German Inheritance Taxes – What U.S. Citizens Need to Know

International families often face significant tax exposure when inheriting assets connected to Germany. Without proper planning, the German tax authorities can claim a large portion of the estate — even if neither the decedent nor the heir resides in Germany. Strategic foresight is essential, especially with real estate, bank accounts, or business assets in both countries.

Anyone inheriting assets when either the decedent or the heir is considered a German tax resident — or when the estate includes assets located in Germany.

Germany categorizes heirs into tax classes based on relationship to the decedent, each with specific exemptions:

• Class I: Spouses (€500,000), children (€400,000), grandchildren (€200,000)
• Class II: Siblings, nieces/nephews (€20,000)
• Class III: Non-relatives (€20,000)

Germany’s inheritance tax is progressive — ranging from 7% to 50% — depending on the heir’s tax class and the size of the taxable estate.

Significant tax savings are possible through timely structuring:

• Lifetime gifting – tax-free every 10 years
• Passing assets directly to grandchildren – leveraging multiple allowances
• Strategic structuring of real estate and business assets
• Utilizing double taxation treaties (such as U.S.–Germany) effectively

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• Delaying planning until death
• Incorrect real estate valuations
• Overlooking international tax coordination
• Ignoring how U.S. and German tax laws interact

Inheritance between the U.S. and Germany presents unique legal challenges. While the U.S. applies estate tax based on citizenship and total worldwide assets, Germany imposes inheritance tax based on residency and asset location. This mismatch creates overlapping obligations that, if not carefully planned for, can lead to costly double taxation. Understanding the interaction between both systems — including treaty provisions, tax credits, and valuation standards — is critical for preserving cross-border estates.

1. Use tax-free gifting allowances early and strategically
2. Distribute assets among multiple heirs to reduce progressive rates
3. Keep property valuations current and documented
4. Coordinate with German and U.S. CPAs and tax advisors
5. Ensure your will is valid and enforceable in both countries

Cross-border inheritance planning requires specialized legal insight. With the right structure in place, you can protect your legacy, avoid unnecessary taxes, and ensure your heirs receive what you’ve built. As a dual-qualified attorney with deep expertise in both German and U.S. inheritance law, I guide you personally — from the first consultation to full implementation.

German Attorney Nicola Casper Hoesl combines international legal strategy with personalized execution to ensure your estate transitions smoothly and tax-efficiently across borders.