The gratuitous transfer of an endowment policy subject to usufruct is a permissible structuring device. The BFH has now clarified when such a gift becomes effective for tax purposes and under what conditions and in what amount the usufruct can be deducted from the basis of assessment for gift tax. In particular, the conditionality of the usufruct plays a decisive role here.
Practical example:
A mother transferred an endowment policy to her son free of charge on 11.10.2017. The mother had previously made a one-off payment of € 2,500,000. The surrender value of the contract amounted to €2,460,093 on the transfer date. The mother contractually reserved the right to usufruct of the surrender value if the contract was terminated. Both mother and son could terminate the contract. The son stated a value of € 630,820 in his gift tax return, as he deducted the value of the usufruct. However, the tax office assessed the gift tax on the basis of the full surrender value and did not take the usufruct into account. The tax court partially upheld the son's appeal and considered the usufruct to be a deductible, unconditional burden.
There is no doubt that the gratuitous transfer of an endowment policy is subject to gift tax at the time the policy is transferred. However, the value of the acquisition is to be measured at the surrender value. The tax court incorrectly assumed that the value of the reserved usufruct is deductible. The BFH therefore overturned the judgment of the tax court and dismissed the claim.
The decisive factor is the following: A usufruct in the repurchase benefit only arises with the actual termination of the insurance contract and the associated establishment of the claim to payment of the surrender value. However, as no termination had taken place at the time of the gift, the usufruct in favor of the mother had not yet arisen.
Important! Encumbrances whose creation depends on the occurrence of a condition precedent are not taken into account when determining the taxable acquisition (Section 6 (1) BewG). This also applies to a usufruct that only arises upon the occurrence of a future event (here: termination of the contract).
Conclusion: A reserved usufruct on the surrender value of an endowment policy is not deductible at the time of the contract transfer as long as the contract has not been terminated. Gift tax must therefore be paid on the basis of the full surrender value, as this is a conditional charge that can only be taken into account when the condition is met.