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I live in Germany. If my father would want to give me a large sum of money - let's say 10,000€ - what would be the safest, least bureaucratic way to do this? I'm an apprentice and I still receive child allowance (I don't know how familiar people outside of Germany are with this), and I have no debts.

What I am afraid of:

  • Missing out on the best way to store such an amount of money for a long time

  • Losing money to bureaucracy (German authorities)

  • Losing money on the transaction due to some taxes (I have no idea about this)

Another thing I'm afraid of is that my girlfriend, with whom I live and will be living with for a long time, has a mother who has a lot of debt.

I am NOT concerned about interpersonal issues (her or her mother wanting money), I am ONLY concerned about legal troubles I might have if a person I live with has a relative with a lot of debt, but that is not my main worry here (as even I with my limited knowledge can tell that the risk for me wouldn't be big as I'm not engaged to her).

Also, my ideal future scenario would be to use this money to finance a flat in another town, so that someday I can own said flat myself instead of living on rent forever, but I know that 10,000€ would not be enough for that - maybe there's something where you can start small.

Sorry if the text body goes a little out of scope. I'm just a little anxious about all of this, and I wouldn't want to start anything before at least getting some feedback here.

Thanks in advance!

  • 3
    "thinking you can separate the two ...... is a daydream" my girlfriend hates her mother as she had a lot of problems with her in the past and as far as i understood it the debt of her mother has no way of "falling back" to herself – Flying Thunder Jan 28 at 14:59
  • 5
    @FlyingThunder What is the relevance of your girlfriend's mother? You bring her debt up as a concern but don't specify what it is that concerns you. Is it that you think she or your girlfriend will try to make a claim for some part of your money/property? – Roy Jan 28 at 15:04
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    No, im not concerned in the slightest by anything that either she or her mother could do - all im afraid of is german authorities and other people who normally try the most to get their money back - and that my girlfriend might have to, for some reason, take over her mothers debt (e.g. when the mother dies, or when her creditors look for more ways to get their money back) – Flying Thunder Jan 28 at 15:06
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    Do you receive bafög or similar where a sum of money would mean you don't receive that anymore? – DonQuiKong Jan 29 at 8:20
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    The relevant legal references for Germany and for your case are this, this and this. In short, from your parents, you can get hundreds of thousands (€) without paying any taxes. But this tax-exempt amount is per 10 years. – caw Jan 29 at 19:35
41

I am Swiss but I will attempt to answer this as good as possible:

1 Storage

You get a bank account. Done. A bank account doesn't get you a lot of interest, but it is a safe way of storing the money and you'll have access to it at any time.

2 Bureaucracy

Germany is a little more bureaucratic than Switzerland but a simple bank transaction should be enough.

3 Taxes

The free sum "Freibetrag" which you can gift to your children is 400k EUR in Germany so you are good to go. This means no taxes for you or your dad.

4 Liability for parents in debt

If your girlfriend doesn't accept the inheritance she's fine. You are not liable for the debt of your parents. If she would accept the inheritance she would also inherit the debt. So don't accept it and everything is fine.

Even if you were married and she accepted the heritage, it's still not your debt, but then your wife's. You can't be hold accountable for debt of your wife/husband, at least not in Germany.

5 Getting a flat with 10K EUR

Not gonna happen, at least not in Germany. You will need to save more and get a mortgage, but 10k is a nice start. You may want to start investing your saved money because you have the 10k security cushion on the bank account.

Edit: Free sum "Freibetrag" is actually 400k not 20k. 20k is for grandchildren I suppose, therefore the mess up.

