Anyone who inherits a property or other assets in Germany must generally pay inheritance tax. However, there are various exceptions and special features - especially in the case of property transfers. As a general rule, the closer the family relationship, the less tax has to be paid on the transfer because the tax allowances are high. The regulations are set out in the Inheritance and Gift Tax Act (ErbStG).
Accordingly, spouses can inherit up to 500,000 euros tax-free. Children and stepchildren can claim an allowance of 400,000 euros from each parent, grandchildren 200,000 euros from their grandparents. Nieces, nephews and cohabiting partners who are more distant relatives are only entitled to an allowance of 20,000 euros. If the inherited assets exceed this amount, tax must be paid on them.
An example illustrates this: If a house with a market value of 550,000 euros is bequeathed to a child, the child must pay inheritance tax of eleven percent (tax class one) on a total of 150,000 euros after deducting the tax-free amount (400,000 euros). This means that 16,500 euros would be due. If you are unable to pay the sum all at once, you can often agree an installment payment with the tax office.
The heirs have three months from the date of death to report the inheritance to their tax office. The office has often already been informed in advance, for example by the registry office. Courts and notaries also notify the tax office of past notarizations that may be relevant for inheritance tax purposes. In addition, banks, building societies and insurance companies automatically inform the tax authorities if a customer has died.
With regard to the amount of tax payable, the closer the relationship between the testator and the recipient, the lower the amount. The tax rate in tax class one is therefore the most favorable. This includes spouses, parents and children.
When transferring real estate, the special feature is that spouses or registered partners who inherit the property do not have to pay inheritance tax as long as they live in it, i.e. use it themselves. Furthermore, they may not sell or rent out the house or apartment for ten years after the inheritance. The only exception is if they need to move into a care home.
This regulation is intended to enable the widow to continue living in her familiar four walls after the death of her spouse without any additional financial burden.
However, if the property passes to a child after the death of the second parent, this tax exemption only applies up to a living space of 200 square meters. Inheritance tax must be paid on any additional space inherited if the tax-free amount for children exceeds 400,000 euros.
Other, more distant heirs do not benefit from this special feature.
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Photo: PeJo29
