Inheritance & Gifting

For commercial enterprises with real estate assets, a distinction is made between the actual business value and the real estate assets contained within it, whereby special inheritance tax relief provisions may apply to operating properties.

For inheritance tax purposes, the full, unencumbered market value of the property is first determined. The remaining outstanding debt can then be deducted as an estate liability, provided it actually originates from the deceased.

If a property is bequeathed to a specific person, the full market value of the property as of the date of death remains decisive for inheritance tax purposes, regardless of whether the legatee is also an heir.

In the event of inheritance, condominium units are valued analogously to houses using the standardized procedures of the Valuation Act (Bewertungsgesetz), usually via the sales comparison approach, provided sufficient comparable data for similar units is available.

Agricultural and forestry assets are valued according to the separate valuation provisions of the Valuation Act (Bewertungsgesetz), which distinguish between the operating value of the ongoing business and the residential portion of the farmstead, and which in some cases provide for substantial tax relief.

In such cases, we prepare a neutral appraisal report that objectively documents and quantifies the actual need for renovation, in order to create a decision-making basis comprehensible to all co-heirs.

In the case of a prior and subsequent inheritance, the property is first valued in respect of the prior heir and later valued again upon the occurrence of the subsequent inheritance. Disposal restrictions on the prior heir may reduce the economic value of his position.

The tax assessment valuation (Bedarfsbewertung) is the standardised procedure automatically applied by the tax office to determine the property value for inheritance and gift tax purposes. It does not replace an individual market value appraisal, but can be rebutted by one.

In the case of anticipated succession, the same valuation rules generally apply as for a gift. Agreed consideration such as usufruct, right of residence, or maintenance payments reduce the tax-relevant transfer value accordingly.

For the calculation of the compulsory portion claim, the actual market value of the property at the time of death is decisive, not the flat-rate tax value determined by the tax office. An appraisal report often provides clarity here.

The supplementary compulsory portion claim takes into account gifts made within the last ten years prior to the inheritance, with the value of the property at the time of the gift being included on the basis of a tapering credit that decreases by ten percent each year.

A purchase price achieved shortly before the inheritance occurred can be used by the tax office as strong evidence of the actual market value, thereby displacing the standardized valuation in the individual case.

An agreed reversion clause, for example in the event of the recipient's insolvency or predecease, can reduce the economic value of the gift and must be taken into account in the tax valuation.

Even where the decedent died abroad, the valuation of a German property is governed by German valuation law. For foreign properties in the estate, however, the valuation principles of the respective country of location apply.

A notional co-ownership share is generally derived proportionally from the overall value of the property. Since co-ownership shares are only tradable to a limited extent, an additional market discount is sometimes discussed in practice, though it is usually not recognized for tax purposes.

If a spouse living in a community of accrued gains passes away, the surviving spouse receives a flat-rate quarter of the estate in addition to the statutory inheritance share as a so-called matrimonial property law equalisation of accrued gains, which reduces the value of the remaining estate.

Under the community of accrued gains regime, the surviving spouse's notional claim to equalization of accrued gains remains exempt from inheritance tax, which correspondingly reduces the taxable estate value. Under separation of property, this benefit does not apply at all.

For gift tax purposes, the tax office determines the value using the same standardized procedures as for an inheritance (§§ 182 et seq. BewG, German Valuation Act). Here too, a lower proven market value can reduce the tax burden.

The personal tax allowances depend on the degree of relationship: spouses receive €500,000, children €400,000, and grandchildren €200,000, each renewable every ten years. For non-relatives, only an allowance of €20,000 applies.

The value is generally determined uniformly for the entire property, regardless of the number of heirs. Each co-heir can then be allocated a proportional share of the total value determined, based on their inheritance quota.

If co-heirs cannot reach an agreement, a neutral appraisal commissioned jointly by all parties is usually helpful. If the dispute continues, any co-heir may apply for a partition auction at the competent local court.

A retained right of usufruct significantly reduces the taxable value of the gift, as its capitalized value is deducted from the determined property value. The amount and duration of the usufruct depend on the age and life expectancy of the beneficiary.

A registered right of residence significantly reduces the market value, as it considerably restricts the owner's rights of use and disposal. The reduction in value roughly corresponds to the capitalized value of the rental income foregone over the expected period of use.

There is no legally fixed deadline for preparing the appraisal report; however, the proof should be submitted within the one-month objection period against the assessment notice or before it becomes final and binding.

Rented residential properties benefit from an inheritance tax valuation deduction of ten percent on the determined value (Section 13d ErbStG), provided they are rented for residential purposes and do not belong to business assets.

The inheritance tax value is determined automatically by the tax office using standardized procedures under the German Valuation Act (Bewertungsgesetz) and serves solely for tax calculation purposes. The market value, on the other hand, reflects the individually determined price actually achievable on the market.

In the case of a transfer against maintenance benefits such as a life annuity or care obligation, the value of the agreed consideration is compared against the value of the property. Only the gratuitous portion is subject to gift tax.

A significant backlog of renovation needs can be asserted as a value-reducing factor through an appraisal report and can often significantly correct downward the value determined by the tax office on a flat-rate basis.

In the event of inheritance, undeveloped plots of land are generally valued based on the current standard land values (Bodenrichtwerte) multiplied by the plot area. Individual particularities such as shape or state of development can additionally be taken into account by means of an appraisal report.

Typically required are: a current land register extract, site plan, building plans, living area calculation, an extract from the register of building encumbrances, property tax and inheritance tax assessments, and – if available – evidence of modernizations and the condition as of the date of death.

Yes, a retrospective valuation as of the date of death is generally still possible even years later, provided sufficient historical documents and comparative data are available to reconstruct the conditions at that time.

A chain gift makes use of the tax allowances of several family members through successive transfers. It is only recognised for tax purposes if the intermediate recipient actually retains their own scope of decision over the property.

For inheritance tax purposes, the tax office determines the property value automatically using a standardized procedure (sales comparison, income, or cost approach pursuant to § 182 et seq. BewG). This value is often higher than the actual market value – an independent appraisal report can correct it by providing proof of a lower fair market value (§ 198 BewG).