Lawyer's Fees in a Teilungsversteigerung as a Nachlassverbindlichkeit: BFH II R 10/23 (2026)

What is the ruling about?

In the disputed case, several heirs of an estate with real-estate assets had managed it jointly for years - collecting rent, commissioning repairs, paying for property management. The Erbengemeinschaft had thus already entered the typical "management phase" that follows the immediate division. Only after several years did one of the co-heirs demand the division and have a Teilungsversteigerung initiated at the Amtsgericht. The other heirs defended themselves through lawyers, and the lawyer's fees ran into five figures.

The Finanzamt (tax office) refused to deduct the lawyer's fees as a Nachlassverbindlichkeit, arguing that the costs were attributable to the management phase - and management costs are expressly non-deductible under § 10 Abs. 5 Nr. 3 Satz 3 ErbStG.

The FG Koeln upheld the heir's claim (ruling of 09.02.2023, 7 K 1362/21). The BFH confirmed the ruling and thereby continued the line from its ruling of 21 August 2024 (II R 43/22) on general division costs.

The guiding principle in its wording

"Where costs of legal advice and representation arise in direct connection with a Teilungsversteigerung for the division of an Erbengemeinschaft, these are deductible as costs of distributing the estate under § 10 Abs. 5 Nr. 3 Satz 1 of the Erbschaftsteuer- und Schenkungsteuergesetz. This applies even where the Erbengemeinschaft had already moved to managing the estate assets before one of the co-heirs demanded the division."

Two core statements sit inside this sentence. First: the word "Teilungsversteigerung" is the decisive bracket. As soon as the lawyer's service serves the proceeding for dividing up the assets, it is distribution cost - regardless of the phase of the Erbengemeinschaft in which it arises. Second: the timing of what came before plays no role. Even where the Erbengemeinschaft has already managed jointly for ten years, that does not flip the character of the lawyer's fees - what stays decisive is the purpose of the measure, while the moment in time steps back.

The ruling can be accessed via LEXinform 0954599 (via datev.de/lexinform).

§ 10 Abs. 5 Nr. 3 ErbStG - the wording and its three sentences

The dispute turns on the three sentences of a single provision:

Satz 1: Deductible are "the costs incurred by the acquirer directly in connection with the winding-up, settlement or distribution of the estate, or with obtaining the acquisition."

Satz 2: "For these costs a total amount of 15,000 euros is deducted without proof."

Satz 3: "Costs for the management of the estate are not deductible."

The boundary between Satz 1 and Satz 3 has been a source of dispute for decades. Distribution is the dividing-up of the estate among the heirs - deductible. Management is the ongoing running of the assets after the Erbschaftsteuer has been assessed - not deductible. It gets difficult in constellations where the Erbengemeinschaft mixes both phases: years of rental management plus parallel division talks in which lawyers are occasionally consulted.

With the current ruling and the predecessor ruling II R 43/22 of 21 August 2024, the BFH has drawn a pragmatic line: as soon as a measure aims to distribute the assets to the individual co-heirs, it is distribution - and therefore a Satz 1 cost. Parallel or upstream management does not contaminate this character.

What can be deducted - and what cannot

After the current BFH ruling, the practice line can be summed up like this:

Important: the 15,000-euro flat allowance under Satz 2 is deducted without proof - and per acquisition, not per Erbengemeinschaft. Anyone in an Erbengemeinschaft with three co-heirs has the 15,000 euros deductible three times over as a flat amount, even where no concrete costs are documented. But anyone who goes beyond the 15,000 euros must prove every euro - invoice, record of hours, link to the mandate.

What this means in practice for heirs in a dispute

Three consequences for advice:

First - documentation pays off. Anyone acting through a lawyer in the Erbauseinandersetzung should have client cost invoices issued from the outset that make the link to the division clear. "Advice in inheritance proceedings XY, Teilungsversteigerung at the AG Z, file no. ..." is better than "General advice on inheritance matter". The tax office later reads the invoices and classifies them.

Second - distribution costs are not limited to the Teilungsversteigerung. The lawyer's fees for the out-of-court settlement, the notary appointment for the Erbauseinandersetzung contract, and the market-value appraisal for calculating the inheritance quotas also belong to the distribution. Anyone who exceeds the flat allowance of 15,000 euros should gather everything that falls under Satz 1.

Third - exclude management costs. Property managers, the ongoing tax returns of the Erbengemeinschaft, repairs to the apartment building during the joint phase - that stays management. Any attempt to set this against the estate as a Nachlassverbindlichkeit gets reliably struck out by the tax office. Anyone who has a mixed invoice from the lawyer (a tenant dispute plus division negotiation in the same mandate, say) should ask for a separate billing - otherwise the entire item risks not being recognised.

Practical example - the maths for a feuding Erbengemeinschaft

Three siblings jointly inherit an apartment building, market value 900,000 euros. After two years of joint management, the youngest sibling initiates the Teilungsversteigerung. The other two siblings defend themselves through lawyers. In total, lawyer's fees of 24,000 euros arise over 18 months, plus court costs of 6,000 euros and a market-value appraisal for 4,500 euros.

Per co-heir (each share of the estate 300,000 euros) the maths works out as follows:

• Flat allowance without proof: 15,000 euros - this would be the simple route, but below the actual costs
• With proof: 8,000 euros lawyer + 2,000 euros court costs + 1,500 euros appraisal share = 11,500 euros

In this constellation the flat allowance is more favourable - 15,000 instead of 11,500 euros per co-heir. But if the lawyer's fees per co-heir came to 16,000 euros, proof would pay off: 16,000 instead of 15,000 euros deduction = 1,000 euros more reduction of the assessment base times the tax rate (often 11 to 19 percent in class I to II) = 110 to 190 euros saving per heir.

Rule of thumb from my practice: from provable distribution costs of 18,000 to 20,000 euros per co-heir, the effort of detailed documentation pays off. Below that, the flat allowance applies automatically - no receipts, no discussion with the tax office.

Cross-links for going deeper

• Dissolving the Erbengemeinschaft - division strategies
• Teilungsversteigerung in the Erbengemeinschaft - the last lever
• Selling your share of the estate instead of blocking

Conclusion

The ruling II R 10/23 creates legal certainty for a very common constellation. Anyone who lives through a Teilungsversteigerung in an inheritance dispute - as applicant or as opposing party - can set the lawyer's fees against the Erbschaftsteuer without being fobbed off by the tax office with the remark "already in the management phase". In the line of the BFH ruling II R 43/22 of 21 August 2024, this also holds for the out-of-court division.

In my practice I recommend that all heirs in dispute constellations have their lawyer's fees classified as distribution costs from the outset, give every invoice a concrete link to the mandate, and, before filing the Erbschaftsteuer return, weigh the 15,000-euro flat allowance against the proven costs together with their Steuerberater. Anyone who then still has a mixed invoice of management and distribution should have the lawyer split it - otherwise they risk losing the entire item.