Transferring a house to your children: process, costs and pitfalls

What does "transferring a house" mean?

"Überschreiben" (signing over) is not a term found in the law. It means that someone else is entered in the land register as owner, and between parents and children this is almost always a gift: a benefit that both sides intend to be free of charge (Sec. 516 (1) BGB). Because part of the later inheritance is anticipated, this is also called anticipated succession (vorweggenommene Erbfolge). Notaries usually call the contract a transfer agreement (Übergabevertrag or Überlassungsvertrag).

There are three variants:

• Pure gift: The child receives the house without giving anything.
• Gift with a reservation or condition (Auflage): You reserve a right of residence or a usufruct, or the child undertakes to provide services, such as a monthly pension. You can demand performance of a condition as soon as you have performed yourself (Sec. 525 (1) BGB).
• Mixed gift (gemischte Schenkung) or sale: The child takes over a loan or pays part of the value. The higher the consideration, the more the gift turns into a sale, with different consequences for tax and the compulsory share.

In addition to the contract, you need the agreement on the transfer of ownership before the notary (conveyance, Auflassung, Sec. 925 (1) BGB) and the entry in the land register (Sec. 873 (1) BGB). Only then does the house belong to your child.

Transferring a house: the process in 6 steps

1. Clarify the goal: One child or several? Keep living there, keep the rent, secure care, save tax? The whole contract depends on this.
2. Documents and bank: Land register extract, details of registered land charges and current loans, and the tenancy agreements if the property is let. If the child is to take over a loan, the bank must consent. Without its approval, the assumption of debt has no effect against the bank, and you remain the debtor (Sec. 415 (1) BGB).
3. Draft from the notary: The notary drafts the transfer agreement based on your information. The notary does not represent either party, but acts impartially for everyone involved (Sec. 14 (1) BNotO).
4. Check the draft: Read the draft in full. Pay attention to rights to reclaim, the allocation of costs, the right of residence or usufruct and provisions on the siblings' compulsory share. If you are unsure, have it checked by a lawyer before the appointment.
5. Notarisation: All parties sign at the notary's office; the conveyance is usually declared at the same time.
6. Land register and tax office: The notary applies for the transfer of ownership and the entry of the right of residence, usufruct and priority notice. The notary also notifies the tax office (Finanzamt) of the gift (Sec. 34 (2) no. 3 ErbStG); you do not need to file your own notification for a notarised gift (Sec. 30 (3) sentence 2 ErbStG). The tax office can nevertheless request a tax return (Sec. 31 (1) ErbStG).

What does it cost to transfer a house?

The notary and the land registry (Grundbuchamt) charge under the Court and Notary Fees Act (GNotKG). What counts is the market value of the house (Sec. 46 (1) GNotKG). Registered land charges are not deducted (Sec. 38 GNotKG), and a reserved right of residence or usufruct does not reduce the transaction value of the contract, because the higher performance counts for contracts of exchange (Sec. 97 (3) GNotKG).

This is how the costs are made up:

• Notary: 2.0 fee for the notarisation (no. 21100 KV), 0.5 completion fee if the notary takes on completion work on instruction, for example requesting the bank's consent to the assumption of debt or deletion documents (no. 22110 KV, preliminary remark 2.2.1.1), flat-rate expenses of at most €20 (no. 32005 KV) and 19% VAT (no. 32014 KV).
• Land registry: 1.0 fee for entering the new owner (no. 14110 KV).

Market value	Notary with completion fee	Land registry	Total	Total without completion fee
€200,000	€1,317.93	€435.00	around €1,750	around €1,490
€300,000	€1,912.93	€635.00	around €2,550	around €2,170
€400,000	€2,359.18	€785.00	around €3,140	around €2,680
€500,000	€2,805.43	€935.00	around €3,740	around €3,180
€750,000	€3,995.43	€1,335.00	around €5,330	around €4,540

Based on our own calculation with Table B (Sec. 34 GNotKG with Annex 2), without further expenses such as land register retrievals.

Example with a right of residence: Maria, 72 years old, transfers a house with a market value of €300,000 to her daughter and reserves a lifelong right of residence in the whole house. In addition to the €2,547.93 from the table, there is the entry of the right of residence: a 1.0 fee (no. 14121 KV) on €75,000, which is €219. The value results from an annual value of 5% of the house (Sec. 52 (5) GNotKG) times five years, because Maria is older than 70 (Sec. 52 (4) GNotKG). That makes around €2,770 in total. How the costs are calculated with a usufruct is shown in our guide to usufruct.

Priority notice for reconveyance (Rückauflassungsvormerkung): If you secure rights to reclaim in the land register, the land registry charges a 0.5 fee for this (no. 14150 KV).

