Anyone who inherits real estate or other assets in Germany generally has to pay inheritance tax. However, there are various exceptions and special features - especially in the case of real estate transfers. In general, the closer the family connection, the less tax has to be paid on the transfer because the tax allowances are high. The regulations are laid down 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 distantly related are entitled to an allowance of only 20,000 euros. If the inherited assets exceed this amount, taxes 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 per cent on a total of 150,000 euros (tax class one) after deducting the tax-free amount (400,000 euros). This means that 16,500 euros would be due. Those who cannot pay the sum all at once can often agree with the tax office to pay in instalments.
From the date of death, the heirs have three months to report the inheritance to their tax office. Often the office has already been informed in advance, for example by the registry office. Courts and notaries also notify the office of past certifications that may be relevant for inheritance tax. In addition, banks, building societies and insurance companies automatically inform the tax authorities if a customer has died.
The amount of the tax burden is also lower the closer the testator and testatrix were related. The most favourable tax rate is therefore in tax class one. This includes spouses, parents and children.
When transferring real estate, the special rule is that spouses or registered partners who inherit the property do not have to pay inheritance tax, provided they live in it, i.e. use it themselves. In addition, they may not sell or rent out the house or flat for ten years after the inheritance. The only exception: the necessary move to a nursing home.
With this regulation, the widow should be able to continue living in the familiar four walls after the death of the spouse without any additional financial burden.
If the property falls to a child after the death of the second parent, however, this tax exemption only applies up to a living space of 200 square metres. Inheritance tax must be paid on any additional areas inherited if their tax-free amount for children exceeds 400,000 euros.
Other, more distantly related heirs do not benefit from this special feature.
You don't know how much your inherited property is worth? We will be happy to advise you.
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