Inheriting from a US estate while living in Germany: preparing for German tax advice

Start by identifying where you need support

The administration of a US estate and your German inheritance tax are two distinct matters. On the US side, an executor may be dealing with the estate and any estate-tax return that is required there. For estate-tax purposes, the IRS considers the deceased person's citizenship and their domicile at the date of death, among other factors. Your own residence in Germany therefore does not tell you which US form is appropriate for the estate. IRS estate-tax FAQ

For German tax advice, the starting point is what you receive as a result of the death and the relevant personal connections. Questions about who is entitled to inherit or whether a will is recognised belong to the separate legal assessment of the estate. Note who is already involved and what each person is doing. An existing US tax return, a bank letter and a document recording an inheritance entitlement answer different questions.

If responsibilities are still unclear, write that down too. You do not need to have resolved everything before the introductory call.

Describe the people separately from the assets

“An inheritance from America” is a starting point, but it leaves important details unanswered. A short account is useful: Where did the deceased last live? Where do you live? Which citizenships did the deceased hold, and which do you hold? Were there other residences or extended stays elsewhere? Add the date of death, your relationship to the deceased and when you learned about what you would receive.

Record the information you have without trying to make the legal assessment yourself. An existing US address is not a domicile assessment that you need to make on your own. Likewise, details of residence and habitual abode in Germany should first be recorded as facts and then reviewed professionally. Information about both people matters when considering the different tax connections. Section 2 ErbStG, IRS estate-tax FAQ

Next, outline the assets. Does the estate include a house, a bank account, an investment portfolio or an interest in a business? If the documents use terms such as trust or beneficiary, note the term alongside the document in which it appears. The aim is to help your adviser see which assets and arrangements are actually involved. Translating a term too quickly into a German legal concept can obscure important differences.

Florian Enders on the German tax preparation for an inheritance from the USA

Gather the documents you have, without waiting for a complete file

For an initial conversation, an overview of the documents already available is enough. These might include a death certificate, a will, relevant trust documents and correspondence from people dealing with the estate. For property, investments or business interests, existing valuations and appraisal reports can be helpful. The IRS also lists these types of document for the particular return concerning the estate of a deceased person who was neither domiciled in the US for estate-tax purposes nor a US citizen. That does not make them an identical list of mandatory documents for every heir in Germany. IRS guidance on estate-tax return documents

A simple way to organise the material is to record who provided each document, what it relates to and what remains unclear. An estate statement should also make it possible to distinguish between a figure for the whole estate and the amount you receive yourself. For the German notification of an acquisition, the law specifies information including the assets received and their value, the legal basis, the personal relationship and earlier transfers. Section 30(4) ErbStG

You do not need to commission a translation of the entire estate file just for an introductory call. First discuss which documents are needed and in what form. Sensitive original documents should only be sent through an agreed transfer method, not through a public contact form.

Keep the German notification in view

With an estate abroad, the German notification of an acquisition is an early point to check. For an acquisition subject to inheritance tax, section 30 ErbStG generally requires written notification within three months of learning of the acquisition. The exception for certain testamentary dispositions opened by a German court, a German notary or a German consul expressly does not apply where the acquisition includes foreign assets. The involvement of a US notary public does not establish this German notification exemption either. Do not assume that the administration of the US estate will automatically take care of your German notification. Section 30 ErbStG

Note when you learned about what you would receive and whether anyone has already contacted the German tax office. If so, keep a copy of that correspondence and any reply. If you are unsure, raise this specific question early. The notification and a complete inheritance-tax return are separate procedural steps. Whether and how a return must be filed is considered separately. Section 30 ErbStG, Section 31 ErbStG

Keep US tax documents and payment records together

In its overview of US treaties with estate and gift tax provisions, the IRS lists Germany as “Estate & Gift”. The existence of a treaty does not, by itself, establish what relief applies in your case. Existing US tax returns, letters from the IRS and payment records are therefore important preparation material. It should also be clear which person or estate bore the tax and which assets it relates to. IRS estate and gift tax treaties

The first question is which treaty provisions apply to your case. Unless the provisions of an agreement for the avoidance of double taxation are to be applied, section 21(1) ErbStG provides for a credit on application, subject to its conditions. Where a treaty provides for a credit, section 21(4) directs that subsections (1) to (3) be applied accordingly. Saying that tax has “already been paid in the US” does not mean that it is automatically deducted in full from the German tax. For the credit review, the law specifies evidence including the value of the foreign assets, the tax assessed and its payment. Section 21 ErbStG

If these documents are not yet available, identify the gap and the person who can help with it. A payment to you, an estate account and a letter from the IRS should remain clearly identifiable as different records.

Bring a specific question to the conversation

A concrete concern is the most useful starting point. You may want to know whether the notification already sent to the German tax office is sufficient. Perhaps several types of asset are involved, or you cannot work out how the US estate account relates to your own inheritance. You may already have a US adviser but no one dealing with the German tax side.

Write your main question in one or two sentences. Add the countries involved, the broad types and approximate scale of the assets you will receive, and the people already advising you. An indication of scale helps put your question in context; it is not a valuation or a tax calculation. You do not need to arrive with a completed tax table or a US exemption amount you have calculated yourself.

Florian Enders advises on the German tax side of cross-border inheritances in German, English and French. The German tax advice for international inheritances page explains the scope of the service and its limits. The consultation languages do not mean that translation of your entire estate file is included.

In a free 15-minute introductory call, you can explain your situation and discuss whether working together is a good fit. The call does not include a complete tax review, a US tax return or representation in foreign estate proceedings. The scope and fees for further advice are agreed separately.

Common questions about preparation

Do I have to pay German tax on an inheritance from the US?

If you have a place of residence or habitual abode in Germany at the time the tax arises, unlimited German inheritance-tax liability generally covers your entire acquisition, including the US assets. Whether you actually have anything to pay depends on the individual calculation and a review of applicable relief. Have the personal circumstances of both people, and the nature and value of your own acquisition, ready for the consultation. Section 2 ErbStG, Section 21 ErbStG

As an heir living in Germany, do I have to file Form 706-NA myself?

Your residence in Germany alone does not answer that question. Form 706-NA concerns certain estates of people who were neither US citizens nor domiciled in the US for estate-tax purposes at death. An important point is the broad executor definition in the IRS instructions. If there is no executor in the US who is appointed, qualified and acting, the definition also covers people in actual or constructive possession of any of the deceased person's property. Do not assume that the absence of a formal appointment as estate administrator rules out a role for you. Ask the appropriate US contact which return and which role apply in your case. IRS Instructions for Form 706-NA: “Executor” and “Who Must File”

Should I wait until all the US documents are available?

Do not wait until the US estate administration is complete before clarifying the German notification requirement. Section 30 ErbStG links the time limit to learning of the acquisition. Have the information already available ready and identify missing documents openly, so that the next steps can be clarified in time. Section 30 ErbStG

Where can I find the general German tax rates and allowances?

The existing German inheritance-tax table is the starting point for looking them up. This article adds the preparation for a US-Germany case. The guide to the EU Succession Regulation has a different focus; it is not a guide to US estate proceedings. Neither replaces a review of your particular cross-border circumstances.