is skimmed off and goes to the donor, also known as the usufructuary. At the same time, the usufructuary retains the power to make decisions about the investments and possible withdrawals, says lawyer Jasper von Hoerner from the law firm LKC. The advantage: the usufruct reduces the taxable portion of the assets.
Because in addition to the so-called personal allowances for inheritance and gifts – which are higher, the closer the degree of relationship is – the tax office also takes into account the so-called capital value of the usufruct. This is the value that the usufruct has for the usufructuary, i.e. in this case the sum of the deposit income to be expected. It depends on the age of the donor and the assumed annual return on the portfolio.
The younger the donor at the beginning of the usufruct and the higher the average performance of the custody account, the higher the capital value and the lower the taxable remainder.
Would you like an example? A father, 50 years old, would like to transfer a securities account with a value of one million euros to his daughter. Without a usufruct deposit, the daughter is only entitled to 400,000 euros of this tax-free, the remaining 600,000 euros would have to be taxed according to her gift tax rate.
However, if the father remains the usufructuary, the capital value of the usufruct, which also remains untaxed, is added to the daughter’s allowance. With an assumed annual return of four percent, the father could transfer a total of more than 1,000,000 euros, and thus the entire portfolio, tax-free. The tax savings: around 90,000 euros. The annual return that is calculated depends, among other things, on the performance of the portfolio in the past.
If you want to roughly determine in a first step how high your maximum tax-free donation and the tax savings with a usufruct deposit will be, you can use the calculator of the German Institute for Old-Age Provision (DIA), for example.
But how do you actually transfer your securities to such a usufruct custody account? Jasper von Hoerner recommends donors to first draw up a donation contract in order to contractually record important details.
For example: What kind of income should go to whom and when? Does the right of usufruct also apply to the spouse in the event of death? Which asset manager should advise in the future? Should the beneficiary have a say in the choice of title? You simply have to be precise with these points, says von Hoerner.
In addition, certain rights of revocation can be stipulated in the donation contract – for example to protect the donating generation, says the lawyer. If, for example, a cost-intensive care situation occurs that was not foreseeable for the donor, it can be agreed that the deposit goes back to the usufructuary. Certain rights of revocation can also be agreed in the event that the new owner dies before the usufructuary or gets on the wrong track.
If both contractual partners have signed, the contract is valid with the transfer of the deposit. According to Hoerner, a notary is not required. The transfer of the securities account into a usufruct account is usually carried out directly by the respective bank. It must then be reported to the tax office which depot and what value has been transferred from whom to whom.
Very important: “Leaving the income in the custody account would be tax evasion for donors,” says von Hoerner. “The proceeds must go from the recipient’s haze to a deposit of the usufructuary.” Otherwise, additional tax must be paid. The lawyer therefore warns against making a portfolio too complex. A parallel calculation has to be made even with accumulating funds, i.e. funds that reinvest their profits. Von Hoerner recommends paying shares.
And what are the costs of the usufruct deposit? “Here you have to make a clear distinction between costs at the bank level and at the lawyer or tax consultant level,” says René Niemann from V-Bank, a bank for asset managers. As a rule, the usufruct does not change the costs on the part of the bank or asset manager.
However, he recommends consulting a tax advisor or lawyer when drafting the donation contract due to the complexity. Here you have to reckon with costs of around 1500 to 3000 euros plus sales tax – depending on the structure of the contract.
If the usufructuary dies shortly after the beginning of the usufruct relationship, the tax-free allowance can be forfeited by the capital value. Exactly when this is the case is regulated by Section 14 of the Valuation Act and depends on the age of the usufructuary. The older the giver, the sooner the usufruct ends – usually after ten years. But a 63-year-old, for example, only has to live for seven years so that the capital value of the usufruct does not expire, according to René Niemann.
