Inheritance Manager
Real Estate Legal Information
Selling inherited property to siblings conditions
An inherited property often raises complex questions: sell, rent, or use it yourself? Selling to a sibling especially involves emotional and financial challenges. This article shows you how to structure the conditions for the sale of an inherited property to siblings in a legally secure and tax-advantageous manner.
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When selling an inherited property to siblings, the full real estate transfer tax is applicable as they are not considered direct relatives.
A selling price significantly below the market value can be considered a mixed gift by the tax office, with a tax-free allowance of only €20,000 applicable for siblings.
An objective property valuation by an expert is crucial to avoid disputes and establish a fair price basis recognized by the tax authorities.
Are you faced with the challenge of selling an inherited property to your sister or brother? This situation requires more than just a family agreement; it calls for clear, fair, and legally sound conditions. Many heirs underestimate the tax pitfalls and potential for conflict that come with incorrect pricing. A hasty sale can not only disturb family harmony but also lead to significant tax payments. We guide you through the key steps – from accurate valuation and tax obligations to contract design, ensuring the sale results in a positive outcome for all parties involved.
Upon the occurrence of an inheritance, multiple heirs automatically form an heir community, known as a joint heirship. This means the inherited property belongs to all co-heirs jointly, and no one can individually dispose of their share. Every decision, particularly the sale, requires the consent of all members – unanimity that is often difficult to achieve in practice. A popular solution is for one heir to take over the property and pay off the other co-heirs. This process, known as partitioning, dissolves the heir community with regard to the property. Determining the payout amount is based on the current market value of the property, highlighting the importance of an objective valuation. Without a clear agreement on the value and terms of sale, lengthy conflicts may arise, potentially halting the process. This lays the groundwork for the tax considerations that need to be addressed next.
The sale of an inherited property to siblings is a tax-relevant transaction that is often underestimated. Many people assume a general tax exemption within the family, which is a costly mistake. Here are the three most important types of taxes you need to be aware of:
Real Estate Transfer Tax: Contrary to popular belief, sales between siblings are not exempt from real estate transfer tax. This exemption only applies to relatives in a direct line (parents, children, spouses). Siblings are considered lateral relatives, which means the buyer must pay the full real estate transfer tax, which can amount to up to 6.5% of the purchase price depending on the federal state.
Gift Tax: If the property is sold significantly below market value, the tax office may assume a mixed gift. Gift tax is then levied on the unpaid portion. The tax allowance for siblings is very low, only €20,000 every ten years. Every euro above this allowance is taxed at a minimum of 15%.
Speculation Tax: This tax on the sales profit does not apply if the deceased acquired the property more than ten years ago. The ownership period of the deceased is credited to the heir. A careful examination of this period is essential.
Having precise knowledge of these taxes is the foundation for setting a fair and realistic selling price.
Determining the purchase price is the most delicate point when selling to siblings. A price that is too low can alert the tax office and trigger gift tax. A price that is too high disadvantages the purchasing sibling and can lead to disputes. Therefore, a professional and neutral property valuation is not an optional expense but a necessity for a transparent process. A valuation report provides a comprehensible basis that is accepted by all parties involved, as well as by authorities. A sale price more than 10-20% below the determined market value is often regarded by the tax office as a mixed gift. To obtain an initial, data-driven assessment, digital tools such as Auctoa ImmoGPT can be a valuable aid. They quickly deliver a realistic price range and help align the expectations of all parties involved. With a clear understanding of the property's value, the next step, contract finalisation, can proceed safely.
Oral agreements have no legal binding in property sales. Every property sale in Germany must be notarised by a notary to be valid. The notary acts as a neutral party and ensures that the contract meets legal requirements and protects the interests of both parties. A properly drafted settlement agreement that governs the sale is key to dissolving the community of heirs. The following points must be clearly stipulated in the contract:
The exact names of the sellers (all co-heirs) and the buyer.
An accurate description of the property in accordance with the land register entry.
