In a Nutshell - German Inheritance and Inheritance Tax Law

When does German inheritance law apply?

In principal, German international inheritance law refers to the countrys jurisdiction of which the deceased was a national. However, such foreign jurisdictions often refer back to the jurisdiction of the country where real estate is located or where the deceased had his last domicile. As a result, German law would apply although the deceased was a foreign citizen.

German Law of Intestate Succession

Unless the deceased arranges his succession by making a will or concluding a contract affecting the devise of his property his spouse and his descendants will be called to succession. Should no descendants exist his parents and their descendants (i.e. the siblings of the deceased) will be entitled to inherit. Consequently, the widespread assumption that the spouse is always entitled the sole inheritance is wrong in most cases.

Effects of the Matrimonial Property Regime on the Spousess Inheritance Quota

Unless the spouses have not agreed otherwise regarding the matrimonial regime of such country would apply where the spouses had their habitual residence at the time of the marriage. German law provides different inheritance quota which depend on the matrimonial property regime. Thereby, the law distinguishes between the separation of property, the joint property and the community of surplus. Foreign property regimes are somewhat adjusted in order to fit with the German legal inheritance system.

Testamentary Succession and Compulsory Portion

In Germany testamentary freedom is granted. However, should the deceased have left behind a will disinheriting his spouse or close relatives by blood they are entitled a compulsory share. Such situation occurs regularly if spouses make a mutual testament appointing the other one as sole heir and thereby disinheriting their children. The compulsory portion amounts to half of their legal share which the disinherited individual would get in an intestate succession. It is not possible to circumvent the compulsory share by donating the property to the beneficiary in ones lifetime instead of bequeathing it. Such donations would be added to the value of the estate when computing the compulsory share. Please note that nonetheless donations and testaments are valid. Therefore, an individual entitled to a compulsory portion only is an outsider and thus has no rights regarding the assets forming the estate. Furthermore, it is up to him to lodge his money claim against the testamentary heirs.

Probate in Germany

There is no such thing in Germany. So it is up to the inheritors to jointly administrate and decide about the distribution of the estate. For such community of inheritors it is often difficult to find a mutual settlement if offspring of a first marriage is involved. In order to facilitate the settlement of the estate the testator can appoint an executor of the will. As an additional measure he can give to his spouse a power of attorney regarding his property which shall remain effective after his death. However, the inheritors could face the requirement to identify themselves as such. As a result, they will have to apply at the German estate court for a certificate of inheritance.

Inheritance and Gift Tax

The tax law distinguishes between residents and nonresidents. The transfer of assets located anywhere in the world are liable to the German tax if either the donator/ deceased or the recipient of a donation/ inheritor is a German resident (unlimited taxation). In contrast to foreigners, a German citizen will be deemed still a resident if he has moved from Germany in the last five years. Residents are entitled the following tax exemptions for gifts and successions: 307.000,00 EURO for spouses; 205.000,00 EURO for children, stepchildren and grandchildren should their parents be predeceased; 51.200,00 EURO for parents in case of succession and grandchildren; 10.300,00 EURO for siblings their descendants, the parents in case of gifts and other relatives; Should neither the donator/ deceased or the recipient/ inheritor be a German resident only transfers of assets which are located in Germany would be liable to the German inheritance/ gift tax. However, the tax exemption in that case is only 1.100,00 EURO. The tax rate depends on the kind and degree of ones familiar relationship to the donator/ deceased.

In order to avoid a double taxation in Germany as well as in the U.S. the two countries have concluded a double taxation agreement regulating the deduction of taxes levied by one country from the tax burden of the other.

Please find more information in English about German succession and real estate law in the online resource of the law offices of Henning Haarhaus, Berlin, Germany:

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