"All too fair does injustice"? Gift tax pitfalls in the equalisation of later born descendants in the succession of assets

Lifetime transfers of assets to the generation of children or grandchildren have the advantage that they can be planned and thus optimised for gift tax purposes. If the donees are still young, it is often to be expected that after the gift, further descendants will be born in their generation, whom the donor would also like to have covered from the transferred assets. As a rule, all members of a tribe should share equally in the donated property. The donor can therefore already oblige the donees in the gift contract to pass on parts of the donated property to later born descendants for the purpose of achieving equality. A father also had this equalisation in mind when making a gift of real estate to his children, the settlement of which, however, failed and which is the subject of a recent BFH ruling (ruling of 16 September 2020 - II R 33/19, ZEV 2021 p. 189).

POELLATH author Dr Katharina Hemmen provides practical tips which legal requirements have to be observed with regard to avoid gift tax pitfalls.