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How To Avoid Inheritance Tax

Common securities deposit and bank accounts 

There is also a common securities deposit and bank accounts worth USD 300,000. Due to an inheritance from the year 2007 I am registered as owner of a property in the land registry (land value currently 360 000 USD).

The property will be sold within the next ten years. We did not make a will. Our son is therefore sole heir. Our son will not live in the house after our demise.

We want to avoid that he comes in inheritance on the allowances and then has to pay inheritance tax. Which way can we go to avoid this? Donation of the property or the house, or let in inheritance? “

Lead to significant tax disadvantages

“We are a married couple, living in own a detached house worth about 200 000 USD (leasehold). There is also a common securities deposit and bank accounts worth USD 300,000.

Due to an inheritance from the year 2007 I am registered as owner of a property in the land registry (land value currently 360 000 USD). The property will be sold within the next ten years.

We did not make a will. Our son is therefore sole heir. Our son will not live in the house after our demise. We want to avoid that he comes in inheritance on the allowances and then has to pay inheritance tax.

Which way can we go to avoid this? Donation of the property or the house, or let in inheritance? “

First, you are advised to establish a will. Because without a will, the legal succession applies, which can lead to significant tax disadvantages. This is shown by the following calculation: If one of the parents dies, by law, 50 percent of the son and 50 percent of the other spouse.

For example, if the husband vorverstirbt, then his fortune in the amount of 250 000 USD (consisting of half of real estate to 100 000 USD and half account credits to 150 000 USD) to 125 000 USD on the son and 125 000 USD on the wife.

With the surviving spouse thus a total fortune amounts to in the amount of 735 000 USD (inheritance property 360 000 USD, half real estate 100 000 USD, half money 150 000 USD, inheritance from man 125 000 USD).

Insufficient to avoid inheritance tax

In the case of the wife’s death, the son’s allowance of 400,000 USD, based on the total assets of 735,000 USD, is insufficient to avoid inheritance tax.

It is true that the surviving spouse could possibly turn down the inheritance in order to immediately induce a larger accumulation of wealth in his son (for the purpose of exhausting the tax-free allowances). The rigid “all or nothing” principle of the rejection should remain only the last alternative action.

It is better, then, to determine the succession through flexible design measures – through a will or lifelong assignment. The will has the advantage that it can still be adapted to future developments, that is, renewed or supplemented.

Also, the tax avoidance aspect can be incorporated in the will, for example, by legacies. Which design is more meaningful for you, can only be determined after taking on all-round interest and needs positions. Schematic solutions do not meet the requirements of individual succession determination.

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