Inheritance tax

Everyone who acquires something from an inheritance, either as heir, legatee, beneficiary of the compulsory portion or beneficiary under conditions, is subject to tax liability according to the provisions of the inheritance tax and gift tax act. The tax liability arises with the death, of which the tax office usually learns very soon. Probate courts and other authorities, but also banks and savings banks are obliged to report to the tax office as soon as they become aware of a death.The amount of the tax to be paid is generally determined by the value of the inheritance and the fact that the beneficiary belongs to one of three tax categories defined by law. In addition, the amount of certain tax allowances must always be taken into account for tax reduction purposes. Due to favourable tax rates and high tax allowances, this means that the closer the relationship to the testator is, the less tax you have to pay.  Spouses have an allowance of EUR 500,000 and a pension allowance of EUR 256,000, children up to EUR 400,000 and grandchildren up to EUR 200,000.The Family Home

Now the inheritance of the family home to the spouse or registered partner remains tax-free, the owner-occupied residential property is not included in the basis of assessment. The size and value of the property are irrelevant. Also, the inheritance at children or children of deceased children is tax-free, however limited up to a floor space of 200 square meters. However, the prerequisite is that the purchaser continues to use the property 10 years after acquisition for residential purposes. Leasing or sale lead to a subsequent burden with inheritance tax, unless there are compelling reasons for the abandonment such as death or significant need for care.

Real Estate

Special provisions apply to other properties. A detailed description can be found in the Caston Report „Praxis der Unternehmensnachfolge“, 5. Edition, 2011

Business Assets

Business assets are exempt from taxation to the extent of 85 to 100 %. It depends on the legal form. Participations in partnerships are always business assets but shares in corporations only if the testator or donor has a direct interest of more than 25% or has concluded an agreement with other shareholders (so-called pool agreement).

The law links the exemption to several conditions, some of which are very difficult to meet. The main features are a retention period of 5 or 7 years, the maintenance of the business with its jobs and a limit on the proportion of administrative assets not required for the business. The amendment of the Inheritance Tax Act as of January 2010 retroactively applies the now amended lower threshold values to acquisitions as of 2009.

 

Gift Tax

Gifts are largely subject to the same taxation rules as inheritances. The 10-year period must be taken into account: in order to calculate the value of the assets acquired, the acquisitions of the last 10 years are added together to determine whether the tax-free amount has been exceeded. Gifts older than 10 years are therefore excluded from the calculation.

Round Table

We rightly talk about these topics in our Round Table meetings. The Round Table is an action of Herfurth & Partner and serves to clarify and secure wishes and decisions in the family in connection with assets, provision and succession.

The next dates can be found in the Round Table section (blue box on the homepage).

Publications

Further information on many topics can be found in the Publications section (right).

Your counsellor

Angelika Herfurth

Attorney at law and specialist lawyer for family law

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