Germany inheritance tax: complete guide for US expats and American heirs (2026)

Germany levies Erbschaftsteuer – inheritance tax – on transfers of wealth at death. The tax applies to both residents and, in many cases, non-residents who inherit German-situated assets. Rates run from 7% to 50%, depending on the heir’s relationship to the deceased and the value of the estate.

For American citizens and green card holders – whether living in Germany, inheriting from Germany, or both – the tax creates a second layer of obligations on top of US federal rules.

This guide covers how the German system works, what you owe as a US person, and how the US-Germany estate tax treaty and US reporting requirements fit together.

Germany inheritance tax at a glance

• Tax type: Inheritance and gift tax – Erbschaftsteuer und Schenkungsteuer – governed by the ErbStG
• Rates: 7% to 50%, depending on tax class and inheritance amount
• Tax-free allowances: €500,000 for spouses, €400,000 for children, down to €20,000 for unrelated heirs – statutory amounts, unchanged since 2009
• Who pays: The heir, not the estate – unlike the US estate tax system
• US reporting: Form 3520 required for foreign inheritances exceeding $100,000; FBAR and FATCA may also apply if you inherit financial accounts
• Double tax relief: The US-Germany Estate and Gift Tax Treaty provides credits to reduce overlapping tax

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What is the inheritance tax in Germany?

Germany’s inheritance tax is a transfer tax paid by the person receiving an inheritance, not by the estate itself. This is a fundamental difference from the US system, where the estate pays before assets are distributed.

The tax is governed by the Erbschaftsteuer- und Schenkungsteuergesetz, or ErbStG, which covers both inheritances and lifetime gifts under a single framework.

Germany’s inheritance tax rates for 2026 remain unchanged from prior years: the same rate tables and exemption amounts have been in force since the 2009 reform, and no new legislation has altered them for 2025 or 2026.

Two variables determine how much tax an heir owes: the heir’s relationship to the deceased, which sets the tax class, and the taxable value of the inheritance after exemptions.

Close family members pay the lowest rates and receive the largest tax-free allowances. Distant relatives and unrelated heirs pay the highest rates with minimal exemptions.

Does Germany have inheritance tax?

Yes. Germany has had a well-established inheritance and gift tax system governed by the ErbStG since the early 20th century, with the current structure dating to the 2009 reform.

The tax applies at the federal level, but it is administered at the state level – the Länder. The same law covers both inheritances at death and lifetime gifts, and the same rates and exemptions apply to each.

The Erbsteuer – short for Erbschaftsteuer – even reaches non-resident heirs in certain situations. If the inherited asset is German-situs property such as real estate or a German business interest, the heir may owe tax regardless of where they live.

German inheritance tax rates – 7% to 50% by tax class

German inheritance tax rates run from 7% to 50%, determined by two variables: the heir’s relationship to the deceased – tax class I, II, or III – and the taxable value of the inheritance after exemptions.

The table below shows the full rate schedule under ErbStG §19. Tax Class I covers spouses, children, and grandchildren.

Tax Class II covers siblings, nieces/nephews, and parents in non-direct-line cases. Tax Class III covers all others, including unrelated persons and most foreign nationals without close family ties.

 

Germany’s inheritance tax rates – 7% to 50% – are not marginal rates the way US income tax brackets work. Once the taxable amount crosses into a new bracket, the rate for that bracket applies to the entire taxable amount, not just the portion above the threshold.

For example, a Class I heir who inherits €80,000 after exemptions doesn’t pay a flat 11% on the full amount. The ErbStG’s hardship rule – Härteausgleich under §19 Abs. 3 – applies automatically here: tax is capped at the tax on €75,000 at 7%, which is €5,250, plus 50% of the €5,000 that exceeds the threshold, which is €2,500. The total is €7,750 – not the €8,800 a flat 11% calculation would produce.

How much can you inherit tax-free in Germany?

The tax-free amount depends entirely on the heir’s relationship to the deceased, ranging from €500,000 for a surviving spouse down to €20,000 for unrelated heirs.

Germany’s personal exemptions – Freibeträge under ErbStG §16 – are statutory fixed amounts set by legislation. They have not changed since the 2009 reform and are not indexed for inflation. The table below shows the current allowances.

 

Beyond the personal Freibetrag, several additional tax-free allowances may reduce the taxable amount further.

