Gifting a Life-Insurance Policy with a Reserved Niessbrauch: BFH II R 27/22 (2026)

What is the ruling about?

In the disputed case, a father had transferred two capital life-insurance policies with a six-figure surrender value to his daughter. In the transfer agreements he reserved the Niessbrauch in the later surrender proceeds. The daughter thereby became the policyholder, the contracts continued unchanged, and the right to the insured sum remained economically with the father - if and when termination occurred.

The tax office assessed the Schenkungsteuer on the full surrender value. The reserved Niessbrauch was not taken into account as a value reduction. The FG Muenster partially upheld the daughter's claim by ruling of 23 June 2022 (3 K 606/21): a gift, yes, but the Niessbrauch should be deducted from the acquisition value as a capitalised burden.

The BFH set aside that ruling and followed the tax office's view. The reasoning marks a clear turning point for succession planning with life-insurance policies.

The three holdings of the BFH

Holding 1 (BFH II R 27/22, 28.01.2026):

"The gratuitous transfer of a capital life-insurance contract (assumption of the contract) is subject to gift tax at the time the contract is transferred and is to be valued at the surrender value."

This settles the point: the assumption of the contract under § 415 BGB is a gratuitous gift within the meaning of § 7 Abs. 1 Nr. 1 ErbStG. In civil-law terms the recipient steps into the position of the policyholder and can terminate, pledge or continue the contract. This legal power is the acquired asset that must be valued. The benchmark for valuation is the surrender value as at the transfer date, rather than the hypothetical insured sum on survival or any other valuation figure.

Holding 2:

"Where the donor has reserved the Niessbrauch in the surrender proceeds, this Niessbrauch only arises when the capital life-insurance contract is terminated."

Here lies the civil-law core. As long as the contract is running, there are no surrender proceeds. There is therefore no object to which a Niessbrauch in the legal sense could attach. The agreed right of use is thus an expectancy that takes effect on a future termination, while remaining short of an existing right as at the valuation date.

Holding 3:

"In so far as no termination has occurred as at the valuation date, the Niessbrauch is a conditional burden that, under § 6 Abs. 1 of the Valuation Act (Bewertungsgesetz), is not deductible from the value of the acquisition."

§ 6 Abs. 1 BewG expressly provides for condition-precedent burdens: they are not taken into account in the valuation. The BFH draws the line consistently. As at the valuation date no termination had occurred, the Niessbrauch had therefore not arisen, so the burden was condition-precedent and not deductible.

The ruling is available as LEXinform document no. 0954407 (via datev.de/lexinform); a press release from the BFH is available through the court's database.

Why the Niessbrauch does not (yet) reduce the value

The central provision is § 6 Abs. 1 BewG:

"Burdens whose creation depends on the occurrence of a condition precedent are not taken into account."

What does that mean in this specific configuration? The donor has reserved the right to claim the surrender proceeds - once termination occurs. Until termination there is neither a payment nor a claim. The Niessbrauch does not exist. Only with the termination event does the insurance receivable turn into a surrender payment that has fallen due, to which the right of use can then attach.

As at the valuation date of the gift - that is, the day the contract is assumed - this condition precedent is not met. § 6 BewG therefore applies clearly: the burden is not taken into account, and the full surrender value is attributed to the recipient.

If the condition is later satisfied (termination), § 6 Abs. 2 BewG in conjunction with § 5 Abs. 2 BewG applies. On application, the tax assessment is corrected, and the Niessbrauch can then be capitalised and deducted retrospectively. In practice, however, this subsequent correction is often worthless: on termination, the surrender proceeds flow to the donor, the assets are gone from the recipient, and the original purpose of the arrangement is missed.

Real-estate Niessbrauch vs. life-insurance Niessbrauch

Anyone wishing to understand the logic of the ruling should set it against the standard arrangement involving a real-estate Niessbrauch.

The decisive difference lies in the civil-law creation. With real estate, the Niessbrauch is a proprietary right that exists and is usable immediately on agreement and registration. The recipient must tolerate the burden from day one - it is real and capable of valuation. With life insurance there is nothing comparably tangible before termination: the contract is running, no money flows, and no right of use can be exercised.

