Anticipated succession: Tax optimization through reserved usufruct – Tax consultants – Hagen – Holzwickede – Kamen – Lünen – Dortmund

Families often intend to transfer assets to the next generation during their lifetime and at the same time provide the transferors (e.g. parents) with economic security, for example by agreeing on a right of use under which the parents continue to be entitled to the income from the transferred assets.

For inheritance tax purposes, the right of use reduces the basis of assessment for gift tax; tax allowances can thus be used more than once if the anticipated succession (gift) and the inheritance are more than 10 years apart.

In this arrangement, the capital value of the right of use and thus also the gift tax advantage increases the younger the transferor is.

If the usufructuary dies and the usufruct thus expires, this does not lead to any (subsequent) tax adjustment; the reduction in tax due to the usufruct that was made when the usufruct was agreed upon is regularly retained.

In terms of income tax, it should be noted that the (further) attribution of rental income to the parents may result in advantages if the parents’ personal income tax rate is lower than the children’s tax rate.

(Further comments & information on this can be found in our information letter 04/2018 under item 2.)