Gift tax allowances

The allowances under § 16 ErbStG

• Spouses and registered partners: €500,000.
• Children and stepchildren: €400,000 – per parent, i.e. up to €800,000 per child for gifts from both parents.
• Grandchildren: €200,000 (€400,000 if the intermediate parent has already died).
• Parents and grandparents on inheritance: €100,000 – but only €20,000 for lifetime gifts (tax class II).
• Siblings, nieces, nephews, children-in-law: €20,000.
• All other persons, including unmarried partners: €20,000.

Tax classes and rates

Anything above the allowance is taxed according to three tax classes: class I (spouses, children, grandchildren) pays 7 to 30 % depending on the amount, class II (siblings, nieces/nephews, divorced spouses) 15 to 43 %, class III (everyone else) 30 to 50 %. The progression jumps in brackets – just above a threshold, the higher rate applies to the entire taxable acquisition, softened only by the hardship adjustment. This is another reason to portion transfers so they stay below the bracket thresholds.

The 10-year cycle as the core planning tool

Under § 14 ErbStG, all acquisitions from the same person within ten years are aggregated – after that, the allowances start afresh. This yields the most important rule of succession planning: start early. A parent who begins at 55 to transfer €400,000 to a child every ten years will have moved €1.2 million tax-free by 85 – per parent. A later inheritance then only hits the remaining estate – and the allowance is available once more if the last gift was more than ten years earlier. For rented property and GmbH shares, the effect can be combined with a reserved usufruct (Nießbrauch): the substance transfers, the income stays with the donor, and the capitalised value of the usufruct reduces the taxable value of the gift.

Chain gifts and the matrimonial property swing – with pitfalls

Two classic structures extend the allowances. The chain gift: instead of giving directly to a child-in-law or grandchild (€20,000 or €200,000 allowance), assets are first transferred to one's own child, who subsequently gifts them onward – each step uses the full respective allowance. The matrimonial property swing (Güterstandsschaukel): spouses notarially terminate their community of accrued gains, whereby the equalisation claim flows tax-free under § 5 (2) ErbStG – allowing unlimited tax-free reallocation of assets between spouses, for instance to then use both parental allowances towards the children. Both routes work, but only if executed cleanly.

Succession planning

Every decade without a plan costs allowances.

Together we develop a transfer roadmap for the next 10 to 30 years – allowances, usufruct, and valuation questions for real estate and GmbH shares included. Coordinated with your notary and, where needed, specialised inheritance lawyers.

Book an initial succession consultation

The most expensive mistakes in practice

• Starting too late – the most common mistake of all: every unused 10-year period is irretrievably lost.
• Not notifying the gift: even tax-free gifts must be informally reported to the tax office within three months (waived for notarised deeds).
• Transferring real estate at the wrong moment – since the 2023 valuation reform, tax values sit much closer to market values.
• Executing a chain gift in a single deed – the intermediate step is disregarded and the small allowance applied.
• Forgetting unmarried partners: only a €20,000 allowance and tax class III – here, a will and possibly marriage are the most effective tax planning.