The agreed purchase price and the terms of payment (e.g., due date).
The date for the transfer of ownership, benefits, and burdens.
Provisions for warranty against defects.
The confirmation of payment to the departing heirs.
This formal act not only protects against future legal disputes but is also a prerequisite for the transfer of ownership in the land register. However, before it gets to this point, alternatives should also be considered.
Selling directly to a sibling is not always the best or only possible solution. Depending on the situation of the inheritance community and the nature of the property, other options should also be considered. A well-thought-out decision-making aid for the inheritance community can provide clarity here. The most risky alternative is a partition auction. It is often seen as a last resort when no agreement can be reached, but it often leads to financial losses of up to 30% of the market value and disrupts family harmony. Better options often include:
Joint rental: The inheritance community remains and shares the rental income. This requires good rapport and a shared administrative effort.
Actual division: If the property is suitable (e.g., a multi-family house), it can be divided into separate units, so each heir becomes the sole owner of a unit.
Sale to third parties: If no sibling can or wants to take over the property, selling on the open market is often the fairest solution, as the proceeds are clearly quantifiable and divisible.
The choice of the right path depends on the goals and willingness to cooperate of all heirs.
The sale of an inherited property to siblings is a process that must be characterized by transparency, fairness, and legal diligence. The greatest challenges lie in the correct taxation handling and objective price determination. Exemption from property transfer tax does not apply to siblings, and a price set too low can quickly lead to a gift tax trap. Therefore, a professional valuation is essential to establish a solid negotiation basis and avoid conflicts. A notarially certified contract ensures the necessary legal security and a clean conclusion. By clearly defining the terms and considering all contingencies, you not only protect your assets but also maintain peace within the family.
The Federal Statistical Office (Destatis) provides current data and statistics on inheritance and gift tax in this press release from July 2024.
Another press release from the Federal Statistical Office (Destatis) from July 2023 also offers data and statistics on inheritance and gift tax.
In the glossary of the Federal Statistical Office (Destatis), you will find relevant definitions on house, property, and real estate wealth.
The Federal Ministry of Finance (BMF) provides information on its official site about the legal foundations and contacts regarding inheritance and gift tax.
The Tagesschau offers an introductory article with current news on inheritance and gift tax.
An article from Zeit Online explores the transfer of assets through inheritance and gift, along with associated taxes.
Haufe offers an article with tax aspects and tips on inherited and gifted wealth in the year 2023.
Is an Expert Valuation Required When Selling to Siblings?
There is no legal obligation for an expert valuation. However, it is strongly recommended to find a fair price, avoid disputes, and provide a solid basis for the tax office, as an unrealistically low price could be considered a gift.
Who Bears the Costs When Selling Property to Siblings?
Generally, the buyer covers the ancillary purchase costs. These include the land transfer tax (3.5% to 6.5% depending on the federal state), notary fees, and the costs for registering in the land register (together around 1.5% - 2.0% of the purchase price). The costs for an expert valuation can be shared.
What is a Mixed Gift?
A mixed gift occurs when a property is deliberately sold at a price significantly below the actual market value. The difference between the paid price and the market value is considered a gratuitous transfer (gift) by the tax office and is subject to gift tax if it exceeds personal allowances.
Does the Speculation Period Restart with Inheritance?
No, the ten-year speculation period does not restart with the date of inheritance. As an heir, you take over the period from the deceased. The key date is when the deceased originally purchased the property. If this purchase was more than ten years ago, no speculation tax is due.
Can We Arrange the Sale Without a Notary to Save Costs?
No, that's not possible. Every property purchase contract in Germany must be notarised to be legally valid. A contract without a notary is ineffective, and no ownership change can take place in the land register.
What If a Sibling Cannot Pay Out the Others?
If the sibling taking over the property cannot pay out the co-heirs (not even with a loan), alternatives must be considered. Options include jointly selling the property to a third party and sharing the proceeds, jointly renting it out, or as a last resort, pursuing a partition auction.