  • 10
    If you're interested in investing the money, I can recommend investing in index funds, but only after you've put aside a considerable sum (thousands of Euros?) as an emergency fund - which means putting it on a "Tagesgeldkonto" if you're in Germany. Yes, the interest rates are negligible right now, but the whole point of an emergency fund is that you're guaranteed that the money is there when you need it. Crypto investing is the exact opposite, as it comes with extremely high risk. Index funds that track indexes like MSCI All Country World Index (ACWI) have much lower risk. – Daniel Seither Jan 28 at 17:15
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    According to Wikipedia the Freibetrag for a child is 400,000 € (but accounting for ten consecutive years). – Ghanima Jan 28 at 18:51
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    @PaŭloEbermann Your bank is ripping you off ;) Right now, you should be getting around 0.3% interest, and not the 0.01% that some banks offer. Although, at 10k €, this means getting 30€ instead of 1€ per year, so it still might not be worth it for interest alone. Putting your emergency funds into an account separate from your regular checking account still helps with not spending it outside of an emergency. – Daniel Seither Jan 29 at 7:17
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    @PaŭloEbermann look at Zinspilot for example. The Flexgeld gives over 0.5% and you can get your money in max 15. days (1. and 15. of every month). Perfect for an emergency fund if you leave maybe 2k on your regular tagesgeldkonto (where you can get max. 0.4% afaik unless you go for some special offers for example for students (mlp) or medical practitioners(apobank)) – DonQuiKong Jan 29 at 8:18
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    For 10000€, you surely won't find any flat in München or Frankfurt. You might be able to buy an old house in the middle of nowhere, though. – Eric Duminil Jan 29 at 11:04
4

I will attempt to answer your questions from a German point of view.

Missing out on the best way to store such an amount of money for a long time

Your bank account is safe

You could "store" an amount of EUR 10,000 in your usual bank account. In Germany, a deposit insurance (Einlagensicherung) with up to EUR 100,000 coverage comes with your bank account automatically, so you won't lose your money in case the bank goes bankrupt.

Setting up an emergency fund

First, as you don't have any debt yourself, set aside some money for an emergency fund, if you don't have one already. Your bank account (or Tagesgeldkonto) is a good choice, because the money is available right away if needed. Ideally, you would then be able to pay your bills for at least 3 months without any income.

This makes sense, as in Germany, it can happen that you will receive unemployment benefits (Arbeitslosengeld I) no earlier than 12 weeks after you lost a job -- for example, if for some reason you were forced to quit a job instead of your employer terminating your contract (Sperrzeit, see § 159 SGB III).

Also, if the company you're working for would go bankrupt, you're entitled to receive Insolvenzgeld (insurance for employees by the Federal Employment Agency in case of employer bankruptcy). But again, this will happen only if your employer couldn't pay your salary for at least 3 months in a row.

Invest with long-term perspective

Depending on your living standard (your monthly expense budget), you will still have a good portion of the EUR 10,000 left after setting up your emergency fund. However, simply "storing" the money for a "long time" is probably not quite what you want: Due to inflation, the value of your money will decrease over time.

If you don't need the money for a long time (at least 10-15 years or more), your best bet would be to invest in a really widespread ETF (ideally worldwide). This way, you mitigate your risk if the economy in certain sectors or regions goes down.

Nowadays, many Germany direct banks (for example DKB, Comdirect or ING) offer a brokerage account basically for free, you would only pay for transaction fees. As ETFs are automated, the management fees are comparably low, also.

Losing money to bureaucracy (German authorities)

Situations to consider regarding authorities

Indeed, you should take German authorities into account. Should you ever get yourself into a financially difficult situation, the government will expect you to pay out of your pocket first, before they pay any money to you.

  • If you are unemployed for a longer time (more than 12 months), you will no longer receive the usual unemployment benefits (Arbeitslosengeld I), but rather Arbeitslosengeld II ("Hartz IV"). If this happens, the government will expect you to use up your own savings before they give any money to you.
    You will be allowed to keep a certain amount depending on your age, called Schonvermögen. It is roughly EUR 150 multiplied by your age. There are various online tools to calculate the exact amount, and there is currently a maximum of EUR 9,750.

  • A very similar situation happens if your girlfriend is unemployed for a longer time. If you're living in the same household together, the authorities will assume that you share a certain responsibility for each other, called Bedarfsgemeinschaft.
    In this case, your girlfriend's savings and your savings will both count together (see link above). This means, your girlfriend won't receive any benefits as long as you don't use up enough of your savings. So you might be forced to pay for your girlfriend's living expenses indirectly.