Who pays the notary? Everyone whose declaration was notarised is liable to the notary (Sec. 30 (1) GNotKG), i.e. parents and child. Who bears the costs between yourselves is set out in the contract; whoever takes them on there is also liable for them to the notary (Sec. 30 (3) GNotKG). If the parents pay, this may be a further gift for gift tax purposes.

Real estate transfer tax: Not payable on a transfer to children, grandchildren, stepchildren and their spouses or to your own spouse (Sec. 3 no. 4 and 6 GrEStG). Gifts to other persons are also exempt, but not for the value of conditions that are deductible for gift tax, such as a loan taken over (Sec. 3 no. 2 GrEStG).

Transferring a house to your children: what belongs in the transfer agreement

Everything you want to reserve for yourself must be in the contract.

Right of residence or usufruct

Both rights are entered in the land register and also apply against a later buyer. The right of residence (Wohnungsrecht) allows you to use the house or part of it as your home to the exclusion of the owner (Sec. 1093 (1) BGB). You may only let it if this is permitted (Sec. 1092 (1) sentence 2 BGB). The usufruct (Nießbrauch) allows you to use the house yourself or to let it and keep the rent (Sec. 1030 (1) BGB). You bear the ordinary maintenance yourself under both rights (Sec. 1041 BGB, for the right of residence via Sec. 1093 (1) sentence 2 BGB).

Rule of thumb: a right of residence is often enough to keep living there; if you want to be able to let the property when you move into a care home, you are more likely to need a usufruct. Details are explained in the guides Lifelong right of residence and Usufruct.

Rights to reclaim and priority notice

Without an agreement, you only get the house back in a few statutory cases (see below). Contractual rights to reclaim are therefore common, for example if the child dies before you, becomes insolvent, becomes subject to enforcement proceedings, divorces or sells or encumbers the house without your consent. So that the right also applies against creditors or an insolvency administrator, you have it secured by a priority notice (Vormerkung) in the land register. A later disposal that would defeat your claim is then ineffective against you, even if it takes place by way of enforcement or through the insolvency administrator (Sec. 883 (1), (2) BGB).

Checklist: what to clarify before the notary appointment

Not a template, but the points that should be set out in the contract:

• Who becomes the owner: one child, several children in fractional shares, also the child's spouse?
• Right of residence or usufruct: for you alone or also for your spouse, the whole house or part of it, letting permitted?
• Costs of the house: who pays for repairs, property tax, insurance, major renewals such as the roof or heating?
• Loans: who pays interest and repayments, has the bank consented to the assumption of debt?
• Rights to reclaim: which cases, secured by a priority notice?
• Care and provision: should the child provide care services or a pension?
• Siblings: equalisation payment, crediting against the compulsory share, waiver of the compulsory share?
• Allocation of costs for the notary and land register.
• Tax: have the gift tax calculated in advance.

What a gift agreement generally contains is explained in the guide Gift agreement.

Transferring a house to only one child: what about the siblings?

You may give your house to one child alone and do not have to pay out the siblings during your lifetime. The consequences only show after your death, in two ways.

Compulsory share supplement (Pflichtteilsergänzung): Children entitled to a compulsory share can demand that the value of the house given away is added to the estate for calculation purposes. They receive the amount by which their compulsory share increases as a result (Sec. 2325 (1) BGB). This also applies if they become heirs themselves; if they have been left more than half of their statutory share of the inheritance, the claim lapses to the extent of the value of the excess (Sec. 2326 BGB). The gift counts in full in the first year before the death and one tenth less for each further year; once ten years have passed since the gift was made, it is disregarded (Sec. 2325 (3) BGB). For the house, the value at the time of the death is used, at most the value at the time of the gift (Sec. 2325 (2) sentence 2 BGB).

Equalisation among heirs (Ausgleichung): If all children become statutory heirs, the child who received the gift only has to bring it into equalisation if it was an advancement (Ausstattung) or if you ordered equalisation when making the transfer (Sec. 2050 (1), (3) BGB). If you want the gift to be credited against the child's compulsory share, you must also stipulate this when making the gift (Sec. 2315 (1) BGB). Both therefore belong in the transfer agreement, not only in the will.

This is how disputes can be avoided:

• Equalisation payment (Gleichstellungsgeld): The child who receives the gift pays the siblings compensation. To that extent, this makes the transfer one for consideration.
• Waiver of the compulsory share (Pflichtteilsverzicht): The siblings waive their compulsory share in return for a settlement (Sec. 2346 (2) BGB). The contract must be notarised; mere certification of the signature is not enough (Sec. 2348 BGB). For tax purposes, such a settlement counts as a gift (Sec. 7 (1) no. 5 ErbStG).
• Coordinate the will: The transfer agreement and the will should fit together. Guidance on this can be found in the guide Writing a will.

