Law firm for
Tax law and tax criminal law
Specialized.
Professional.
Effective.
Inheritance Tax and Gift Tax
A single misstep in an inheritance matter can prove costly from a tax perspective. I ensure that your assets are transferred to the right hands in a tax-optimised manner — legally sound and with strategic foresight. — Attorney Ibrahim Çakır, Specialist in Tax Law & Certified Advisor for Tax Criminal Law (DAA)
Brief description of legal services
A single misstep in an inheritance matter can prove costly from a tax perspective. I ensure that your assets are transferred to the right hands in a tax-optimised manner — legally sound and with strategic foresight. — Attorney Ibrahim Çakır, Specialist in Tax Law & Certified Advisor for Tax Criminal Law (DAA)
As a tax law attorney with a focus on inheritance tax and gift tax, I assist you with:
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Succession and transfer strategies for tax-optimised asset transfer
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Drafting gift agreements, transfer agreements and inheritance tax-effective wills
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Examination and utilisation of tax-free allowances and valuation discounts
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Preparation or review of tax returns for inheritance tax and gift tax purposes
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Representation before the tax office in objection proceedings and disputes regarding tax assessments
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Proceedings before the tax court in contested tax assessment cases
I work closely with your tax advisor on request — or make my professional network available to you.
Fundamentals of Inheritance Tax and Gift Tax
What are inheritance tax and gift tax?
Inheritance tax and gift tax govern the taxation of gratuitous asset transfers — whether by inheritance or by lifetime gift. The legal basis is the Inheritance and Gift Tax Act (Erbschaftsteuer- und Schenkungsteuergesetz, ErbStG). The tax liability depends, among other factors, on the degree of family relationship, the value of the assets transferred, the type of assets involved — such as real property or business interests — and the tax-free allowances claimed.
Who is affected?
Inheritance tax can in principle affect anyone — not only those with substantial estates. Even the transfer of a residential apartment, real property assets or a business succession can quickly give rise to taxable transfers. The same applies to larger lifetime gifts, for example in the context of anticipated succession or tax planning.
Why is early advice so important?
Many errors arise from lack of knowledge or amateur solutions — such as poorly structured wills or ill-considered gifts. Those who, for example, miscalculate the ten-year periods for renewed utilisation of tax-free allowances, or overlook valuation-relevant details in connection with real property, risk significant tax liabilities.
Professional succession planning means:
Strategic use of all available tax-free allowances
Avoidance of double taxation through international advisory support
Optimisation in respect of business assets and company interests
Integration of income tax and civil law considerations
When does inheritance tax become due?
Inheritance tax arises upon the death of the deceased. In the case of gifts, it arises at the time the transfer is made. In both cases, the recipients are obliged to submit a tax return as soon as they become aware of the transfer of assets — failure to notify the tax authorities may result in back-payment interest and, in certain circumstances, criminal consequences.
What services do I provide?
I advise and support you in connection with:
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Structuring wills from a tax perspective
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Drafting and reviewing gift agreements
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Negotiations with the tax office, for example regarding assessed values or deferred payment arrangements
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Filing objections against inheritance tax assessments
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Tax court proceedings in contested assessment cases
I am also able to provide competent support in cross-border inheritance matters or cases involving international assets — in collaboration with specialist partners.
Inheritance tax and gift tax: structuring, valuation and defense
Inheritance and gift tax affects virtually every transfer of assets within a family – from inherited family homes and business assets to anticipated inheritance. The tax consequences depend crucially on proper structuring and accurate valuation. As a tax lawyer, I advise clients on tax-optimized asset transfers and represent them in disputes with the tax office regarding inheritance tax assessments.
The family home: Tax exemption and its limits
Conditions for tax exemption
The transfer of the family home to a spouse or children can be tax-free under certain conditions. However, the tax exemption under Section 13 Paragraph 1 No. 4a of the German Inheritance Tax Act (ErbStG) (transfer during one's lifetime to a spouse) and Section 13 Paragraph 1 No. 4c of the German Inheritance Tax Act (ErbStG) (inheritance) is subject to strict conditions.
Important: The tax exemption requires that the deceased actually used the property for their own residential purposes. Mere intention or renovation before moving in is not sufficient, even if moving in was prevented by death (Munich Tax Court, judgment of February 24, 2016 – 4 K 2885/14).
Contribution to a spousal partnership
The Federal Fiscal Court (BFH) has confirmed an important structuring option: The contribution of a family home to a general partnership (GbR) in which both spouses are partners is eligible for preferential treatment as a gift tax-exempt transfer of the family home. This results in the partner being held liable for the tax (BFH, judgment of June 4, 2025 – II R 18/23).
Usufruct: Assessment and current case law
Gender-differentiated life tables
When valuing usufruct rights and other lifelong rights, separate mortality tables for each gender are used. The Federal Fiscal Court (BFH) has confirmed that this differentiation is constitutional, as it realistically reflects the statistically different life expectancies (BFH, judgment of November 20, 2024 – II R 38/22).
Binding Duplicators
The statutory multipliers for usufruct according to Section 14 of the Valuation Act (BewG) are binding. A "mathematically more correct" value cannot be applied as long as the conditions for a correction according to Section 14 Paragraph 2 of the Valuation Act (BewG) are not met (Cologne Tax Court, Judgment of August 18, 2022 – 7 K 3179/18).
International inheritance law: Cross-border asset transfers
Limited tax liability and tax allowances
Special rules apply to allowances for assets held abroad and for limited tax liability. The pro rata reduction of the personal allowance in cases of limited tax liability (§ 16 para. 2 Inheritance Tax Act) is compliant with European law (Lower Saxony Fiscal Court, judgment of 22 July 2020 – 3 K 163/19).
