Over time, many parents consider the option of selling or donating an apartment to a child. Given the diversity of approaches in relation to the Property Transfer Tax (ITP) found in the different autonomous regions, it is not surprising that these two possibilities are considered to ensure this asset for future generations. Whether you need to remember what the ITP entails and how it is calculated, or if you are looking for information to determine which is the most appropriate alternative to transfer property to your heirs, this article aims to provide clarity in that situation.
Which alternative is more appropriate, selling or donating a property to a child? To do this, it is essential to analyze several aspects, such as the value of the home, the taxes that could be applied depending on the choice made or the location of the property. It is essential to spend some time reflecting before making such an important decision.
Is it legal to sell or donate an apartment to your children?
Both the sale and donation of a property are two completely legal actions, so it is essential to consider the implications of each of them before making the right decision.
If you choose to sell property to a child, it is important to keep in mind that both parties involved (parents and child) will be subject to various taxes, similar to any other purchase and sale transaction. In this case, the parents would be obliged to pay the Personal Income Tax (IRPF) because they would obtain benefits from this operation. On the other hand, the son must face the Inheritance Transfer Tax.
When opting for this alternative, parents must keep in mind that by formalizing this operation, they will lose all control over the home and their child will be able to dispose of it at their discretion. However, if the parents wish to continue residing in the home, they can always reserve the usufruct of the property, which will allow them to remain in the property as long as they live.
Additionally, if the sale is chosen, it is important to consider if the child is married and if she did so under the community property regime. If so, the spouse will also become the owner of the home.
In the case of opting for the donation, both parties must take into account a series of expenses. Parents must pay the Personal Income Tax (IRPF) to settle the donation. For his part, the child receiving the property must face the Inheritance and Donation Tax if applicable in his autonomous community, as well as the Municipal Capital Gains Tax if applicable.
Advantages of donating an apartment versus selling it
To make an informed decision between selling or donating an apartment to a child, it is important to understand the advantages offered by each type of operation. If you choose to donate, the following advantages can be considered:
- It avoids possible disputes, paperwork and problems related to inheritance, since it allows you to make a donation during your lifetime of the assets that you want to leave to your descendants, thus avoiding later problems at the time of opening the will and distributing the inheritance.
- The donation allows establishing conditions, such as the retention of rights over the donated properties or agreeing to collect taxes from children only at the time of death... Conditions not applicable in the case of opting for sale.
- It provides economic security by allowing you to know the gift tax that must be paid at the time of the donation, as opposed to the uncertainty about the taxation of the Transmission Tax at the time of death.
- If necessary, it is possible to recover the donation according to the conditions established in the operation.
- Donating gives parents the opportunity to help children facing financial difficulties.
Donating real estate has advantages and disadvantages. If the child later decides to acquire another property with a value equivalent to that of the donated apartment, she will only need to sell said apartment to finance the purchase.
Advantages of selling an apartment versus donating it
Selling property to a child also entails certain advantages for parents, such as those detailed below:
- If the home to be sold is the habitual home, and the intention is to acquire another home for the same purpose, parents over 65 years of age can benefit from tax credits on both sides.
- If there are other heirs, the sale offers parents the opportunity to benefit one of their children over the others.
- Even if the sale is chosen, the parents can establish in the contract the possibility of remaining as usufructuaries of the home until the moment of their death.
- This alternative provides an economic benefit to the parents that can be very useful, while allowing the asset to continue in the family's possession.
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