Two other ways to transfer property to a child without leaving it as an inheritance.

Faced with the dilemma of how to ensure a stable future for their children, many parents are considering alternatives to traditional inheritance for transferring property ownership. The two most commonly discussed options are selling or gifting real estate. However, each alternative has its own nuances, particularly regarding tax and legal implications.

Sale and donation of real estate

Both selling and gifting an apartment are completely legal. It is important to understand the differences between them in order to make an informed decision that best meets the needs and goals of each family. When selling an apartment to children, parents need to consider various taxes. One of them is the Personal Income Tax (IRPF), which is levied on the profit from the sale. On the other hand, the child, as the buyer, will have to pay the Property Transfer Tax (ITP), the rate of which depends on the region where the property is located.

A sale involves a final transfer of ownership, and parents lose any control over the property once the transaction is finalized. However, they may consider retaining the right to maintain the property for life, allowing them to continue to live in it.

On the other hand, gifting offers an alternative route with its own advantages and considerations. When gifting an apartment, parents will also have to pay IRPF for capital gains, while the recipient, their child, will need to pay the Inheritance and Gift Tax, the rate of which depends on the region, as well as the municipal profit tax.

Pros and cons of selling and gifting

One of the main advantages of gifting is the ability to establish specific conditions, such as the right to use the property or setting reverse conditions, which provides greater flexibility compared to selling. In turn, gifting can be an effective way to assist children during economically difficult times, without waiting for the inheritance to be opened.

However, both alternatives have consequences that go beyond fiscal ones. The choice between selling and gifting an apartment to children depends on many factors, including the parents' economic situation, their long-term plans for the property, and the impact on the rest of the inheritance. It is important for families to take the necessary time to evaluate all options and consider the consequences of each decision. This may include consulting with legal and tax professionals who can provide personalized guidance.

Each family will have to weigh up the pros and cons of each alternative, taking into account both the practical and emotional aspects of the decision. The key will be to find the right balance that will provide for the present and future well-being of both parents and children, ensuring a transfer of assets that meets the wishes and needs of all concerned.