Have you inherited a property with a right of usufruct and are wondering what it's really worth? Often, a registered right of use can reduce the market value by 30% or more, which presents both risks and tax opportunities. This article will show you how to have an inherited property with a right of usufruct evaluated to make informed decisions.
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The topic briefly and concisely
A usufruct right can reduce the market value of a property by 30-40%, significantly lowering the taxable value of the inheritance.
The value of the usufruct (capital value) is calculated from the annual value of use and a multiplier based on the life expectancy of the beneficiary.
A professional market value appraisal is crucial for countering the often disadvantageous blanket valuations by the tax office and saving taxes.
An inherited property is rarely a pure stroke of luck, especially when a usufruct is registered in the land register. This right, defined in § 1030 BGB, grants a person the authority to use the property and derive income from it without owning it. For you as an heir, this means a significant restriction and a complex valuation task. A misjudgment can lead to excessive tax payments or disadvantages in an inheritance settlement. However, with the right approach, you can accurately determine the value and optimise your financial position. We guide you through the crucial steps, from calculating the value of the usufruct to strategically using a professional appraisal.
In brief: Your options for action
Understanding Depreciation: A usufructuary right can reduce the market value of a property by 30% to 40%, significantly lowering the taxable value of the inheritance.
Capital Value is Key: The value of the usufruct is expressed as a capital value, which consists of the annual value of use and a multiplier based on the beneficiary's life expectancy.
Use a Professional Appraisal: The tax office's standard valuation is often inaccurate. A market value appraisal provides a realistic market value and can reduce the tax burden by thousands of euros.
Actively Manage Taxes: By deducting the usufruct value, the inheritance value can fall below the legal allowances (e.g., €400,000 for children), resulting in no inheritance tax due.
These factors form the basis for every strategic decision you must make as an heir.
Basics: How usufruct specifically affects property value
A usufructuary right gives the entitled person (usufructuary) the right to extensively use a property – that is, to live in it themselves or rent it out and keep the income. For you as the owner, only the 'bare ownership' (nudum dominium) remains until the right expires, usually with the death of the usufructuary. This encumbrance significantly reduces the market value, as a potential buyer cannot use the property themselves for an indefinite period. Studies show that this deduction often lies between 30% and 40% of the unencumbered market value. However, this depreciation is not purely a disadvantage. For inheritance tax purposes, the value of the usufruct is deducted from the property's value, directly reducing your taxable base. A precise valuation after an inheritance is therefore essential. The precise calculation of this depreciation is the next logical step.
The Valuation Formula: Accurately Calculating the Net Present Value of Usufruct
To assess an inherited property with usufruct rights, calculating the capital value of the usufruct is central. The Valuation Act (BewG) provides a clear formula for this: Capital value = Annual usufruct value × Multiplier. Both components must be precisely determined to obtain a correct value that is also recognised by the tax office.
Step 1: Determine the annual value (§ 15 BewG)
The annual value is the amount the usufructuary "earns" within a year through the use of the property. There are two scenarios here:
The usufructuary rents out the property: The annual value corresponds to the annual net cold rent.
The usufructuary lives in the property themselves: The annual value corresponds to the saved annual rent that would be incurred for a comparable property.
It is important to note the legal limit according to § 16 BewG: The annual value must not exceed the market value of the property divided by 18.6. For a property value of €500,000, the maximum annual value would therefore be €26,881.
Step 2: Determine the multiplier (§ 14 BewG)
The multiplier links the annual value to the expected duration of the usufruct. For a lifelong right, this factor is based on the statistical life expectancy of the usufructuary at the valuation date. The Federal Ministry of Finance (BMF) regularly publishes updated tables based on data from the Federal Statistical Office. An example: For a 65-year-old woman, according to the BMF table (as of 2023), the multiplier is 12.689. The younger the usufructuary, the higher the multiplier and the greater the impairment of value. This calculation is crucial to optimise inheritance tax. With these two key figures, the value of the usufruct and therefore the encumbered property value can be determined.
The market value appraisal: Your protection against excessive tax demands
The tax office often determines the value of your inherited property using standardised methods. These methods inadequately consider the specific disadvantages of a usufruct. The result is often an overestimated market value, leading to unnecessarily high inheritance tax. Here, the so-called opening clause in the Valuation Act protects you: you can prove a lower, more realistic value through a qualified market value appraisal. The costs for such an appraisal, which start at about €1,500 to €2,500, are deductible as an estate liability and therefore an investment that quickly pays off. An appraisal provides not only a figure but also a legally sound basis for argument. It documents the market value, taking into account all devaluing factors, including the usufruct. This creates transparency and avoids costly disputes with the authorities. Such a document is also invaluable for the determination of the market value for the tax office. On this solid data basis, you can plan your next strategic steps.