However, it is contrary to European law if compulsory portion liabilities cannot be deducted in the case of limited tax liability, while this would be possible in the case of unlimited tax liability (ECJ, Judgment of 21.12.2021 – C-394/20).
Credit for foreign inheritance tax
Inheritance tax paid in Switzerland on a prior gift is creditable against German gift tax, even if the types of tax and the dates of accrual formally differ. An economic perspective applies (Düsseldorf Tax Court, judgment of May 4, 2022 – 4 K 2501/21 Erb).
Special features of double taxation agreements
Double Taxation Agreement with Sweden: Since Sweden has abolished gift tax, there is no "residence" within the meaning of the DTA with Sweden. The right to tax gifts reverts to Germany in cases of dual residence (Federal Fiscal Court, judgment of May 24, 2023 – II R 27/20).
Double Taxation Agreement with the USA: The special rule regarding residency (Article 4, paragraph 3 of the Double Taxation Agreement between the USA and Germany) does not apply to the heir, but only to the deceased and family members living in the same household. An heir residing in Germany who is not a member of the household is fully taxable (Federal Fiscal Court, decision of September 20, 2022 – II B 2/22).
Gifts and loans: Tax traps
Interest-free loan as a gift
The interest advantage of an interest-free loan constitutes a taxable gift. For loans with an indefinite term, an interest rate of 5.5% and a multiplier of 9.3 are applied – the total value is thus approximately 51% of the loan amount (Düsseldorf Tax Court, judgment of January 26, 2022 – 4 K 272/21 Erb).
Gift of company shares vs. wages
If a family member employed by the company receives shares as a gift, this does not constitute employment income if it serves the purpose of business succession and the value of the shares far exceeds the employment income (FG Bremen, judgment of 27.01.2022 – 1 K 152/21).
Swiss family foundation
Distributions from a Swiss family foundation to domestic beneficiaries are taxable as income from capital assets (Section 20 Paragraph 1 No. 9 EStG) if the recipient's position is economically similar to that of a shareholder (Federal Fiscal Court, judgment of 01.10.2024 – VIII R 25/21).
Procedural law: deadlines and binding effect
Commencement of the limitation period for inheritances
The limitation period for inheritances only begins when the heir has certain knowledge of the acquisition – for example, through a court ruling on the validity of the will (Federal Fiscal Court, judgment of 27.04.2022 – II R 17/20).
Binding effect of declaratory rulings
A determination notice regarding the value of real estate has binding effect on all subsequent gift tax assessments – including the 10-year aggregation – even if the value was materially incorrect (Federal Fiscal Court, judgment of 26.07.2023 – II R 35/21).
Tax-free allowances for great-grandchildren and family foundations
Great-grandchildren are only entitled to the tax-free allowance of €100,000 as long as their parents and grandparents are still alive (Federal Fiscal Court, decision of July 27, 2020 – II B 39/20). For family foundations, the tax-free allowance is determined by the "most distant beneficiary." This can also include unborn great-grandchildren, resulting in a tax-free allowance of only €100,000 (Federal Fiscal Court, judgment of February 28, 2024 – II R 25/21).
Real estate transfer tax in the case of inheritance and gifts
Purchase right legacy
If a beneficiary acquires only the right to conclude a purchase agreement for a property by way of a legacy (legacy of a right to purchase), this purchase agreement is subject to real estate transfer tax. An exemption as an acquisition by inheritance does not apply here (Federal Fiscal Court, judgment of January 16, 2019 – II R 7/16).
Group clause for shelf companies
The tax exemption under Section 6a GrEStG (group clause) does not apply if limited partnership interests are contributed to shelf companies that were acquired only shortly before (Federal Fiscal Court, judgment of 25.09.2024 – II R 46/22).
Reversal
A late notification by the notary does not preclude the cancellation of the real estate transfer tax upon reversal, provided that the notification is received by the tax office within the time limit applicable to the taxpayer (Federal Fiscal Court, judgment of 21.06.2023 – II R 2/21).
FAQ: Frequently asked questions about inheritance tax
What are the tax-free allowances for inheritance tax?
The allowances depend on the family relationship: spouses €500,000, children €400,000, grandchildren €200,000, great-grandchildren where parents or grandparents are still living €100,000, siblings and other persons €20,000.
Can I transfer business assets free of inheritance tax?
Yes, subject to strict conditions. The standard relief exempts 85% of the value; the full relief option exempts 100%. The application for full exemption must be submitted before the assessment becomes final and binding. Where the conditions are not met, the exemption may be withdrawn in its entirety.
What is harmful administrative assets?
Administrative assets include in particular let real property, securities and receivables. Where these exceed certain thresholds, the exemption is at risk. The distinction is complex and requires careful examination.
Is the family home exempt from inheritance tax?
The transfer of the family home to a spouse can be made free of tax during the transferor's lifetime. In the event of inheritance, the exemption applies to spouses and children provided they occupy the property themselves. A precondition is that the deceased must have been using the property as their primary residence.
How is a usufruct valued?
The capital value of a usufruct is calculated pursuant to Section 14 of the Valuation Act (BewG) using statutory multipliers that depend on the age and gender of the entitled person. The use of gender-differentiated mortality tables has been held to be constitutional.
What happens in the case of an interest-free loan?
The interest benefit arising from an interest-free loan constitutes a taxable gift. Where the term of the loan is indefinite, the gift value amounts to approximately 51% of the loan sum.
When does the limitation period begin in inheritance cases?
The assessment period does not begin until the heir has certain knowledge of the acquisition — for example through judicial confirmation of the validity of the will.