Inherited property: avoiding conflict – generating a pension vs gifting the property

Anyone wishing to bequeath their property while still alive in order to avoid inheritance disputes has various options for doing so. People often sign their properties over to loved ones. As an alternative to gifting the property, however, it can also be used to generate a pension. But which is the better option in a given situation?

Regardless of whether owners sign over their property or use it to generate a pension, each method has its advantages. It is also important to consider the personal family relationships of the owner and what the goal is. Both options provide the possibility of continuing to reside at the property.

Generating a pension – receive an income and avoid inheritance disputes

Anyone using the pension option sells their property without having to move out. The buyer doesn’t pay the purchase price all at once. Instead, the sellers retain their right of residence and receive a monthly pay-out. In addition to their monthly payment, the former owners also receive a one-off lump sum.

Depending on the specific contractual arrangement, a life annuity or a fixed-term annuity with life-long or time-restricted right of residence can be arranged. In addition, the amount of the one-off and monthly payments can be set individually.

The amount of the sale proceeds, and thus the total pay-out, depends in part on the selected type of pension and right of residence. Yet age also plays a key role in determining the size of the sum. The older the seller signing the pension agreement, the greater the sale proceeds and, of course, the bigger the overall size of the pay-out.

Gifting your property to avoid inheritance disputes and save on tax

If you transfer ownership of your property to family members during your own lifetime, there are no tax liabilities on the property after 10 years. This is because gift tax decreases by 10 per cent each year. If there is also a tax burden on the property, this additionally decreases the value of the property.

That is because the amount of gift tax is based on the property’s value. Debts that decrease a property’s value might include a registered life estate as well as a self-granted usufruct right or right of residence recorded in the Land Register.

The person gifting or transferring the property therefore not only influences the value of the property but can also continue residing there. With the usufruct right, the former owner ensures that they are provided and cared for by the property’s new owner for the rest of their life. However, this does not include any monetary payments.

Which option is the most suitable?

For owners wishing to improve their pension in older age and less concerned with retaining the property in the family, using the property to generate a pension is the better solution. Those who care less about money and more about saving on tax are better advised to sign over their property. However, we recommend seeking the advice of an estate agent before deciding.


Do you wish to find out how to generate a pension with your property? Then get in touch with us! We are happy to advise and support you.


For more information:





Note: In this text, the generic masculine is used for better readability. Feminine and other gender identities are explicitly included to the extent necessary for the statement.


Disclaimer: This article does not constitute tax or legal advice in individual cases. Please consult a solicitor and/or accountant to clarify the circumstances of your specific case.