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Real estate transfer within the family - how to avoid arguments!

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Before you pass on a property within the family, you should sit down with the people concerned - because very different interests and perspectives really collide here!

Open discussions are of course the be-all and end-all. It is therefore important that all those involved agree on a few rules beforehand that can contribute to an expedient conversation. Because, especially within the family, it often happens that one's own ideas are not openly expressed and many things are taken as given unsaid.

Before a meeting between the property owner and the potential heir, agree on a »discussion etiquette«:

  • Everyone clearly expresses their own opinion.

  • Every interlocutor - parents, children, children-in-law - may express views openly without questioning them.

  • Arguments are exchanged, but it is not absolutely necessary to reach an agreement on all points. Everyone has the right to hold their own opinion and say no to a proposal.

If there are already discrepancies in advance or you fear that important points will either not be addressed openly or that could lead to disputes, then it helps to bring in a third party as a moderator. This should be accepted as competent by all those involved and ideally all family members should already be familiar.

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1. Interests of senior citizens (property owners)

Emotions

Especially when it comes to passing on your own parental home or the property you have built yourself, feelings often play a much bigger role than the bare numbers.

If you own several properties, you should prepare a list of the properties that you could most easily part with. Start with the properties that you would least mind giving away and work your way to the property that you do not want to hand over under any circumstances.

Finances

Many high-earning employees and self-employed have relied on two essential components for their retirement provision: life insurance and real estate, which should secure a regular income in old age with rental income.

If part of the rental income is still required to cover one's own needs, an unconditional transfer of all real estate must of course be ruled out: Either the transfer of real estate - in parts - is waived or it must be possible to secure livelihood during the transfer, for example through the agreement of pension payments by the new owner or a usufruct reservation.

Personal use

If you would like to continue living in the property you are using yourself in the future, please exclude the property from the transfer planning: Anyone who has lived in their own home for many years will find it difficult if the property suddenly no longer belongs to them and they move on to the new one before major measures Owner, who is also their own child, has to ask for permission. Remember that even small conversions - such as widening doors for easier access with a walking aid - are no longer possible without coordination.

Only when absolutely clear relationships between parents and children have been created and the decisions about possible later changes have been discussed are there good chances of avoiding conflicts.

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Discussion of the estate

A death transmission always takes place unplanned. Often not everything is regulated so thoroughly that the will of the testator is actually legally implemented. For the heirs, this often means a lengthy argument until they finally come to an agreement. In the case of real estate in particular, this can mean that the value of the estate declines before the heirs finally have access to it. The only way to completely rule out this risk is to transfer the "critical" objects during their lifetime.

In the case of real estate, there is also the fact that the later heirs have a significantly higher benefit from a property if they become owners early on: On the one hand, a home used by a young family more than a year later uses their own home, on the other hand, the additional income from one rented property a welcome additional income, especially in younger years.

Inheritance tax structuring

If the total assets that are inherited when the senior citizen dies, exceed the inheritance tax allowances, an early transfer can generate savings. Because the tax exemptions from inheritance and gift taxes come back to life after ten years. This means: If you think about transfers in good time, you can use the tax exemptions multiple times.

2. Children's interests (potential heirs)

use

If the future owner is still a tenant himself, he might want to live in his own home in the future. Then the transferred property must not only meet the requirements of the transferee, the financing must not pose problems for the new owner - for example, for changes before moving in. At the same time, the property should be available at short notice. If a previously rented property is the focus of interest, it must first be clarified whether the existing lease can be terminated without further notice due to the new owner's own needs.

Income increase

If rented properties are to be handed over, the new owner expects an increase in his income. So that there are no nasty surprises, the transferee has to get an overview of the expenses incurred by owning the property. In the case of older properties in particular, the owner also has to pay for maintenance and renovations. In addition, the additional income increases the income tax burden.

Delivery costs

There are not only advantages associated with ownership of a property for the purchaser, but also some obligations. Often, loans that were taken out to finance the property should also be transferred when the property is handed over. With this, the transferee enters into the loan obligation.

If there is vacancy or rent defaults, he must be able to continue to service the loans taken over from other sources of income. If the transferee is unable to do this, there is an existential danger in the event of loss of rent.

Further payments can be made during the takeover itself if the transferee has to make severance payments to siblings or co-heirs who also have claims and receive fewer assets.

Co-heirs

To avoid arguments, the first thing that comes to mind for many parents is the possibility of spreading it to several children in equal parts. However, this often only increases the problems: A community of owners is created that is initially bound to one another and has to agree on how the property will be managed in the future. Numerous decisions have to be made unanimously and, last but not least, the joint filing of a tax return is required.

If there are already pronounced disagreements among the future co-owners, another solution should be sought: A lack of agreement among the heirs can even trigger the dissolution of the community of owners by auctioning off the property at the request of a partner.

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3. Interests of tenants / users

Continuation of rent

With a change of ownership, the new owner enters into the existing lease as a contractual partner and is also bound by the agreements made. Still, the change can be a concern for long-term tenants if there was a personal relationship between the tenant and the landlord. After all, it is not certain that a similar relationship of trust will develop with the successor. In addition, fears often arise that the new owner could create a reason for substantial rent increases through extensive renovations or changes.

Real estate purchase

It can lead to greater difficulties if the tenant has hoped to be able to buy the property from the previous owner. This can lead to unpleasant changes in the situation for tenants and landlords. If the tenant goes other ways and realizes his wish to live in the property, he cancels the lease, then the new owner threatens to be vacant if he does not find a new tenant at short notice. This can mean considerable financial losses for the owner.

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