When you think about your child's future, you probably have many wishes: a safe home, a good start in life, financial independence. All of this requires planning - and sometimes the courage to deal with uncomfortable topics such as inheritance or death. Especially when it comes to larger assets such as the family home, real estate or investments, you should know what your child might have to deal with - and how you can make provisions today so that inheritance tax and the like don't become a stumbling block later on.
This is because clear tax regulations apply in Germany: Depending on the degree of relationship, i.e. whether spouse, children, grandchildren or siblings, a certain tax bracket applies with corresponding allowances and tax rates. If you don't take this into account in good time, you run the risk of reducing your hard-earned assets.
With the right plan, you can avoid this - and ensure that your child inherits not just a legacy, but real security.
We'll help you find the right investment for your child!
- An additional $25,703 per child, thanks to our modern ETF strategy
- Find the perfect ETF investment for your child in a 30-minute video conference from the comfort of your own home.
- Sit back and watch your child's assets grow – our experts will take care of the rest.
What is inheritance tax - and who does it affect?
Inheritance tax is a tax that is payable when you inherit or are bequeathed assets - for example money, real estate or a house. The legal basis is the Inheritance Tax and Gift Tax Act (ErbStG), which regulates the taxation of inheritances and gifts in Germany. Many people initially think: "That only affects the rich!" But beware: even transferring a parental home to your own children can quickly become expensive - especially if you exceed the tax-free amount.
💡 Briefly explained:
Inheritance tax is levied on the value of the assets you receive through an inheritance, legacy or gift. The amount depends on who inherits and how much.
The tax class plays a central role here. There are three categories in Germany:
- Tax class I: children, spouses, registered partners, parents and grandparents
- Tax class II: Siblings, children-in-law, nieces, nephews
- Tax class III: all other persons, e.g. friends, distant relatives
Depending on the tax bracket, different allowances apply - for example, 400,000 euros for children, 500,000 euros for spouses and only 20,000 euros for more distant relatives or friends.
📌 Exemplary allowances:
Child inherits 600,000 euros → 400,000 euros free, 200,000 euros taxable
Siblings inherit 100,000 euros → only 20,000 euros free, 80,000 euros taxable
And there's more: Gifts during your lifetime are also subject to gift tax - and are treated in the same way as inheritances. However, you can use the full allowance again every ten years - cleverly used, you can avoid high taxes.
In the next section, we look at why these allowances are often not enough - and which cases are particularly affected.
Allowances for children and grandchildren: sounds good, but is often not enough
When you think of inheritances, the statutory tax-free amounts seem pretty generous at first glance. Children can currently inherit up to 400,000 euros tax-free. For grandchildren, the tax-free amount is at least 200,000 euros - unless your own child has already died, in which case grandchildren are also entitled to the full 400,000 euros. Sounds fair at first, doesn't it?
But in practice, things often look different.
🏠 Example:
The inherited family home in a good location is now worth 600,000 euros. Added to this are reserves and securities worth 150,000 euros. This means that the tax-free amount is quickly exceeded - and the tax office demands its share.
The situation is particularly critical for real estate, because since the revaluation from 2023, the original purchase price is no longer used, but a realistic market value. This means that what was on the books 20 years ago as a family home at 250,000 euros can now be valued at 600,000 euros or more - and this increases the tax burden.
📌 Important to know:
The amount of tax depends on the amount that exceeds the tax-free amount - and on the tax class of the heir. Lower tax rates apply to children (tax class I) than to siblings (tax class II) or unrelated persons (tax class III), for example.
Clearly, the statutory tax-free amounts are a good start - but they are by no means always enough to protect your child from high taxes.
4. ETF savings plan for children - favorable, but tax problematic?
Many parents opt for an ETF savings plan if they want to build up long-term assets for their children. No wonder: ETFs are inexpensive, transparent and easy to manage. But what appears to be a clever solution at first glance can later become a tax trap - especially in the event of an inheritance or gift.
📉 Problem 1: Capital gains when changing strategy
If you want to switch your child's ETF custody account at a later date - for example, because your goals change - every move will be subject to tax. Capital gains tax is due immediately, even if the money is not paid out at all.
📅 Problem 2: Coming of age
As soon as your child turns 18, the deposit belongs to them. You no longer have any control - and what happens then is in the hands of your offspring. Whether the assets are used for studies or for a new car - you no longer have a say.
📬 Problem 3: Inheritance tax on death
If you inherit the custody account, inheritance tax applies immediately - including accrued capital gains. And this applies regardless of how long you have held the custody account. Although the tax-free amount of 400,000 euros for children also applies here, this is often not enough for large sums or multiple assets.
An ETF savings plan can be a good building block - but in many cases it is less flexible from a tax perspective, especially in the event of death, gifts or changes in asset accumulation. It is worth looking at alternatives that are smarter from a tax perspective.
The Invest4Kids concept: how to secure your child's future in a tax-smart way
If you want to provide for your child, it's not just about high returns - it's also about planning security, flexibility and tax cleverness. This is exactly where the Invest4Kids concept comes in. It works in a similar way to an ETF savings plan, but has decisive advantages - especially with regard to inheritance tax, gifts and tax law.
🛡️ Tax benefits that really count
With Invest4Kids, you can build up assets for your child in such a way that in many cases they are taxed much more favorably than with traditional child custody accounts.
