The donation is a formidable anti-tax formula as it can be activated throughout the year, killing three birds with one stone. Not only do you reduce the cost of your inheritance tax, but also all income tax. Passing on an inheritance to your loved ones while you are still alive has another benefit, it avoids family quarrels after your death. The idea here is not to completely deprive yourself from your belongings when you are young, but to choose your donation carefully.
The legal form of the donation
Tax and donation are two things that often go hand in hand and it is up to you to choose the form that suits your situation, the most common one being the customary gift which refers to gifts that you give on festive days such as birthdays or Christmas. Often, these gifts are neither declarable nor taxable, so you will be exempt from tax. However, the amount of this form of gift should be proportionate to your wealth. Secondly, there are sums of money that parents or grandparents can pass on to their children without paying tax. However, the donor must be at least 80 years old and the recipient is supposed to be of age to be able to enjoy such a privilege. Finally, there is the simple donation, which, in addition to giving money, allows for the donation of real estate, furniture, a car, etc. It is renewable every 5 years, must be allocated to a someone of age and does not incur any tax.
Donations: the best anti-tax weapon
To establish the link between taxes and donations, you should fill in an allowance of €31,865 before making a direct donation of €100,000. This way, you won’t have to pay a penny in taxes. After that, if you want to give without being deprived of your belongings, go for a donation with usufruct reserve. This means giving the bare ownership of the property while keeping the usufruct. It is a recommended option if you plan to give a flat or property to your relatives. In addition, you can occupy or rent it out while passing it on to your child.
It is not essential to call in a notary, but it is still necessary as he/she is the one who is supposed to add return clauses to the deed of gift. This implies that no tax will be paid and that the heir before the donor will receive the property. Moreover, a notary can add an inalienability clause which means that the heir cannot transfer the property to another person without the donor’s consent. In this way, your property will be better safeguarded.