Additional allowances beyond the personal exemption

Several further allowances may apply on top of the personal Freibetrag:

• Household goods exemption, Class I only: Up to €41,000 for household effects inherited by a Class I heir
• Other movable property, Class I only: Up to €12,000 for additional personal property
• Spousal pension allowance – Versorgungsfreibetrag, §17: Surviving spouses may claim up to €256,000, reduced by the value of any pension or insurance entitlements that pass outside the taxable estate

These allowances reset every 10 years for gift tax purposes, which has significant planning implications covered in the gift tax section below.

Inheritance tax exemptions in Germany: how much can you inherit tax-free?

The exemptions described above cover the personal allowances under ErbStG §16, but Germany offers several additional relief provisions beyond these.

The most significant are the family home exemption, the spousal/partner residential property exemption, and business asset relief:

1. Family home exemption under §13 No. 4b ErbStG for spouses and partners and No. 4c for children: A surviving spouse or registered partner who inherits the family home and continues to live there for at least 10 years can receive it completely tax-free, regardless of value. Children can claim the same relief under No. 4c, but only if the home’s living space does not exceed 200 square meters.
2. Business asset relief under §§13a, 13b ErbStG: Business property, agricultural and forestry property, and qualifying corporate shares may qualify for relief of 85% or 100% of value. This relief is subject to business continuity and payroll requirements over a five-year or seven-year holding period.
3. Charitable and public-benefit transfers: Transfers to certain charitable and public-benefit entities are exempt under §13 No. 16-17 ErbStG.

Note that these reliefs have specific conditions and can be forfeited if requirements are not met. The 10-year occupancy rule for the family home exemption is strictly enforced.

Inheritance tax in Germany for foreigners

Non-residents who inherit German-situs assets don’t get the full relationship-based allowance, but they also don’t face a flat €2,000 exemption regardless of relationship.

Whether you face unlimited or limited tax liability in Germany depends on residency, nationality, and the type of assets involved.

When unlimited tax liability applies

German inheritance tax applies whenever either the deceased or the heir is a German tax resident – unbeschränkte Steuerpflicht, or unlimited tax liability – or when the inherited assets are German-situs property – beschränkte Steuerpflicht, or limited tax liability for non-residents.

Three triggers create unlimited liability: the deceased was a German resident at death, the heir is a German resident at the time of inheritance, or either party is a German national who has lived abroad for fewer than five years.

Limited liability and the pro-rata allowance for non-residents

For non-residents who inherit only German-situs property – typically real estate, a German business, or certain corporate shares as defined in §121 BewG – the rules are materially different.

Since a 2017 law change, limited tax liability under ErbStG §2 Abs. 1 Nr. 3 reduces the regular allowance under §16 ErbStG proportionally.

You receive the share of the full allowance that matches the German-situs share of everything you personally received from that person over the preceding 10 years – not the decedent’s entire worldwide estate, which matters when there are multiple heirs with different shares.

Can non-residents opt into higher exemptions?

Germany used to let EU and EEA residents elect into unlimited tax liability to claim the full personal exemptions, but that election, formerly ErbStG §2 Abs. 3, was repealed following EU Court of Justice rulings.

There’s nothing to opt into now for EU/EEA or US residents: The pro-rata allowance under §16 Abs. 2 ErbStG applies automatically, without an election.

Example – US heir inheriting a Munich apartment

A US citizen living in Texas who inherits a Munich apartment from a German aunt faces inheritance tax on the property value, even though neither party lived in Germany at the time of death. The apartment is German-situs property, so limited tax liability applies, and the heir falls in Class II as a niece or nephew.

If the apartment is the aunt’s only asset, the heir receives the full Class II allowance of €20,000, since the pro-rata allowance matches the German share of the aunt’s total worldwide estate.

Germany’s inheritance tax rates for 2026 remain unchanged from prior years. The personal exemptions have been in force since the 2009 reform, and the current tax-class rate schedule has been in force since a 2010 adjustment; no new legislation has altered either for 2025 or 2026.

That figure surprises most US heirs, and it is due before the estate is settled.

The US-Germany estate tax treaty: avoiding double taxation

The US-Germany Estate and Gift Tax Treaty is one of the few bilateral estate tax treaties the United States maintains, and it provides critical relief mechanisms for US citizens and German residents who face inheritance tax obligations in both countries.

The treaty, signed on December 3, 1980, and amended by the Protocol on December 14, 1998 – as the Treasury’s technical explanation of the Protocol confirms – covers the US federal estate tax, gift tax, and generation-skipping transfer tax on the American side, and the Erbschaftsteuer and Schenkungsteuer on the German side.

It uses a primarily credit-based approach: rather than exempting assets from one country’s tax, each country credits the other’s tax on specific asset categories against its own liability.