What this means in practice for clients with life-insurance policies

Three consequences for advice:

First - no value reduction in standard arrangements. Anyone who transfers a capital life-insurance policy to children or grandchildren and reserves the Niessbrauch in the surrender proceeds pays Schenkungsteuer on the full surrender value. With a surrender value of EUR 300,000 and a transfer to one child: the Freibetrag of EUR 400,000 (§ 16 Abs. 1 Nr. 2 ErbStG) still covers it. With a surrender value of EUR 600,000, gift tax falls due on EUR 200,000 - tax class I, depending on the situation 11 to 15 percent (§ 19 ErbStG).

Second - review ongoing configurations. Anyone who has implemented such an arrangement in the last ten years and declared a value reduction should have the tax assessment and its Bestandskraft (the point at which a tax assessment becomes final and can no longer be challenged) reviewed. For final assessments the old treatment stands, because the BFH has no retroactive effect. For still-open proceedings the tax office will enforce the new line immediately.

Third - avoid a false impression. A contract clause "Niessbrauch in the future insurance benefits" does not make the gift cheaper; it merely secures the donor's access in the event of termination. Anyone who, in the transfer deed, creates the impression that the Niessbrauch reduces value risks a correction of the tax assessment once the BFH line becomes known, and in a dispute a finding of grossly negligent ignorance (§ 173 AO).

What remains of the planning

The ruling closes the door for the simple reserved Niessbrauch - so the advice moves to other levers.

Variant A - prior termination with annuitisation. The donor first terminates the capital life-insurance policy and uses the surrender amount to take out an immediate annuity. What is then gifted is the capital base less the annuity stream the donor uses; the insurance contract no longer matters for the valuation. The tax treatment is more differentiated and, in planning terms, considerably more controllable.

Variant B - transfer on death instead of during life. The policy is assigned to the desired successor through a Testament (will) or an Erbvertrag (inheritance contract), and the testator continues to use it during their lifetime. The tax burden arises only on death, the allowances run fresh (§ 16 ErbStG), and the civil-law question "has the Niessbrauch arisen, yes or no" falls away.

Variant C - gifting in instalments below the Freibetrag. Anyone who sees room within the 10-year period under § 14 ErbStG can split the contract - through partial surrenders and staggered transfers - and so stay below the Freibetrag. The precondition: the insurer plays along with the split.

Variant D - transfer to a family company. The policy is contributed to an asset-managing KG or GmbH, and the shares are gifted. Valuation is via § 11 BewG (common value), and there is planning latitude through articles of association with voting-rights restrictions - complex, but computationally attractive for larger estates. Here a careful overall review with inheritance and company law is mandatory.

Which variant suits the family depends on the type of policy, the surrender value, the donor's age and the desired power of disposal. There is no blanket recommendation.

Cross-links for further reading

• Niessbrauch 2026 - the complete guide
• Niessbrauch on a house or property - why the standard model still carries there
• Calculating the Niessbrauch - value reduction in the table
• Niessbrauch redemption now taxable: BFH IX R 4/24 - the parallel current piece on taxing the waiver
• Gifting to children and Gift allowance
• Gifting and the 10-year period

Conclusion

The ruling II R 27/22 closes one planning door - and opens no new one. Anyone who wants to pass on a capital life-insurance policy within the family should plan it without the reflex "add a Niessbrauch and it gets cheap". A clean upfront valuation of the surrender value, a look at the Freibetrag and the sober choice between a gift during life, transfer on death and a family company lead to better results than the hope for a valuation discount that the BFH has just collected.

In my practice I now take on such projects fundamentally differently: first determine the surrender value, then weigh the Freibetrag and the 10-year period against it, then choose the right planning route. Anyone who currently has a life-insurance policy in their succession planning, or is planning a transfer in the coming months, should go through the model with their Steuerberater (German tax advisor) before signing the contract - the BFH has changed the valuation mathematics.