Advance inheritance without pitfalls: gifting cash vs. real estate

What you should bear in mind if you are planning to transfer assets to your heirs during your lifetime.

Not all gifts are the same: when making an advance inheritance, it's important to consider not only the gift amount, but also whether you want to pass on real estate or cash. Why? Future changes in value can become a challenge for your heirs if inequalities have to be balanced out later.

Would you like to support your children or grandchildren financially during your lifetime? By making a gift, you can pass on some of your assets in advance. It may also be important to you to treat all your heirs equally.

“What is worth a million today may be worth two tomorrow.”

However, well-intentioned 'equal treatment' can often lead to pitfalls because the gift amount is not the only factor to consider from an inheritance law perspective.

An example:

• Sandra gifts her daughter Carola a property with a market value of one million. Wanting to treat her son David equally, she transfers the same amount in cash to him, which he immediately invests.
• After Sandra’s death, the advance inheritance is offset against the actual inheritance.
• In the meantime, the property's value has risen to two million. David's portfolio has also grown considerably, doubling in value to two million.

Were both children treated equally? To the surprise of many, the legally correct answer is: No.

For real estate, the decisive factor is the market value on the date of the mother's death, whereas for cash, the nominal value counts. In other words, changes in value are taken into account for real estate, but not for cash. In our example, the daughter would have received one million more than her brother. She would therefore be obligated to compensate him for the difference.