Which country taxes which assets – situs rules

The treaty’s situs rules determine which country has the primary right to tax specific assets:

• Real estate: Taxable where the property is located – Article 5
• Business property of a permanent establishment: Taxable where the PE is located – Article 6
• Ships and aircraft in international traffic: Taxable only by the domicile state – Article 7
• Partnership interests: Taxable where the partnership’s underlying real estate or permanent-establishment business property is located, to the extent the interest’s value is attributable to that property – Article 8, per the Treasury’s technical explanation
• All other property: Taxable only by the domicile state – Article 9

How the credit mechanism works

When a US-domiciled person owes Erbschaftsteuer on real estate situated there, the US allows a credit for that tax against the US estate tax on the same property, and vice versa.

The credit is capped at the tax attributable to the relevant assets, so it reduces but does not necessarily eliminate double taxation.

Time limit and the US savings clause

A credit claim must be made within one year of the final assessment and payment of the other country’s tax, provided the claim falls within 10 years of the death or gift – Article 11 of the treaty.

The US savings clause under Article 11 preserves the right of the United States to tax its citizens and residents regardless of treaty provisions.

American citizens and green card holders remain subject to US estate tax on worldwide assets, with treaty credits available to offset the German tax.

Double taxation between the US and Germany on inherited assets is reduced – but not always eliminated – through this credit-based treaty framework.

Section 21 ErbStG: crediting foreign inheritance tax paid abroad

German tax residents who already paid inheritance tax in another country can claim a foreign inheritance tax credit under Section 21 ErbStG against their German liability.

The credit comes with several important conditions:

• The credit applies only under unlimited German tax liability per ErbStG §2. Non-residents under limited liability cannot claim it.
• Where a double-taxation treaty exists – as it does between the US and Germany – the treaty’s credit rules take precedence under §21. The procedural rules of §21 still govern the mechanics of the claim.
• The credit is not automatic. It must be claimed by application – auf Antrag.
• The credit is capped at the proportional German tax attributable to the foreign assets. Per-country calculation is required when assets sit in multiple foreign jurisdictions.
• The German tax on the foreign assets must arise within five years of when the foreign inheritance tax arose – in most cases this lines up automatically, since both countries’ taxes typically arise on the date of death.
• Documentation is required: proof of the foreign tax assessment, payment confirmation, and certified German translations of foreign documents may be required.

Note that IRC §901 – the US foreign tax credit provision – covers income, war profits, and excess profits taxes only. It does not cover inheritance, estate, or gift taxes.

German inheritance tax is not creditable on Form 1116. The relevant US-side relief for double taxation with Germany runs through the treaty’s Article 11 and the estate tax return – Form 706 – not the income tax return.

Inheriting from abroad adds US reporting and tax obligations most expats overlook.

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German succession law and forced heirship

The inheritance laws in Germany differ significantly from the common-law system Americans are used to. Under German law, heirs step directly into the legal position of the deceased – a principle called Gesamtrechtsnachfolge under §1922 BGB.

This means they automatically inherit all assets and all debts by operation of law, without a probate process comparable to the US model.

The automatic succession and forced heirship rules can override what an American might expect from their own estate plan – making it essential for any US citizen with German connections to understand the differences.

Pflichtteil (forced heirship)

German law imposes mandatory inheritance rights called Pflichtteil – compulsory share – which entitle certain close relatives to at least half of their statutory inheritance share, regardless of what the will says.

The German forced heirship rules work as follows:

1. Entitled persons are limited to descendants, parents, and the surviving spouse or registered partner – not siblings
2. The Pflichtteil is a monetary claim against the estate, not an entitlement to specific assets
3. The amount equals one-half of the value of the statutory inheritance share the person would have received without a will
4. Pflichtteil rights can be waived by notarized contract during the deceased’s lifetime under §2346 BGB
5. Gifts made within 10 years before death are added back to the estate value for Pflichtteil calculations, with the amount reduced by 10% for each year elapsed since the gift, per §2325 BGB

EU Succession Regulation 650/2012

The EU Succession Regulation determines which country’s civil law governs a cross-border estate. The default rule under Article 21 is that the law of the deceased’s habitual residence at death applies to the entire succession.

This matters for US citizens living in Germany: without a choice-of-law clause in the will, German succession law – including Pflichtteil – applies to the entire worldwide estate.

Under Article 22, a person may elect the law of their nationality to govern their succession. A US citizen in Germany can choose US law – specifically, the law of their US state of domicile – to avoid German forced heirship provisions.

The Regulation covers civil succession only – it does not determine which country taxes the inheritance. The US is not a party to the Regulation, but German courts apply it to all successions regardless of the nationalities involved.

