Tax-free transfer and inheritance of securities accounts
- Liechtenstein life insurance with usufructuary rights
In addition to asset accumulation and retirement provision, life insurance is a valuable instrument for estate planning and the transfer of assets to beneficiaries. Clever structuring and early planning can minimize financial burdens such as inheritance tax and flat-rate withholding tax for heirs - or in the best case even reduce them completely.
A usufruct can be an effective solution for passing on your own assets without significant losses. This instrument, which is anchored in civil law, is often used when transferring real estate. The usufruct grants the original owner a lifelong right of use, so that they can continue to receive income from a rented property, for example, even though the property already legally belongs to the donee.
Less well known, however, is the usufruct of securities assets in connection with a life insurance policy, although legislation pursuant to Sections 1068 et seq. BGB allow such arrangements. Especially with regard to German inheritance tax law, usufruct becomes an attractive strategy.
Similar to real estate usufruct, dividends and contract payouts initially remain with the donor, while the custody account already belongs to the donee or beneficiary. The usufruct allows the donee to deduct a taxable use value, which significantly reduces gift tax. The tax valuation of the usufruct depends on the age of the usufructuary: The younger this person is, the longer and more comprehensively they can benefit from the income - an aspect that has a favorable effect on the tax base.
Calculation example:
Calculation example:Initial situation and goal:
The wealthy parents of the Müller family, resident in Germany (father, 62 years old, mother, 58 years old), would like to transfer parts of their assets to their children in the most tax-optimized way possible, while continuing to benefit from the income.
Solution:
In order to transfer the assets to their children (son, aged 32, and daughter, aged 30) as tax-free as possible, the parents decide to give away €3,100,000 to their children today. A Liechtenstein life insurance policy in combination with a usufruct reservation and the utilization of the tax-free allowances is suitable for this purpose, whereby the assets can be transferred largely tax-free. Taking into account the maximum deductible value in use, the transferable amount is €2,365,006, which can be passed on to the children without gift tax.
|
Schenker |
Mother |
Father |
|
Value of the gift |
1.800.000 € |
1.300.000 |
|
Deductible utility value (capital value of the usufruct) |
1.452.726 € |
912.340 € |
|
Tax value |
347.274 € |
387.660 € |
|
Allowances |
400.000 € |
400.000 € |
|
Gift / inheritance tax |
0 € |
0 € |
Conclusion:
By using a life insurance policy in combination with a usufruct, the Müller family can transfer the entire €3,100,000 to their children tax-free. At the same time, the parents continue to benefit in full from the income and payouts. Without this targeted design of the life insurance would result in a total tax burden of 437,000 € are incurred (€ 266,000 for the mother and € 171,000 for the father).
