Inheriting Real Estate
Inheritance or bestowal?
No one likes to talk about inheritances! Thinking of one’s own passing or the death of a loved one is dreadful. And yet it is important to deal with the subject during one’s lifetime, so that the family’s valuables, art and heirlooms are preserved. All tax-registered inheritances and bestowals in 2017 amounted to around 97 billion euros, 47% of which was real estate. The reason for this is also the enormous development of real estate prices, especially in large cities. In about half of the cases, single-family houses are inherited, followed by two-family houses, which represent a quarter of the inherited real estate. On average, an inheritance consists of assets of 305,000 euros. It is therefore important to think carefully about what happens to these hard-earned assets.
Move in yourself?
People coming into an inheritance today are on average 50 to 60 years old. By then, the living conditions have long been established, and after the children have left the house, often times there is the wish to downsize or to find an apartment suitable for the elderly. In addition to inheritance tax, it is quite often necessary to carry out refurbishment and renovation work on the inherited property in order to equip it in a contemporary way. This causes not only a lot of work but is also a high financial expense. In case of doubt, the costs can be refinanced via a mortgage on the inherited property, but then interest and redemption fees become due and the once paid-off house will again cost money on a monthly basis.
Sell or rent?
With an inheritance it can therefore make sense to rent out the inherited property or even to part with it and to put the money left over after the deduction of inheritance tax and the sale of the property into a more low-maintenance property – e.g. a condominium or a micro apartment. As a rule, such properties require considerably less maintenance than single-family houses, and the costs can be calculated more easily in advance. In order to provide an orientation, our experts evaluate your property free of charge and without obligation according to the current market conditions and assist the heirs with knowledgeable, tailor-made advice even in the event of a sale.
Those who inherit larger real estate assets and do not have sufficient liquidity must usually decide whether the due inheritance tax can be covered by a real estate loan or by the sale of parts of the inheritance. In order to make the best possible use of these values, it is a good idea to divide an inherited apartment building into condominiums. Our sales experts are there to support such division projects from start to finish, and can then sell individual apartments on request. The division usually increases the value of the property, as individual apartments can be sold more profitably and more quickly than larger packages. Ideally, the owner sells less than half of the property and thus retains the majority in the condominium community in the long term.
On the safe side: Options for during your lifetime
A more elegant solution than waiting for inheritance, is the bestowal during one’s lifetime. After all, it makes sense to organize your assets over the course of your life and to secure the real estate profits of past years through sales or bestowals. In addition, you can save taxes because the tax-free amount can be claimed every 10 years. Another alternative, according to our experts, is the concept of reverse mortgage: The residents can stay in their house and receive a regular pension payment from the new owner. If you choose the one-off payment, you can leave your heirs a small fortune and still grow old in your own four walls. Whether through reverse mortgage or through the sale of the inherited property, the heirs are spared a great deal of effort and can simply pay their taxes from the liquid assets. And the rest can be invested – in real estate, for example.