Assignment Agreement

Transfer Agreement - a notarized contract through which a property is transferred to another person while the owner is still alive, typically as part of an anticipated succession. This distinguishes it from a traditional purchase agreement, as the transfer usually takes place either free of charge or in exchange for consideration below market value. It combines elements of gift law, inheritance law, and real estate law-which is why careful legal and tax guidance is essential.

Content and Consideration in the Transfer Agreement

The transfer agreement governs the transfer of ownership of a property from parents or another family member to the next generation. The goal is to plan for asset succession during one’s lifetime and to make optimal use of tax exemptions. Notarization is mandatory for real estate transactions-agreements that do not meet formal requirements are legally invalid.

In practice, the property is rarely transferred without any consideration. The parties often agree on considerations that serve the interests of both sides. These include, in particular:

• Retention of usufruct: The transferor reserves the lifelong right to use and derive income from the property (e.g., rental income)-this simultaneously reduces the gift tax value of the transfer significantly.
• Right of residence: Less restrictive than usufruct-the transferor may live in the property themselves but may not rent it out.
• Care obligations: Care services agreed upon in writing by the transferee, which can be scaled according to the degree of care required.
• Life annuity: Monthly payments to the transferor for life, which may be deductible for income tax purposes as a pension benefit.
• Sibling compensation: One-time or installment compensation payments to siblings who do not take over the property to ensure equal treatment.

These considerations are detailed in the contract; rights in rem such as usufruct or right of residence are additionally entered in the land register and are thus also effective against third parties.

Rights of recovery and safeguard clauses

Rights of recovery are an important component of many transfer agreements. These protect the transferor in certain cases-such as if the transferee sells the property without consent, becomes insolvent, gets divorced, or permanently fails to provide the agreed-upon care services. Such recovery clauses should be precisely worded, as they must withstand judicial review in the event of a dispute.

Protection against third-party claims is particularly important: If the transferee becomes insolvent, the insolvency administrator may liquidate the property-without a contractual right of recovery and its registration as a priority notice in the land register, the transferor is left unprotected. We therefore always recommend securing rights of recovery as a priority notice of conveyance or limited personal servitude in the land register so that they are also effective against the transferee’s creditors.

Tax Aspects and Supplement to the Statutory Share

The transfer agreement has significant tax implications. For gift tax purposes, children can utilize an exemption of 400,000 euros per parent, which is renewed every ten years. By transferring assets in a timely manner, these exemptions can potentially be utilized multiple times, leading to significant tax savings in the case of valuable real estate assets. A reserved usufruct reduces the gift tax value of the transfer because the capitalized value of use is deducted-the younger the transferor, the higher the deduction.

However, the supplement to the statutory share must be taken into account: According to Section 2325 of the German Civil Code (BGB), gifts are allocated proportionally to the estate within ten years of the transfer. For each year that has elapsed since the gift, the claim for supplementation is reduced by ten percent. Only after the ten-year period has expired is the transfer completely disregarded in the calculation of the statutory share-but only if the transferor has waived any right of use, since, according to the case law of the Federal Court of Justice (BGH), a reserved usufruct prevents the period from commencing (BGH, judgment of April 27, 1994, Case No. IV ZR 132/93).

Don’t forget: In the event of a subsequent sale by the transferee, the speculation period may start anew-it begins not on the date of transfer, but on the date of the original acquisition by the transferor. This detail is relevant for tax purposes and should be taken into account during planning.

Practical Tip for Nuremberg and Franconia

In the Nuremberg metropolitan region, we observe a high proportion of single-family and two-family homes being passed down within the family. Especially in neighborhoods where property values have risen sharply, such as Erlenstegen, Mögeldorf, Schwaig, or Hersbruck, we recommend planning the transfer early to make the best possible use of tax allowances.

In many Franconian families-especially in rural communities in the districts of Nürnberger Land, Roth, or Ansbach-the agricultural farm transfer privilege is relevant, which, under certain conditions, allows for a valuation below market value. For family-owned multi-family homes in Nuremberg as well, there are favorable valuation rules for gift tax purposes (Section 13d ErbStG: 10% discount for rented residential property).

We recommend consulting not only a notary but also a tax advisor specializing in inheritance tax who can calculate the specific implications for gift and income tax. Contact us-we assist with transfers during the planning phase and connect you with suitable notaries and tax advisors from our network in the region.

Frequently Asked Questions

How much does a transfer agreement with a notary cost?

Notary fees are based on the transaction value of the transfer and are regulated by the Court and Notary Fees Act (GNotKG). The decisive factor here is not the market value, but the tax-assessed value after deducting usufruct or life annuity. For a transfer value of 300,000 euros, notary and land registry fees total approximately 1,500 to 2,800 euros. Added to this are costs for registering usufruct or right of residence (an additional 500-1,500 euros, depending on the value) as well as, if applicable, costs for priority notices of conveyance to secure the right of recovery.

Can a transfer agreement be rescinded?

Rescission is only possible if explicit rights of recovery were agreed upon in the contract or if statutory grounds for recovery apply-such as in cases of gross ingratitude (Section 530 of the German Civil Code) or impoverishment of the donor (Section 528 of the German Civil Code). Without a contractual provision, reclaiming the gift is very difficult in practice. Gross ingratitude must constitute a serious offense; a poor relationship or disagreements are not sufficient. Therefore, we recommend including typical clawback clauses (insolvency, divorce, sale, failure to provide care) in the contract from the outset and securing them in the land register.

What role does the transfer agreement play in inheritance tax?

The transfer agreement makes it possible to reuse the tax-free allowance of 400,000 euros per child and parent every ten years. With early planning, high-value real estate can thus be transferred tax-free or with reduced tax liability. It is important to note that reserved rights, such as usufruct, reduce the value of the gift and thus further lower the tax burden. Additionally, a 10% deduction applies to rented residential property under Section 13d of the Inheritance Tax Act (ErbStG). Together, these provisions make the transfer agreement one of the most effective tools for real estate succession planning.

What happens to the transfer agreement if the transferee gets divorced?

Many transfer agreements contain a divorce clause: If the transferee’s marriage ends in divorce, the transferor can reclaim the property. Without this clause, a division of marital gains or even a forced sale may result in the event of a separation. We strongly recommend including the divorce clause in the contract and additionally agreeing on a prenuptial agreement with the child taking over the property that excludes the property from the division of marital gains.

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