How does inheritance and inheritance tax work in Germany?

Inheritance tax in Germany

Inheritance tax is one of the most important tax obligations faced by individuals in Germany who are subject to income tax. In this country, there is a concept known as the right of inheritance, or Erbrecht.

Inheritance rules

In situations where one spouse does not leave a will, the other spouse cannot automatically inherit his or her estate. Under current law, a certain group of heirs must be created, called the Erbengemeinschaft, which also includes other blood relatives of the deceased. It is important to understand that individual heirs do not become owners of specific objects, but are considered as collective owners of the entire inherited property.

Harmonization between heirs

To successfully divide an inheritance amongst themselves, the heirs must reach a consensus, which is often quite difficult in the absence of a will in Germany.

Rights of heirs

If the deceased has children or grandchildren, other relatives automatically lose the right to inherit. According to the laws of the country, half of the inherited property goes to the spouse and the remaining part is divided equally among all descendants.

Protection of minors

It is important to note that in Germany there is protection of the rights of minor heirs, which implies that parents cannot dispose of their children's property without court authorization.

Inheritance tax exemption

There are some cases where no inheritance tax is payable. For example:

• If the widower or widow inherited residential real estate owned by the decedent;
• If the children inherited a dwelling of no more than 200 square meters with a restriction on sale for ten years;
• If the testator used the property until his death;
• If the inheritance includes artwork and jewelry.

The process of notification of inheritance

In most cases, banks inform the tax authorities about the fact of inheritance. However, if this does not happen, the heirs must, within three months after receiving the inheritance, independently apply to the tax authorities and file a tax return.

Duration of processing

The tax filing process can take a few weeks, but sometimes drags on much longer. It is important to remember that if no notice to pay tax is received within four years of filing the return, no payment is required due to the statute of limitations.

Conclusion

Thus, knowledge of German inheritance and tax law is essential for anyone intending to pass on or inherit property, helping to avoid potential legal complications and misunderstandings in the future.

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Inheritance in Germany

As far as the inheritance process in Germany is concerned, it is carried out in two main ways -.by lawandthrough a will. If the deceased left no instructions, the inheritance takes place according to the established order. The legal heirs can be both the spouse and the next of kin of the deceased.

Categories of relatives

The relatives are divided into several groups:

• First group: direct descendants (children and grandchildren);
• The second group: parents and siblings;
• The third group: grandparents and their descendants;
• Group four: cousins;
• Group five: everyone else.

An interesting point: if the deceased has at least one descendant of the first order, other claimants for inheritance from other groups will lose it. In the absence of direct heirs, the property will go to the second group - parents, brothers and sisters.

Distribution of inheritance

It should be remembered that the share of inheritance is established depending on the degree of kinship:

• For example, the spouse and first-order heirs split the inheritance in half.
• Meanwhile, second-order heirs can only claim one-fourth of the entire estate.
• For the third and subsequent groups, inheritance is only possible if the deceased had no spouse.

It is also important to emphasize that, under the law, stepchildren and descendants of a spouse cannot be considered heirs.

Testament

If a will has been made, the inheritance is divided according to the will of the deceased.

Key points about a will

In a will, both individuals and legal entities can be named, and it is not necessary to take into account family ties. The person who makes a will is entitled to freely distribute his or her property among the heirs, setting any shares for each of them.

In addition, there may be certain conditions that must be met in order to receive the inheritance. However, close relatives, including children, spouses and parents, can appeal the will within three years if they believe they are entitled to a larger share of the inheritance under the law.

Options for making a will

There are two main ways to make a will:

• A handwritten will that clearly states the last will and testament;
• A formal will, notarized by a notary public.

When an heir learns of the death of a relative, he or she can renounce the inheritance within six weeks. For people who live outside Germany, this period is six months. If the renunciation is not filed within the time limit, the inheritance is automatically deemed to have been accepted.

Acceptance of inheritance

When heirs accept an inheritance, they receive not only assets but also liabilities, including the debts of the deceased. To prevent the acceptance of debts, there is an option to renounce the inheritance, which also avoids unnecessary funeral expenses. To formally renounce an inheritance, the heir must apply within six weeks to the probate court, which can be at any local courthouse. Such an application requires a fee of about 20 euros and the personal presence of the applicant is mandatory.

Classification of heirs and tax benefits

Heirs in Germany are divided into three categories depending on the degree of kinship, which determines the corresponding tax class:

• Category one:Includes spouses, children, grandchildren, parents and grandparents.
• Second category:covers other relatives.
• Third category:Includes heirs who have no family ties to the testator.

Tax benefits depend on the class of kinship and can vary:

• For the first group, which includes spouses and registered partners, there is a tax-free amount of500,000 euros.
• Children, including adopted children, may qualify for a tax credit of400,000 euros.
• Grandchildren who inherit property in place of deceased children can also count on the same amount in the400,000 euroswhile grandchildren who inherit directly can count on the following200,000 euros.
• To great-grandchildren and subsequent generations, the amount is set at100,000 eurosand for parents and grandparents.100,000 euros.

Second and third categories of heirs

In the second category, for example:

• Siblings can count on a nontaxable amount of20,000 euros.
• Nephews and stepdaughters, as well as stepfathers and mother-in-laws, also have the same limit.
• Sons-in-law and daughters-in-law also fall under the same limit.
• Divorced spouses can also rely on a similar nontaxable limit - the20,000 euros.

The third category includes heirs who are not related to the testator, and they can also count on an amount of20,000 euros.

Conclusion

Thus, inheritance laws in Germany are very carefully drafted and knowing all the nuances is important to avoid misunderstandings and conflicts among family members.

Introduction

In conclusion, it is worth noting that the inheritance process in Germany has its own unique peculiarities and rules, which may cause legislative and bureaucratic difficulties for heirs. The absence of a will may lead to the fact that the issues of inheritance distribution will turn into long and difficult disputes among relatives, which will only exacerbate the grief of loss. Therefore, I strongly recommend making a will in order to determine the fate of your estate in advance and avoid potential conflicts among heirs.

Taxes and liabilities

You should also pay attention to the existing tax obligations and peculiarities related to the execution of inheritance. It is important to know that heirs are obliged to:

• Notify the tax authorities themselvesof the inheritance within three months;
• Submit a tax returnwhich requires them to be active and attentive;

A plan prepared in advance will help avoid unnecessary problems and delays in the inheritance distribution process.

Conclusion

I hope this article will help readers to better understand the inheritance process in Germany, its nuances and possible difficulties. Ultimately, being aware of your rights and obligations in inheritance matters is the key to peace of mind and effective management of your estate in the event of unforeseen circumstances. I urge anyone who has not yet thought about making a will to take control of this and ensure their loved ones have minimal stress during a difficult time.