German British Estate Planning

When does German inheritance law apply?

Where a person’s date of death is after 16^th August 2015 German courts will have jurisdiction with regard to all questions pertaining to the estate of that person in accordance with the European Succession Regulation (Europäische Erbrechtsverordnung), also known as "Brussels IV". The applicable law under the European Succession Regulation is that of the country of the deceased's habitual residence (gewöhnlicher Aufenthalt) at the time of death.

Does the European Succession Regulation also govern the applicable tax laws?

No. Other rules govern German inheritance tax (Erbschaftsteuer).

Does German inheritance law apply to the estate of a British national?

If the foreigner’s last habitual residence (gewöhnlicher Aufenthalt) was in Germany and he had not chosen the law of his nationality, German law governs succession of his worldwide estate.

What constitutes a validly executed will under German law?

Pursuant to § 2231 BGB, the testator can choose between the notarial will (Notarielles Testament) and  the handwritten/holographic will (eigenhändiges Testament).

Are British Wills recognized in Germany?

Germany has ratified the Hague Convention on the Form of Testamentary Dispositions. Thus, most British Wills are recognized as valid as regards to form i Germany.

Does German law provide for a statutory share / forced heirship?

Yes, German law provides for a statutory share (Pflichtteil), also referred to as compulsory share (Pflichtteil), for certain privileged individuals. It is a claim in money which does not invalidate the Will.

What are the inheritance tax thresholds in Germany?

German inheritance tax thresholds depend on the relationship between the decedent and the beneficiary and the value of the net inheritance. The tax free allowances range from EUR 20,000 to EUR 500,000, If Germany only taxes the German assets, the allowance may not be available. Further information is available here. 

Are spouses subject to German inheritance tax in Germany?

Yes. The transfer on death to a spouse of the decedent is generally not excluded from taxation. However, certain benefits are available: The inheritance tax threshold for the surviving spouse is EUR 500,000. Furthermore, if the spouses were married under the German default property property regime of community of accrued gains (Zugewinngemeinschaft), the value of the claim for equalization of accrued gains (Zugewinnausgleich) is tax exempt. Finally, an additional tax-free exemption of up to EUR 256,000 is granted to the spouse if he/she is not entitled to inheritance-tax-free pension payments upon the death of the first dying spouse. 

Does Germany have a gift tax?

Yes, Germany has a gift tax (Schenkungsteuer). 

Do gifts decrease the available inheritance allowance?

A gift and an inheritance from the same person within 10 years are aggregated and the tax is (re-) calculated based on the aggregated taxable acquisition (see more information here). Thus, if the decedent made a gift prior to his death to a future beneficiary under his/her will and dies no later than 10 years thereafter, the full inheritance allowance may not be available. 

Are transfers to trusts subject to German inheritance tax?

Germany taxes the transfer to an opaque trust if there is a nexus to Germany (e.g. because the settlor or sole trustee has a residence in Germany).