In its ruling of January 19, 2022 (Case No. -5 AZR 217/21-), the Federal Labor…
It is common that ownership of real estate is to be transferred between spouses for inheritance reasons. Usually it is the husband from whom property is to be transferred to his wife and not often the husband’s children from a previous relationship are the reason for this deision. The motivation for this is quite clear: the husband wants to protect his wife from excessive claims to a compulsory portion by his children from the previous relationship in the event of his death.
However be careful: As soon as the transfer is legally to be regarded as a gift or as a mixed gift, it fails to achieve its objective. One speaks of a mixed gift if one part of the legal transaction is combined with payment and another part is not. An example: The husband “sells” his real estate for 150,000, – € to his wife, while the actual market value of the real estate lies with 230,000, – €. In this case a mixed donation of 80.000, – € is present!
Tricky with donations between married couples is the fact that these donations are added obligation-legally to the estate of the sometime later dying husband and without temporal restriction. This is a very important point to be considered, the legal situation is clear. Whereas in the case of other gifts by the husband to persons other than his wife, the 10-year period applies and the principle of amortization applies, in the case of gifts between spouses this period only runs from the dissolution of the marriage, i.e. in this case from the death of the husband, which does not benefit the wife at all.
Thus, the aim is to avoid gratuitousness in legal transactions between spouses with such a background. This is not always possible and not always complete, but most of the time it is. One possibility is the reservation of the husband’s rights of use. For example, if the husband reserves the usufruct of the property, this significantly reduces the amount of the gift. This is because the value of the usufruct is capitalized, i.e. converted into money, and deducted from the value of the property. The calculation of the value of the usufruct is based on the statistical life expectancy of the transferor, i.e. the husband, which in turn means that the earlier the gift is made or the younger the transferring husband is, the more it can be reduced. Another possible starting point in this context is to obtain a competent expert opinion on the value of the property. Such an expert opinion is advisable for the sole reason of having clarity and provability for a value that may not be relevant again until many years later, namely after the husband’s death. If one has not taken precautions by means of an earlier expert opinion, the dispute is pre-programmed and the need for proof that the value of the property, which may have been transferred decades ago, was actually so low, is high.
There are other ways and means to reduce gifts between spouses or to bring them down to zero altogether. What makes sense in a particular case and what should be avoided at all costs is always left to the examination of the individual case and the creativity of the legal advisor. From our own experience, the involvement of the client’s tax advisor is always advisable in such cases, so that the final arrangement is examined from both a civil law and a tax law perspective and holds up.
Author: Dr. Klaus Krebs