How the supplement claim is calculated and enforced is explained in the guide Compulsory share supplement; the basics are in the guide Compulsory share.

The three 10-year periods when transferring a house

There is not just "the" ten-year period, but three with their own rules, plus a shorter one for creditors.

Period	What it is about	Start	Basis
Gift tax: 10 years	Gifts from the same person are added together; afterwards, the tax-free allowance is fully available again	with the gift	Sec. 14 (1) ErbStG
Reclaiming on impoverishment: 10 years	If you become needy, you can reclaim the house; excluded if ten years have passed since the gift was made when the need arises	with the conveyance and the application for entry at the land registry; a reserved right of use does not prevent the start	Sec. 529 (1) BGB; Federal Court of Justice (BGH), judgment of 19 July 2011, X ZR 140/10
Compulsory share supplement: 10 years, reducing	Siblings can demand a supplement to their compulsory share	with the gift being made; with a reserved usufruct, as a rule only when it ends; for a gift to the spouse, not before the marriage is dissolved	Sec. 2325 (3) BGB; BGH, judgment of 29 June 2016, IV ZR 474/15
Challenge by creditors: 4 years	Creditors or the insolvency administrator can challenge a gratuitous transfer	transfer up to the insolvency application or the challenge	Sec. 134 (1) InsO, Sec. 4 (1) AnfG

Usufruct and right of residence for the compulsory share: If you reserve the usufruct without restriction, according to case law you have not given up the "enjoyment" of the house, and the period for the compulsory share supplement does not begin (BGH, IV ZR 474/15, with reference to BGH, judgment of 27 April 1994, IV ZR 132/93). A right of residence can only prevent the period from beginning in exceptional cases; in the case decided, involving a right of residence in rooms on the ground floor, the period ran (BGH, IV ZR 474/15, headnote).

Need for care: can the social welfare office take the house back?

Yes, within the period. If, after the gift, you can no longer pay for your reasonable maintenance, you can demand that the child hands over the gift (Sec. 528 (1) sentence 1 BGB). If the social welfare office (Sozialamt) pays, for example, help with care costs (Hilfe zur Pflege), it can transfer this claim to itself by written notice (Sec. 93 (1) SGB XII). Your child can avoid handing it over by paying the amount needed for maintenance (Sec. 528 (1) sentence 2 BGB). Reclaiming is excluded if ten years have passed since the gift was made when the need arises (Sec. 529 (1) BGB). What matters is therefore when you become needy, not the day of the application to the social welfare office.

Transferring a house tax-free: allowances and gift tax

The child only pays gift tax on the part that exceeds their tax-free allowance. However, in the case of a gift, the donor is also liable for the tax (Sec. 20 (1) ErbStG). The valuation is not based on the purchase price back then, but on the tax value of the property (Grundbesitzwert) on the day of the gift.

Recipient	Tax class	Tax-free allowance per donor
Spouse, registered civil partner	I	€500,000
Child, stepchild	I	€400,000
Grandchild, if their parent is alive	I	€200,000
Grandchild, if their parent has died	I	€400,000
Sibling, niece, nephew, child-in-law	II	€20,000
Unmarried partner, everyone else	III	€20,000

Basis: Sec. 15, 16 (1) ErbStG.

• Per parent and every ten years: If the house belongs to both parents in equal halves, the child uses two tax-free allowances. After ten years they are available again (Sec. 14 (1) ErbStG), so expensive houses can be transferred in stages.
• Right of residence and usufruct reduce the taxable value, because the child receives an encumbered house. How the tax office calculates this is explained in the guide Usufruct.
• Example: If the tax value of the property is €500,000, €100,000 remains taxable after the tax-free allowance of €400,000. At 11% in tax class I (Sec. 19 (1) ErbStG), that is €11,000 in gift tax.

Spouse: You can transfer the owner-occupied family home to your spouse free of gift tax regardless of its value, insofar as you live in a home in it yourselves (Sec. 13 (1) no. 4a ErbStG). For children, this exemption only exists on inheritance, and then subject to conditions (Sec. 13 (1) no. 4c ErbStG).

Transferring or inheriting a house?

