Inheritance Tax Solutions for German Estates

In case (i) the decedent was a German resident or (ii) assets, like real estate, are located in Germany German inheritance and gift tax will apply.

The personal allowances are between EUR 20,000 and EUR 500,000 depending on the degree of relationship. There are also material allowances, e.g. for business assets (up to 100%) and household effects.

Spouses and registered partners benefit from the highest tax-free allowance: They can inherit up to EUR 500,000 tax-free. Otherwise, the closer you are related to the deceased, the higher your tax-free allowance.

For example, an allowance of EUR 400,000 applies to each child of the deceased and also to grandchildren – provided the deceased’s children have already died. If they are still alive, an allowance of EUR 200,000 applies to each grandchild. The allowance for great-grandchildren or for parents who inherit from their children is EUR 100,000.

For all other heirs, even if they are not related, the tax-free amount is EUR 20,000. Life partners or children of the deceased who were dependent on his or her financial support also benefit from additional pension allowances when it comes to inheritance taxation.

If you inherit assets in excess of the respective tax-free amount, you must pay tax on the exceeding amount. The tax rates are between 7% and 50% depending on the degree of relationship and the amount of the estate. There are three tax brackets applicable:

• The most favorable tax rate applies to tax class I (7% to 30%). It applies to spouses or registered partners, children and stepchildren as well as other close relatives.
• More distant relatives in tax class II (15% to 43%) receive the second most favorable tax rates. These include siblings and siblings’ children, stepparents and parents-in-law, children-in-law and divorced spouses.
• The highest tax rates apply in tax class III (30% to 50%) for all other acquirers who are not related to the deceased.

Germany has concluded double taxation treaties with some countries, e.g. the USA, so that the tax exemption of acquisitions can be considered. If no double taxation treaty is applicable, the tax paid abroad can at least be tax credited in Germany.

If the deceased owned the property for at least ten years or lived in it themselves, there is generally no tax on the sale proceeds. In case you need support due to long distance, we are happy to assist you in the sales process. We also work closely together with trusted real estate agents all over Germany.

Yes, gift tax is calculated according to the same principle as inheritance tax and applies if either (i) the donor or (ii) the recipient is tax resident in Germany or (iii) the gift is a real estate located in Germany.