3 min read
30.01.2026

Transferring property as a gift: what you need to know

Person signing a business contract document on a wooden desk with a leather wallet and keys beside it, photographed from above

Many people decide to gift their property—such as a residence or a plot of land—to their relatives during their lifetime, rather than bequeathing it. But how does the gifting of a property work? What tax-free allowances apply to gift tax? And what costs are involved? We aim to answer these questions for you in detail here.

The Essentials in Brief

Formalities: Gifting a property is only possible with a notarized gift contract and an update to the Land Registry—this incurs notary fees based on the property value.

Retained Rights: For the donor, a right of residence or usufruct (Nießbrauch) is often advisable: this allows them to continue living there or retain rental income (recorded in the Land Registry).

Gift Tax: This generally only applies if the tax-free allowance is exceeded: €500,000 for spouses/civil partners; €400,000 for children (incl. step/adopted children) and grandchildren of deceased parents; €20,000 for parents/grandparents and non-relatives.

The 10-Year Rule: These allowances reset every 10 years—larger values can therefore often be transferred in stages to avoid taxes.

Valuation: For tax purposes, the market value determined by the tax office applies; if the valuation is too high, a lower market value can be proven via appraisal.

Revocation: Reclaiming a gift is only possible in exceptional cases (e.g., impoverishment of the donor); the claim may expire after 10 years, among other conditions.

Table of Content

Gifting your property: The gift deed
Gift tax allowances for real estate
Can gifts be reclaimed?
Gifting a property – How is the value calculated?

Gifting your property: The gift deed

To gift a property or a plot of land, you require a notarized gift deed. Especially if it is your primary residence, you should also reserve a right of residence or a usufruct right (Nießbrauch) upon gifting, so that you can continue to live in the property or receive rental income. Both are recorded by an entry in the Land Registry. Keep in mind that a property gift deed involves notary costs, which vary depending on the value of the property.

Gift tax allowances for real estate

The following applies to the gifting of real estate: depending on the family relationship and the value of the gift, different tax-free allowances apply. When you gift a property, it is possible that no gift tax will be incurred, provided you do not exceed the allowance. The allowances for real estate gifts are structured as follows:

Spouses and civil partners: €500,000
Children, stepchildren, and adopted children, as well as grandchildren whose parents are deceased: €400,000
Parents, grandparents, and non-relatives: €20,000

Important to note: These allowances are not just a one-time benefit; they can be utilized again every 10 years. This means that if at least ten years pass between two gifts to the same person, the full allowance becomes available again. In this way, larger assets can—depending on the situation—be transferred in stages to optimize tax efficiency.

The market value of the property is used to calculate the gift tax. The tax office determines this value according to the rules of the German Valuation Act (Bewertungsgesetz). If the assessed value seems too high to you, you can provide evidence of a lower market value to reduce the tax. An experienced real estate agent can assist you in seeking a property valuation: they provide a realistic assessment of your property's value and offer a solid basis for this evidence.

Please also note: Notary fees for the gift deed generally do not reduce the gift tax liability.

Can gifts be reclaimed?

In principle, it can be difficult to reclaim a gift after the fact. According to the law, this requires serious grounds. One of the reasons provided by law is the impoverishment of the donor. If, after making the gift, the donor finds themselves unable to maintain an adequate livelihood, they can demand the return of the gift from the recipient. However, according to Section 529 of the German Civil Code (BGB), these claims can expire if the donor brought about their neediness intentionally or through gross negligence, or if more than 10 years have passed since the gift was made.

Gifting a property – How is the value calculated?

The fair market value of a property is decisive for the gift. In the event of a gift, this is determined by the Valuation Act. Naturally, as an owner in such a case, one wishes for the property value to be assessed as low as possible to avoid exceeding allowances or to keep gift tax payments to a minimum. In this context, the donor has the opportunity to prove a lower value if the determined market value seems too high. Since numerous factors influence the final value, comprehensive expertise and sound knowledge of the real estate market are required. Therefore, it is recommended to consult an experienced real estate agent for the valuation of the property.

Does the market value of your property significantly exceed the allowance? An alternative is to sell the house profitably and divide the gift in such a way that the allowance is not exceeded. All allowances are subject to a 10-year period, after which a new tax-free gift is possible.

Disclaimer:
The free and freely accessible contents of this website have been prepared with the greatest possible care. However, Engel & Völkers does not guarantee the accuracy and timeliness of the free and freely accessible advice and news provided. The contents do not replace legal advice, but merely serve as a thematic overview.

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