Feature	Transferring during your lifetime	Inheriting
Control	ownership is gone; security only through a right of residence, usufruct and rights to reclaim	remains entirely with you until your death
Tax-free allowances	can be used again every ten years (Sec. 14 ErbStG)	once on the death
Family home for children	no exemption	tax-free subject to conditions, including owner-occupation for ten years and up to 200 m² (Sec. 13 (1) no. 4c ErbStG)
Siblings' compulsory share	supplement reduces over ten years, usually not with a usufruct	house forms part of the estate in full
Need for care	reclaiming possible for ten years (Sec. 528, 529 BGB)	house is your own assets
Costs now	notary and land register based on value	none; entry of the heirs free of charge if applied for within two years (note (1) to no. 14110 KV GNotKG)
Risk of dispute	distribution fixed during your lifetime	several heirs form a community of heirs; in a dispute, a partition auction threatens

Transferring is worthwhile above all if the value exceeds the tax-free allowances or if a particular child is to receive the house. If you need the house as security in old age, inheriting is often the calmer solution. Overview: guide to inheritance law.

Can a house transfer be reversed?

As a rule, a gift is a gift. It can only be reversed in these ways:

• Impoverishment: reclaiming under Sec. 528 BGB within the ten-year period (see above).
• Gross ingratitude: You can revoke the gift if your child is guilty of gross ingratitude through a serious offence against you or a close relative (Sec. 530 (1) BGB). The revocation is made by declaration to the child (Sec. 531 (1) BGB). The hurdle is high.
• Contractual rights to reclaim: Only if they are in the contract. If the house has to be handed back because of such a right, the gift tax lapses retrospectively (Sec. 29 (1) no. 1 ErbStG).

Special cases: spouse, grandchildren, siblings, dementia, insolvency

Transferring a house to your spouse

This is possible and, for the owner-occupied family home, free of gift tax (Sec. 13 (1) no. 4a ErbStG). For the children's compulsory share, the ten-year period does not begin before the marriage is dissolved in the case of a gift to the spouse (Sec. 2325 (3) sentence 3 BGB).

Transferring a house to grandchildren

This is also possible. The tax-free allowance is €200,000 if the grandchild's parent is alive, otherwise €400,000 (Sec. 16 (1) no. 2, 3 ErbStG). No real estate transfer tax is payable (Sec. 3 no. 6 GrEStG).

Transferring a house to a brother or sister

No difference in legal terms, but there is one for tax purposes: siblings are in tax class II with a tax-free allowance of only €20,000 (Sec. 15, 16 (1) no. 5 ErbStG). The gift itself is exempt from real estate transfer tax, but deductible conditions such as a loan taken over are not (Sec. 3 no. 2 GrEStG).

Transferring half a house

You can transfer a co-ownership share, for example half. The house then belongs to you and your child jointly in fractional shares (Sec. 1008 BGB). Note: every co-owner can demand the dissolution of the co-ownership at any time (Sec. 749 (1) BGB), in a dispute up to a partition auction. This can be excluded by contract, but dissolution remains possible for good cause (Sec. 749 (2) BGB).

Dementia, lasting power of attorney and court-appointed guardian

A person who is in a state of pathological mental disturbance that permanently excludes the free exercise of will lacks legal capacity (geschäftsunfähig); their declarations are void (Sec. 104 no. 2, 105 (1) BGB). A diagnosis of dementia alone does not automatically mean this. With a lasting power of attorney (Vorsorgevollmacht), the attorney can only transfer the house if the power of attorney covers gifts and is available in the form required by the land registry (Sec. 29 (1) GBO). A court-appointed guardian (Betreuer) needs the approval of the guardianship court (Betreuungsgericht) for dispositions of a plot of land and for gifts (Sec. 1850 no. 1, Sec. 1854 no. 8 BGB).

Berlin will

If spouses have appointed each other in a Berlin will (Berliner Testament) and named the children as final heirs, the survivor is usually bound by this disposition (Sec. 2271 (2) BGB). They may nevertheless give the house away during their lifetime. However, if they give it away with the intention of harming the final heirs, the final heirs can demand the gift back after the survivor's death (Sec. 2287 BGB). More on this in the guide Berlin will.

Personal insolvency

Giving a house to relatives shortly before insolvency does not help. The insolvency administrator can challenge a gratuitous transfer from the last four years before the insolvency application (Sec. 134 (1) InsO), and creditors outside insolvency one from the last four years before the challenge (Sec. 4 (1) AnfG). Anyone who intentionally disadvantages their creditors even risks a challenge for ten years if the recipient knew of the intent (Sec. 133 (1) InsO, Sec. 3 (1) AnfG).

Advantages and disadvantages at a glance

Advantages

• Tax-free allowances can be used again every ten years.
• Succession is settled during your lifetime, and disputes in a community of heirs are avoided.
• With a right of residence or usufruct, you remain protected.

Disadvantages

• Ownership is gone: you can no longer sell, mortgage or convert the house on your own.
• Notary and land register costs are payable immediately.
• Without rights to reclaim, you bear the risk of the child's insolvency, divorce or death.
• In the event of need for care, the social welfare office can access the house for ten years.