Usufruct of Cash and Securities Assets in Germany
Transferring cash, current accounts, and securities to subsequent generations in a tax-efficient manner can be challenging in Germany. Even if these are business assets, they typically cannot be transferred in a tax-favored way as harmful administrative assets. A creative and lesser-known alternative is the gift of cash and securities assets with the simultaneous creation of a usufruct in favor of the donor.
Legal requirement: usufructuary is entitled to income
Essentially, the donor or usufructuary can only profit from the use of the object. These uses are the benefits conferred by the use of the asset. In the case of financial assets and securities, these are usually the income in the form of interest, dividends, and other income. The use of financial assets also includes the use of money. The donor and usufructuary only receive back the nominal value of the financial assets. Capital gains or price gains on securities generally accrue to the donee and not the usufructuary.
Securing access to assets through organization
A clever structuring of the usufruct can ensure that the donor or usufructuary maintains substantial influence over the capital over time. For instance, the usufructuary can reallocate the assets and secure access to the cash and securities assets through redemption rights.
Usufruct is a charge on the asset
The usufructuary right is considered a charge on the asset for tax purposes in Germany. Therefore, the tax value of the donated cash and securities assets is reduced by the value of the usufructuary right.
German law simulates high value of usufructuary right
The value of the usufructuary right is determined by a legally stipulated return of 5.5 percent per year for the duration of the usufruct. In the case of a lifelong usufructuary right, this is determined by the remaining statistical life expectancy of the usufructuary and the resulting capital value.
Tax-free gift through reservation of usufruct
For example, a 50-year-old father can now make a tax-free gift of around EUR 2.1 million in cash and securities assets to his son, who can still claim a full tax-free allowance of EUR 400,000, subject to usufruct. Without the usufruct arrangement, a gift tax of EUR 323,000 would be triggered.
The earlier the cash and securities assets are transferred to one's own children, the more effective the usufruct arrangement is, and after the ten-year period has expired, a new transfer subject to usufruct can possibly be considered.
Our advisory services on the usufruct of financial assets
Our experienced attorneys for usufruct and asset succession support you with the:
- Holistic overall conception of your individual asset succession
- Development of your individual (tax) optimized usufruct structure
- Drafting suitable contracts such as usufruct agreements and transfer agreements
- Advice on problems between usufructuary and owner
- Cancellation of the usufructuary right to securities assets
Your lawyer for the usufruct of financial and securities assets in Germany
Would you like to make a tax-free gift of financial assets or securities? Do you want to check whether a usufruct right is an option for you? We would be happy to support you! Our attorneys are available to you at any time.
The most convenient way to reach us is via e-mail (info@winheller.com) or by phone (+49 69 76 75 77 85 22). Don't hesitate to get in touch with your queries.
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