  • Authorities might also force you to use up some of your savings if you do not earn enough money, for example if you will have a child and need to pay child support. If your regular income is low, but you have a lot of money in the bank, you might need to use that money.
    However, in such a case, regulations are rather vague. The exact outcome will depend on the individual situation. There is no simple calculator for such situations. Should you ever be in that situation, a family court would have the final say.

In any case, it is better to have some money in the bank and use it in case of a financial emergency -- rather than having no savings at all -- because you might not receive social benefits immediately.

As as side note, there is no way to simply transfer your money to another person (for example, back to your father) to "protect" it from the government. If you apply for social benefits, they will ask you specifically if you gave away large amounts of money in the past.

Losing money on the transaction due to some taxes (I have no idea about this)

Taxes that could play a role

This is called Schenkungssteuer ("gift tax") in Germany. It depends on the relationship between the donor and yourself. If your father is giving money to you (his child), there is a tax-free amount of EUR 400,000 (see § 16 ErbStG), so tax won't be an issue if this is a one-time transaction.

The EUR 400,000 tax-free amount is for a time span of 10 years - ten, instead the usual one year for tax-free amounts. And it is not about gifts from your father, but about the sum of gifts given to you, as you would pay tax for the money that exceeds the limit. So for EUR 500,000 in 10 years, you would pay tax on EUR 100,000 in the year it exceeds the limit.

If you choose to invest (part of) the money as suggested above, you would have to pay capital gains tax. But again, there is a tax-free amount per year called Sparer-Pauschbetrag. Make sure to set up a proper Freistellungsauftrag at your bank, so they won't accidentally deduct taxes.

3

Given the information you have provided, it seems that your biggest problem is storing your money. Taxes shouldn't be a concern for €10,000 as you will most likely be exempt under the laws for donation or gift tax. The taxation on gifts is usually for larger amounts. Bureaucracy should be nothing more than receiving €10 unless you are receiving cash, which might draw some unwanted attention. Your girlfriend's family's debt shouldn't be a problem as far as my legal knowledge of any country goes.

If it were €100,000, the situation would be a bit different. You would need to take taxes into consideration and your bank might pry a little bit further - nothing to worry about if the transaction is legitimate.

Back to the problem of storage, which is really your problem - you can choose to store your money safely in a bank account, or you can choose to invest it. On the safer side, you can look at a call deposit/certificate of deposit or fixed deposit account and choose the one that pays the highest interest. Alternatively, you can choose to invest in the stock market or whatever suits you, but accept that you are likely to lose some money.

  • In Germany, cash draws extra attention for amounts of €10,000. or more - above that, to detect money laundering, cash transactions are routinely monitored. But that is no reason to worry. No problem at all with just going to your bank, stacking it on the counter, and transfering it to your account. – Volker Siegel Jan 30 at 21:59
3

To extend the (excellent) answer from Lucas. Your girlfriend's mother has no claim on your assets at the moment. Assuming your girlfriend lives longer than her mother, your girlfriend will by default inherit everything her mother has including the debts (possibly shared with any siblings of course). However your girlfriend can choose not to accept the inheritance, in which case she doesn't inherit the debts - but she also doesn't get to keep that favourite picture from when she was little. That is a decision your gf will have to make when the time comes.

(Taking the favourite picture anyway would be theft ... but it's very unlikely anybody would know.)

  • And people who are owed money by your girlfriend’s mum have no rights either. – gnasher729 Jan 29 at 13:31
1

Adding to Lucas Raphael Pianegonda's excellent answer:

  1. While a bank account is a secure way to store money, you might want to consider something that has a bit of interest. Assuming you have a little financial safety already, you could put it into a savings account that will yield some interest for a little less flexibility. You might not be able to access the money on a day's notice but unless you need that kind of access, it will save the value you lose to inflation otherwise.

With a fixed expectation about security, there are still varying trade-offs between interest and flexibility:

  • Regular bank account: Provides zero interest and full flexibility.
  • "Tagesgeldkonto": Provides a bit of interest, if you shop around: Up to 1%, often limited to 1 year and new customers. If you need your money "today", that's a problem, but "tomorrow" works out.
  • "Festgeld": Provides better interest, usually. However you lose the interest for one year, when accessing the money.

