Lifelong right of residence without rental costs - early estate planning through a gift

If house or apartment owners transfer a property they use themselves to family members during their lifetime, they can reserve a right of residence.

From then on, the transferors may live there rent-free. This is a personal right: shared use by another partner must be expressly permitted in the order. A further advantage in addition to the early settlement of the inheritance is the utilization of the gift tax allowance.

Use the property alone or together with the owner

A basic distinction must be made between a right of abode and a right of residence. A person with a right of residence may live in a house, a condominium or parts thereof to the exclusion of the owner of the property. With a right of residence, on the other hand, use is shared with the owner. The premises to which this right applies must be defined individually and specifically. This may also include the use of a garden or the shared use of common areas. The right of residence cannot be inherited or transferred and ends at the latest upon the death of the person entitled to the right of residence. He or she may not rent out the property.

Assumption of repairs and consumption costs

Authorized tenants are responsible for the upkeep and ordinary maintenance of the rented premises. This includes repairs, improvements and ongoing consumption costs, for example for electricity or water. Expenditure for renovations and extraordinary repairs must be borne by the owner. The owner is also responsible for all public and private charges such as property tax, residents' contributions and building insurance. A different individual allocation of the amounts can be contractually agreed when the right of residence is granted.

Entry in the land register

A right of residence is created by agreement between the property owner and the beneficiary and by entry in the land register. The signature of the registration permit must be notarized. Entry in the land register protects entitled persons from losing their right of use when the property is sold. Buyers can only purchase the property including the right of residence and are bound by this agreement. The entitlement can be granted for life, but also for a limited period of time. It is also possible to include conditions, such as termination of the right for the partner in the event of divorce. A right of residence can only be granted to premises. It is not possible to encumber merely non-material co-ownership shares, whether in apartments or land, which therefore belong to several owners.

Transferors can use the gift tax allowance

Transferring a property during your lifetime allows you to take advantage of the gift tax allowance. Like the inheritance tax allowance, this amounts to EUR 500,000 for spouses and EUR 400,000 for each of their own children. The value of the right of abode is deducted from the value of the transferred property. The tax significance must always be examined on a case-by-case basis. After ten years, the aforementioned allowance can be claimed again for a gift. However, if the right of residence is to be terminated prematurely by waiver and deletion from the land register, this may be considered a gift in favor of the property owner and trigger gift tax if the tax-free amount is exceeded.

You can find further news at https://ratgeber-notar.de/.