Under German inheritance law, a will that includes a clear choice-of-law clause in favor of US law can prevent the forced heirship rules from applying to the estate distribution, though it will not affect German tax obligations.

Probate in Germany: how the estate administration process works

Germany does not have a formal probate court system equivalent to the US.

Instead, heirs typically obtain an Erbschein – a certificate of inheritance – from the local Nachlassgericht, the probate court, which serves as proof of heirship for banks, land registries, and other institutions.

US heirs can manage much of this process remotely. German consulates in the US can accept Erbschein applications, and German law firms routinely handle inheritance matters for clients abroad.

US reporting obligations when you inherit German assets

A US citizen or resident who inherits assets from a German estate must evaluate at least three separate US reporting obligations entirely apart from any German tax owed.

FBAR: reporting inherited German bank accounts

If you inherit a German bank account, you become the account holder or have a financial interest for FBAR purposes from the moment you have authority over the account.

If the aggregate value of all your foreign financial accounts – including the inherited account – exceeds $10,000 (2025) at any point during the calendar year, you must file FinCEN Form 114 – the FBAR.

The filing deadline is April 15, with an automatic extension to October 15. The $10,000 threshold is statutory and not adjusted for inflation.

Penalties for non-willful violations are $16,536 per report, not per account, for tax year 2025, following the Supreme Court’s 2023 ruling in Bittner v. United States. Willful violations carry penalties of the greater of $165,353 or 50% of the account balance, per violation.

FATCA: Form 8938 for specified foreign financial assets

Inherited German financial accounts and certain other financial assets may also require reporting on Form 8938 under FATCA – the Foreign Account Tax Compliance Act.

The reporting thresholds for tax year 2025 depend on your filing status and where you live:

• Single, living in the US: $50,000 at year-end or $75,000 at any point during the year
• Married filing jointly, living in the US: $100,000 at year-end or $150,000 at any time
• Single, living abroad: $200,000 at year-end or $300,000 at any time
• Married filing jointly, living abroad: $400,000 at year-end or $600,000 at any time

FBAR and Form 8938 have different thresholds, different filing destinations, and different penalties – but they can apply simultaneously to the same accounts.

Strategies must be implemented well in advance. Last-minute transfers close to death may be challenged or clawed back under the Pflichtteil 10-year rule.

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Stepped-up basis rules for inherited German property: US tax treatment

Under US tax law, a US heir who inherits property generally receives a stepped-up cost basis equal to the fair market value of the asset on the date of the decedent’s death. This can significantly reduce future US capital gains tax when the asset is sold.

This stepped-up basis under IRC §1014 applies to foreign property inherited by a US person. It applies regardless of whether US estate tax was owed on the property and regardless of whether the decedent was a US person or a nonresident alien.

The fair market value is converted to US dollars at the exchange rate on the date of death.

For inherited German real estate or business interests, this means the heir’s US cost basis for future capital gains purposes is the date-of-death fair market value, not the decedent’s original purchase price.

Germany has no equivalent of IRC §1014. German income tax on future capital gains from inherited property uses the decedent’s original acquisition cost – Anschaffungskosten – not a stepped-up value.

This creates a potential mismatch: the US basis is stepped up while the German basis is not, which can affect the calculation of foreign tax credits on a future sale.

See our guide to capital gains on inherited property for the separate US tax treatment when you sell.

German inheritance tax for US expats living in Germany

US expats living in Germany face both German and US tax exposure on any inheritance – the broadest possible combined liability.

Under unlimited tax liability – unbeschränkte Steuerpflicht – inheritance tax in Germany applies to all assets inherited from anywhere in the world, not just German property.

The US savings clause preserves US taxing rights over its citizens regardless of where they live, so both countries may assert a claim on the same inherited estate.

The US-Germany estate tax treaty and the foreign tax credit mechanisms are the primary tools for avoiding double taxation in this scenario.

 

Foreign inheritances add layers to your US return – from Form 3520 to FBAR to basis documentation.

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FBAR and FATCA: reporting inherited German bank accounts

Once a US person inherits a German bank account, they become the account holder and standard FBAR and FATCA obligations apply from the moment they have a financial interest in or signature authority over the account.

This obligation starts even before probate is complete or funds are transferred.

The FBAR and FATCA filing thresholds and rules are described in detail in the US reporting section above.

The key points specific to inherited accounts:

• The reporting obligation begins the calendar year in which you gain a financial interest, which may be the date of death itself
• Even if the inherited account is closed within the same calendar year, it must still be reported on the FBAR for that year if the aggregate threshold was exceeded at any point
• FBAR and FATCA thresholds differ and depend on filing status and residency
• Penalties for non-willful FBAR violations apply per report, not per account, following the Supreme Court’s clarification in Bittner v. United States.