Nowadays, every bank accountant will try to talk you into a managed fond (good ones might mention unmanaged or ETF). This goes as far as them claiming they don't offer "Festgeldkonto". Simply ask for the guaranteed effective interest after all costs are covered. Then ask for the risk associated to stock markets and the low-interest policy of EZB that lasted for about a decade now. Ask for the risk associated to a hard Brexit. Finally ask for the bank account you originally asked for. If they still don't offer what you want ask for the "Beratungsprotokoll" and how they arrived at that risk assessment. Leave. (Been there, done that, multiple times, multiple banks)

The above approach is about as risk-averse as Lucas Raphael Pianegonda's (which I've read as "Regular bank account") but may pay off in the long run. Don't worry too much about "missing the best way". Everyone misses that, because no one can predict, which penny stock will shoot up most. Stocks will pay off more in the long run but only if you don't invest "shortly" before a bubble blows. Wait at least until after it has blown. Take the rising flank after the falling has passed. There's a reason we had all time highs not long ago and that reason isn't because the financial sector has learnt its lesson.

  1. While inheriting debt can easily be avoided, there are other mechanisms to mention:

    • If your girlfriend's mother (GsM) falls ill and needs on-going treatment, the social service will cover that (because your GsM can't, because she's in debt). However they are entitled to try and get the expense back from close relatives, i.e. your girlfriend. While your money should be safe, money in a shared account might be subject to this. It's safer to have separate accounts with verifiable sources of money.
    • If your girlfriend is registered at your GsM's address, the two can be considered a "Zugewinngemeinschaft", i.e. covering expenses for each other is expected in context of e.g. Hartz IV. In a fringe case of the social service becoming aware that you live with your girlfriend despite her being registered elsewhere, it's imaginable (maybe unlikely but still) that you'll be considered part of the same "Zugewinngemeinschaft". In this strange and constructed case, your GsM won't get Hartz IV and you'll be obliged to cover her expenses. However there are "Freibeträge" for this, too. I remember something like 1,000€ in savings per year of age, i.e. assuming you're 18 and have less than 8,000€ prior to getting the 10,000€ you're safe. However, it's more secure for your girlfriend to be registered at her correct address.
    • If your GsM has given your girlfriend any valuable gifts or money lately, she might be compelled to ask for it back in order to cover her own debts. This is in the context of private bankruptcy. It'd be mandatory for her and your girlfriend would have to give it back, if the conditions of certain laws are met.
  • "financial sector has learnt its lesson" is figuratively: Of course, they did. After all, they aren't playing with their money, are they? – NoAnswer Jan 29 at 17:26
  • For those interested: "Tagesgeld" with 1% p.a. is currently advertised by a bank that was renamed lately. The advertisement is with the famous German basketball star they've been advertising with even before the renaming. The offer is limited to a certain amount of money, new customers and one year. Just watch German TV for 1-2 hours, you'll see the ad. – NoAnswer Jan 29 at 17:32
  • The Hartz IV Freibetrag is actually much less, like 150€ per year. See for example: brutto-netto-rechner.info/schonvermoegen.php – tmh Jan 30 at 15:05
  • Additionally, if the OP and his girlfriend share the same apartment, the girlfriend won't get any Hartz IV, because the OP's money counts towards their savings. Regardless of her mother's situation. – tmh Jan 30 at 15:17
0

Regarding inheritance of debt, that is not possible legally. At least not in Sweden and I assume that goes for the rest of the EU too (and the rest of the civilized world ;). The creditors will of course take their cut of the inheritance but if that does not cover the debts, the remaining debt will not never ever get passed on to siblings/relatives/children/...

  • 1
    Germany is a little bit different, you can inherit debt. "However, as German inheritance law states that heirs inherit obligations as well as assets, a German inheritance can include debt. Thus German inheritance law permits people to reject an inheritance if they wish. This has to be done within six weeks, or six months if the heir is not a German resident." from expatica.com/de/finance/taxes/… – janm Jan 30 at 14:43

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