Strategic Options for Heirs: From Tax Savings to Replacing the Law
With a well-founded expert report in hand, several strategic paths open up for you. The right choice depends on your individual situation and the willingness to cooperate of the usufructuary. An accurate assessment is always the first step. You can easily and quickly carry out such an assessment with our inheritance tax calculator.
Here are four key courses of action:
Minimise inheritance tax: The main advantage is the reduction of the tax burden. If the property value after deducting the usufruct capital value is below your personal allowance (e.g. €400,000 for children), you pay €0 inheritance tax.
Redeem usufruct rights: You can offer the usufructuary a one-off payment (compensation) to relinquish their right. The amount of compensation is based on the calculated capital value and is subject to negotiation.
Sell the property with usufruct: A sale is possible but challenging. The pool of buyers is small, and the achievable price is significantly lower than the unencumbered market value. The discount often even exceeds the purely calculated value of the usufruct.
Wait and let the right extinguish: The usufruct right automatically expires with the death of the beneficiary. After that, you can apply for its removal from the land register and have unrestricted control over the property.
Each of these options has far-reaching financial consequences. A data-driven analysis, like the one Auctoa provides with ImmoGPT, helps you identify the optimal strategy. The final implementation, such as the removal of the right, then becomes a mere formality.
The formal conclusion: Removing the usufruct from the land register
If the usufruct right has expired due to the death of the beneficiary or due to a waiver, it must be removed from the land register to make the property unencumbered. This step is essential for a future sale. The process is straightforward and usually requires only a few steps. First, you must present the land registry with proof of the expiry of the right, typically through the death certificate of the usufructuary. If it is a lifetime waiver, a notarised deletion consent from the usufructuary is required. The costs for the simple removal in the land register are low and are approximately 25 € per deleted right according to the Court and Notary Costs Act (GNotKG). Additional notary costs may arise if a deletion consent needs to be notarised, the amount of which depends on the value of the usufruct. The deletion is the final step to realise the full value of your inherited property.
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Having an inherited property with a usufruct right evaluated is far more than a mere formality. It is a crucial strategic tool that provides you with financial flexibility and protects you from costly mistakes. The precise, data-driven determination of the market value after deducting the usufruct capital value enables you to legally minimise inheritance tax and make informed decisions about the future of the property. Therefore, consider the cost of a professional appraisal not as a burden but as an investment in securing your wealth. At the end of the day, a smart evaluation turns uncertainty into a clear financial advantage.
Additional useful links
Wikipedia explains the term 'Nießbrauch' in German law, which involves the right to use someone else's property or rights.
The Federal Ministry of Finance (BMF) provides a document on the valuation of lifelong usages and benefits under inheritance and gift tax law effective from 1.1.2025.
The Federal Statistical Office (Destatis) offers information on construction prices and the property price index in Germany.
The Federal Statistical Office (Destatis) provides tables on house prices and land prices in Germany.
Laws in Germany (BGB) presents the legal text of § 1030 BGB (German Civil Code) concerning 'Nießbrauch'.
The Deutsche Bundesbank provides information on the indicator system for the residential real estate market.
The Deutsche Bundesbank publishes statistics on real estate and construction service prices.
The Federal Court of Justice (BGH) offers a decision on the subject.
The Association of German Pfandbrief Banks (VdP) provides information on the mortgage lending value of properties.
The German Notary Institute (DNotI) issues an opinion on the draft law for mobilising land for development.
FAQ
What does it cost to have a usufructuary right removed?
The basic land registry fees for the cancellation of a usufruct are low, approximately €25. If the cancellation occurs during the lifetime of the beneficiary, additional notary costs will arise for the certification of the cancellation consent. These depend on the value of the usufruct and can amount to several hundred to a thousand euros.
Do I have to pay inheritance tax if a property is encumbered with a usufruct?
That depends on the value. The net present value of the usufruct is deducted from the market value of the property. If the remaining value is below your personal allowance (e.g. €500,000 for spouses, €400,000 for children), no inheritance tax is due.
What is the difference between usufruct and right of residence?
The right of residence only permits living in the property. The usufruct right is more comprehensive: the usufructuary not only has the right to live in the property themselves, but also to rent it out and retain the rental income. Therefore, usufruct generally leads to a greater depreciation.
How long does a right of usufruct last?
A usufruct can be granted for a fixed period or for the lifetime of the beneficiary. In most cases, especially with inheritances and gifts, a lifelong usufruct is agreed upon, which automatically expires upon the death of the usufructuary.
Can the usufructuary make structural changes?
The usufructuary is obliged to maintain the property but must not make any substantial alterations or changes without the owner's consent. They are responsible for ordinary repairs and maintenance.
What happens if the usufructuary needs to go to a care home?
If the usufructuary moves into a care home, their usufruct right remains in place. They can then rent out the property to cover care costs with the rental income. Alternatively, they can agree with the owner to terminate the right in exchange for a compensation payment.