See our detailed FBAR guide for the full filing process and common mistakes to avoid.

German inheritance law and wills: what US citizens need to know

Germany recognizes both individual wills – Testament – and joint wills – gemeinschaftliches Testament. The joint will is a uniquely German instrument commonly used by married couples that binds the surviving spouse after the first death.

Requirements for a valid German will

German law recognizes the three will formats below, each with its own requirements for validity.

• Handwritten will – eigenhändiges Testament: Must be entirely handwritten and signed by the testator – typed or printed wills are invalid without notarization under §2247 BGB
• Notarized will – öffentliches Testament: Declared before a German notary and notarized under §2232 BGB
• Berlin will – Berliner Testament: A common joint will structure that leaves everything to the surviving spouse, with children inheriting after the second death, per §2269 BGB

Cross-border will considerations

A US will is generally insufficient to administer a German estate – a separate German will, or at minimum a certified translation and apostille, is typically required.

Under the EU Succession Regulation 650/2012, including a choice-of-law clause choosing US state law can prevent German forced heirship – Pflichtteil – from overriding the testator’s wishes, while still leaving German tax obligations unaffected. German estate law requires careful coordination when assets sit in multiple jurisdictions.

Dual citizenship and inheritance: German-American estate planning considerations

Holding both US and German citizenship does not reduce inheritance tax obligations in either country. Dual citizens are fully subject to both countries’ rules and must plan carefully to avoid paying tax twice on the same assets.

The following areas require attention when both citizenships are in play.

Key planning considerations for dual citizens

Dual US-German citizens should review the five planning areas below to keep their combined tax burden as low as possible.

1. Domicile planning. Where the deceased is domiciled at death determines treaty allocation of taxing rights
2. Asset location. German real estate in a German Gesellschaft may change the situs characterization
3. Lifetime gifting using both countries’ exemptions and the 10-year reset on the German side
4. Coordinating wills and powers of attorney in both jurisdictions
5. Annual review of the estate plan, particularly after cross-border moves or significant acquisitions

For US-German dual citizens, the interaction between German and US estate tax is particularly complex because both countries assert taxing rights based on citizenship and domicile simultaneously.

The treaty credits help, but careful structuring is required to minimize the combined tax burden.

US-Germany tax obligations extend well beyond inheritance – including income tax, social security totalization, and ongoing FBAR/FATCA compliance.

Gift tax in Germany (Schenkungsteuer): the 10-year planning cycle

German gift tax – Schenkungsteuer – uses the same rates and exemptions as inheritance tax, both governed by the same ErbStG. The critical planning feature is the 10-year aggregation rule under §14 ErbStG.

The 10-year aggregation rule

All gifts from the same donor to the same recipient within a rolling 10-year window are aggregated, and the personal exemption applies once per 10-year period. Previously paid gift tax is credited against the tax on later transfers within the same window.

After 10 years, the exemption resets – making systematic lifetime gifting the most effective tool to reduce the ultimate inheritance tax burden.

How much can be transferred tax-free

A parent can give each child up to €400,000 every 10 years tax-free. A married couple with two children can collectively transfer up to €1.6 million per decade with no German gift or inheritance tax – a powerful strategy that compounds over time.

Special exemptions: family home, business assets, and pension allowances

Germany offers significant additional exemptions beyond the personal allowance, most notably a full exemption for the family home inherited by a surviving spouse or registered partner who continues to live there for at least 10 years.

Key special exemptions:

• Spousal/partner residential property exemption: Full exemption for the marital home if the surviving spouse continues to live there for 10 years. No value limit.
• Child residential property exemption: Same as the spousal exemption, but limited to homes under 200 square meters of living space
• Business asset relief – Betriebsvermögensbegünstigung: 85% exemption under Regelverschonung or 100% exemption under Optionsverschonung for qualifying business assets, subject to holding periods and minimum payroll requirements
• Additional spousal/partner pension allowance – Versorgungsfreibetrag, §17: Up to €256,000, reduced by the capital value of pension entitlements passing outside the estate
• Child maintenance allowance: Available for children under 27, with amounts scaled by age per §17 ErbStG

These reliefs have specific conditions and can be forfeited if requirements are not met.

The 10-year occupancy rule for the residential property exemption is enforced strictly – moving out before the end of the period triggers full recapture of the exemption, except in cases of compelling necessity such as the need for nursing care.

Living as a US citizen in Germany creates a web of overlapping tax obligations.

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