Asset transfers in marriage

Asset transfers between spouses and the associated protection of the partner can therefore make a lot of sense for non-tax or otherwise economic reasons alone.

If this is done in a targeted manner and accompanied by experts, very large amounts of gift, inheritance and income tax can even be saved in the short and long term. The tax-free allowances of €500,000 that only apply every ten years to transfers of assets during a couple’s lifetime can even be disregarded if the arrangements are skillfully made. This is made possible by various special tax regulations.

1. Design with the family home swing

If a property used jointly as a main residence is wholly or partly owned by one spouse, he or she can transfer it to his or her partner free of gift tax without offsetting against the allowance for other gifts. The value of the property is also irrelevant. If the donating spouse subsequently buys the property back at market value, the spouse receives the corresponding amount of money tax-free.

I described this model in detail and with a concrete example in an earlier article of mine, which you can find here: https://buse.de/blog/steuerrecht/die-familienheimschaukel/

2. Marital property swing

With the so-called ‘marital property regime swing’, spouses end the marital property regime of community of accrued gains by mutual agreement, utilise the existing advantage in this context to transfer assets completely tax-free to the less wealthy partner in order to later switch back to equalisation of accrued gains if they so wish. If you had initially agreed on separation of property, you can agree on community of accrued gains retroactively to the beginning of the marriage and then ‘switch back’ to separation of property. It is obvious that there are a few things to consider here. However, the model is ideally suited for the tax-optimised or gift tax-free transfer of very large assets and has been recognised by the Federal Fiscal Court.

3. Transferring assets and saving income taxes

Cleverly applied, the above-mentioned change of matrimonial property regime can not only transfer larger assets to the spouse, but also achieve even greater income tax savings in subsequent years. In such an arrangement, the equalisation of gains between the spouses is not made in cash, but in lieu of performance by transferring ownership of a rented property, where only little or no depreciation can be deducted from the rental income as income-related expenses. The transfer of ownership in lieu of fulfilment as part of the equalisation of gains leads to an acquisition of the property by the spouse entitled to equalisation that must be taken into account for tax purposes. Thanks to the newly created depreciation volume based on the current market value of the building, both spouses pay significantly less tax on their combined income – for decades!

Asset transfers between spouses should not only be considered with the intention of providing financially for the partner and as a pure outflow of assets from the transferring spouse. They show appreciation for the partner and their contribution during the partnership, promote and support continued cohabitation and can also be carried out in a tax-neutral manner for larger assets. In addition, they preserve the life’s work through large inheritance tax savings and even increase it through specifically planned income tax savings.
So equalise large differences in wealth. It is ‘worth it’ in many respects!

We will be happy to assist you with the appropriate organisation and implementation in your specific case!