✅ These are the advantages at a glance:
- No capital gains tax deduction for strategy changes
- Income is reinvested tax-free
- Only half of the gains are taxable if your child withdraws the money after the age of 62
- Condition hedging provides long-term protection against negative changes in tax law or rising costs
In concrete terms, this means that you can make regular contributions - from as little as 25 euros a month - and your money grows in a tax-optimized way.
👨👩👧 "Right of determination" - you remain in control
A unique feature of the Invest4Kids concept is the so-called right of determination. It ensures that you retain control over the investment even after your child's 18th birthday.
🗣️ Practical example:
You want to prevent your child from spending all the money they have saved on a new car when they turn 18? No problem. With the right of determination, you continue to control when and how the money is used - until you release it.
🔄 Flexibility meets the long term
Whether you want to pay in more, need a break or want to invest a one-off amount - it's all possible with Invest4Kids. And if your life situation changes, the strategy is simply adjusted.
With Invest4Kids, you combine tax intelligence, legal security and emotional responsibility - for assets that will really help your child get ahead.
Our advice: Why you make better decisions with Invest4Kids
Many parents feel overwhelmed by issues such as inheritance tax, gifts or the right form of pension provision. This is understandable - tax law is complex, life situations are different and the emotional responsibility is great. This is precisely why personal advice is not an add-on at Invest4Kids, but an integral part of the concept.
💬 Free, personal and independent - this is how many parents describe their experience with Invest4Kids.
Instead of struggling through confusing tables, tax brackets, allowances and forms, you get a clear recommendation that suits you and your family. And in understandable language, without technical jargon.
🗣️ What other parents say:
🍼 "I would never have thought that the topic of inheritance and taxes could be explained in such a straightforward way. The advisor really took her time."
- Julia (mother of two)
🏠 "We wanted to secure our family home for our daughter. Now we know how we can do this tax-free and sensibly - and still retain control."
- Markus & Leonie (parents of a 12-year-old)
The advice is not just limited to the start: Even if something changes - change of job, another child, new goals - your strategy will be adapted together with you. This ensures that your plan not only makes sense from a tax perspective, but is also feasible from a human perspective.
📌 Tip: Many parents also use the consultation to find out about the 10-year rule for gifts or how to make the best use of pension allowances. Because sometimes a small step can mean thousands of euros in tax savings.
"Know what counts: Plan your family's financial future now."
We'll help you find the right investment for your child!
- An additional $25,703 per child, thanks to our modern ETF strategy
- Find the perfect ETF investment for your child in a 30-minute video conference from the comfort of your own home.
- Sit back and watch your child's assets grow – our experts will take care of the rest.
Pension provision instead of tax: How to transfer assets cleverly
If you start thinking early on about how your child will be financially secure in later life, you can save a lot of tax with a few simple steps. The key is to plan in good time - and to make intelligent use of statutory allowances and tax planning options.
🔄 Use the 10-year cycle for donations
A real insider tip is the so-called ten-year rule. You can transfer up to 400,000 euros to your child tax-free every ten years - regardless of whether it is money, securities or even real estate. In tax law, this is called a gift - and is subject to the same tax-free amounts as an inheritance.
📬 Example:
You start giving your child 400,000 euros every ten years at the age of 40. When you pass away at 70, your child will have received a total of 1.2 million euros tax-free over three periods - and the inheritance will also fall under a new tax-free amount.
🛡️ Security through clear structure
With the Invest4Kids concept, gifts and long-term provision can be optimally combined. Not only do you benefit from tax advantages, but you also have the flexibility you need as a parent.
✅ Your benefits at a glance:
- Tax-free transfer of assets in several stages
- Control through the right of determination
- Avoidance of unnecessary tax burden for inheritances
- Flexible design - even when life changes
🧾 Don't forget:
Depending on the amount of assets, a lack of planning can quickly result in five-figure sums in inheritance tax - or even the loss of some of the assets. That's why it's worth looking at your options in good time - with professional advice from Invest4Kids.
Practical example: How the Schneider family cleverly transfers assets
The Schneider family wants to give their two children something for the future today - not just when they inherit. It is important to them that their assets are not diminished by unnecessary taxes. In a consultation with Invest4Kids, they learn about the possibility of making a tax-free gift of 400,000 euros per child every ten years.
Instead of waiting until inheritance to act, they start building up capital for their children at an early stage - in a tax-optimized and flexible way. With the Invest4Kids concept, they save in a way that allows them to make targeted use of allowances and pass on the assets later in a regulated manner. By making clever use of the pension allowance and the tax advantages of the policy - such as the tax-free reinvestment of earnings and the elimination of capital gains tax when changing strategy - your children benefit in several ways.
The best thing is that the Schneider family retains control over the capital via the right of determination. For them, this is the perfect combination of tax efficiency and parental responsibility.
Conclusion: If you plan wisely today, your child will certainly benefit tomorrow
Financial provision for your child is more than just a savings plan - it's a piece of lived responsibility. With the Invest4Kids concept, you have the opportunity to make clever tax provisions, remain flexible and give your child real security. Whether inheritance, gift or asset accumulation: You are well advised - and remain in control. Take advantage of the opportunities offered by tax law and let us help you.
👉 Get free advice now - to give your child a strong start in life.
