Giving a penny at Christmas and New Year? Beware of tax pitfalls!
It is a time-honored tradition: reading your New Year's letter to family and receiving a penny in return, or grandma and grandpa giving you some cash under the party table. But how big can that penny really be and what are the legal and tax implications?
Donating money, either cash or by wire transfer, is also called a handgrip mentioned. The money literally passes from hand to hand. In principle, this hand gift is not subject to any legal or tax rules. However, if, for example in the context of estate planning, you want to give a larger amount as a gift, you should still consider the following.
First and foremost, hand gifts of cash are subject to a maximum amount of 3,000.00 euros, that is all you are allowed to donate in cash. Of course, you can donate more than 3,000.00 euros by bank transfer, be sure not to mention that it is a Christmas or New Year gift, this way it is clear that it is a occasional donation concerns!
Therefore, if you, as a grandparent, already wish to give away a portion of your estate and wish to endow your grandchildren with a larger gift this year, you should also note the following:
There is No registration requirement for hand gifts and thus the beneficiary does not have to pay gift tax of 3%. This is obviously very advantageous. Yet there is a pitfall here, if you die within the three years, the gift will be subject to the progressive inheritance tax, it starts at 7% and is thus much more disadvantageous....
Normally, a gift for Christmas or New Year is not considered a gift in the legal sense. However, if it is a larger amount, the tax authorities may become suspicious. Even if you register the gift, it will be considered a gift in the legal sense. With this comes a second pitfall, namely the reservatory inheritance. If you have a spouse and/or children, you should keep in mind that you cannot give away more than half of your estate. After all, this is the legal inheritance share to which children and spouses are always entitled.
So, the bottom line is that you can confidently give a penny during the year-end festivities. However, do it in moderation so that the occasional gift cannot be viewed as a donation. If you do wish to make a larger gift already.
The Bannister team wishes you happy holidays and a Happy New Year!
