Transferring Your House

Giving Away Property Without Nasty Surprises

Gifting Instead of Selling – What’s Behind It?

There are many ways to acquire a property. But sometimes, you have a family member who wants to gift you a place. When someone gives away a property, it's legally known as a gratuitous transfer. In everyday language, this is often referred to as "transferring" a property. Ownership of a house or apartment changes hands without any money being exchanged or financing requirements.

However, even if no purchase price is paid, a legally binding agreement is still required: the gift must be notarized and entered into the land register. So simply saying, “Here, take the house,” isn’t enough. In this article, we list some of the most common examples. In addition, there are other scenarios where different rules apply — for example, in the case of gifts made through a property-holding (asset-managing) GmbH. In any case, it’s worth consulting a tax advisor for specific information and liability purposes.

When Parents Transfer a House to Their Daughter

A common example of gifting within the family is parents transferring their single-family home to their daughter once they no longer use it as a retirement provision instead of selling the property. Several key points need to be clarified in such cases. Often, parents want to continue living in the property — in this case, a usufructuary right or lifetime right of residence is registered in the land register. This protects the donors and has an added benefit: the taxable value of the property is reduced, since the right of residence lowers the market value.

Additional agreements are also common, such as a care obligation, where the daughter agrees to provide care for her parents later on or cover certain costs. From a tax perspective, parents can gift up to €400,000 to each child every ten years without triggering gift tax. If the property's value exceeds this threshold, the excess amount is taxed — unless the usufruct right reduces the taxable value below the exemption limit.

When Grandparents Gift an Apartment to a Grandchild – What Applies?

Grandparents can also gift real estate to grandchildren, but the tax allowances are much lower. The tax-free threshold for grandchildren is €200,000. Anything above that is subject to gift tax. For example, if an apartment worth €250,000 is transferred to a granddaughter, €50,000 is taxable. Depending on the applicable tax rate, this could result in several thousand euros in taxes. Still, the gift may be worthwhile — especially if the property increases in value over time.

Inheritance Disputes? Don’t Underestimate Compulsory Share Claims

Many overlook the fact that gifting property during one’s lifetime can still lead to inheritance disputes later. If parents transfer property to just one of their children, siblings may feel left out — especially if there’s no clear will. This is where the supplementary compulsory share claim becomes relevant: under German inheritance law, gifts made up to ten years before death can be factored into calculating compulsory shares. The older the gift, the less weight it carries — after ten years, it's no longer considered. However, if the parents retain a usufruct right, the ten-year countdown doesn’t start at all.

Gifting Property to a Partner – Without Marriage, It Gets Expensive

Many couples buy a property together but there are also scenarios in which only one person in the relationship owns a property. Thinking of transferring a property to your partner without being married? Proceed with caution. For unmarried couples, the tax-free allowance is just €20,000. That means, for example, that transferring a €300,000 apartment would leave €280,000 taxable, possibly resulting in gift taxes in the five-figure range. Married couples fare much better — they benefit from a €500,000 exemption. While it may not be the most romantic reason, from a tax standpoint, getting married can result in significant savings.

Protection Clauses, Restrictions, and Contractual Safeguards

One commonly underestimated aspect of property gifting is protecting the donor. What happens if the relationship with the recipient deteriorates? Or if they pass away or declare bankruptcy? To mitigate these risks, many donors include contractual rights of revocation. It's also possible to add sale restrictions or transfer bans to the agreement. These clauses provide security and help prevent unwanted outcomes — and should be discussed with a notary from the outset.

Property Transfer Tax – Usually Not an Issue, But…

One major benefit of a genuine gift: real estate transfer tax usually doesn’t apply. This holds true for transfers between parents and children, grandparents and grandchildren, and between spouses. However, be cautious: if the gift includes a significant economic exchange — such as taking over a large mortgage or committing to long-term care — it may be considered a sale rather than a gift. In such cases, property transfer tax could apply after all.

Careful Planning Is Essential

Transferring a property as a gift is a generous gesture — but it’s also a complex legal and financial process. It involves navigating tax allowances, ensuring fairness within the family, securing legal safeguards, and understanding long-term financial implications. That’s why the rule is: seek expert advice first, draw up a proper notarial agreement, and ideally involve all parties early in the process. Acting too hastily or cutting corners may lead to conflict or unnecessary costs down the road. Done right, a property transfer can reduce taxes and create lasting clarity and peace of mind.