Child of foreign origin, unmarried and yet-to-be-born, sadly passes away, leaving questions about inheritance rights.
In the unfortunate event of a sudden death, the question of inheriting property in Germany becomes particularly important. This article focuses on the case of Mr. T.F., who passed away recently in Germany, leaving behind an apartment he owned with an unmarried partner.
The specifics of German law regarding inheritance and property transfer in such circumstances are not clearly outlined in the article. However, it's worth noting that unmarried partners do not benefit from the same tax exemptions as spouses, which can result in high tax rates (up to 30% or more) on inherited property.
To pass on the inherited apartment in a tax-efficient and quick manner, there are a few key points and steps to consider:
- Inheritance and gift tax treatment in Germany: Inheritance tax in Germany depends on the relationship between the deceased and the heir. Spouses and children benefit from significant tax exemptions (€500,000 for spouses), but unmarried partners have little or no exemption.
- Direct inheritance vs. gift: The inherited apartment initially belongs to the legal heirs. To pass it on to a non-spouse partner quickly and tax-effectively, the current owner can transfer it as a gift to the partner. Gifts are also subject to inheritance/gift tax rules, so the same exemptions apply.
- Minimizing taxes:
- One possible strategy is to utilize the annual small gift tax exemption (€20,000 in Germany) repeatedly over several years to reduce the taxable base gradually. However, this is not a fast solution.
- Another is to explore whether the apartment can be sold to the partner at a low or below-market price, but this may trigger capital gains tax if the apartment was not owned for at least 10 years.
- Consulting a specialist lawyer or tax advisor experienced in German inheritance law is essential to explore possibilities such as setting up a trust or company ownership shares, but these can complicate and delay matters.
- Quick transfer options: Since tax exemptions are minimal for partners and tax rates are high, expecting a fast and tax-efficient transfer mirroring spousal treatment is unrealistic. The partner may need to accept the tax costs or wait for favorable exemptions (if any) to apply.
- Legal safeguards: To ensure the partner's claim, it’s advisable to have the property owner draw up a will or inheritance contract (Erbvertrag) specifying the partner as the beneficiary of the apartment, which can speed up the legal process.
- Cross-border considerations if applicable: If the partner or deceased lived abroad, double taxation treaties or foreign tax laws might affect tax obligations; expert advice can help navigate these complexities.
In conclusion, passing on an inherited apartment to a non-spouse partner in Germany involves gift or inheritance tax at high rates. To move quickly and efficiently, it's best to consult a German inheritance/tax law professional to draft wills or contracts and explore tax strategies, but a fully tax-efficient, rapid transfer is generally not possible without significant tax liability.
In the realm of personal-finance and wealth-management, navigating the complexities of German inheritance laws is crucial when passing on an inherited apartment to a non-spouse partner. Given the high tax rates and minimal tax exemptions for unmarried partners, it is advisable to consult a professional experienced in German inheritance and business tax laws to devise a strategic plan that minimizes tax liability and ensures a quick transfer. Additionally, legal safeguards such as wills or inheritance contracts can expedite the legal process in such situations.
