- Erbschaftsteuer (German inheritance tax, often also spelled "Erbschaftssteuer") follows the Erbschaftsteuergesetz (ErbStG); Freibetraege (personal tax-free allowances) are graded by degree of kinship
Erbschaftsteuer is one of the most underestimated burdens in succession planning — and at the same time one of the easiest to reduce if you plan early enough. In my advisory practice I regularly see families paying high five- to six-figure amounts to the tax office that would have been avoidable with three to five years' preparation.
Erbschaftsteuer hits anyone who inherits more than the Freibetrag allows — graded by degree of kinship. Children have high Freibetraege (EUR 400,000 per parent), siblings almost nothing (EUR 20,000). The right preparation separates the wheat from the chaff.
What is Erbschaftsteuer?
Erbschaftsteuer is a tax on the gratuitous acquisition by inheritance, legacy or Pflichtteil (compulsory share, § 2303 BGB) claim (Erbschaftsteuergesetz, ErbStG). It arises on the death of the Erblasser (testator) (the so-called reference-date principle under § 9 ErbStG) and is levied on the acquirer — so on each individual Erbe (heir) separately.
Important: Erbschaftsteuer is an acquisition tax, not an estate tax. Each Erbe pays tax on their acquisition separately, with their own Freibetrag and their own Steuersatz. With three children as heirs there are therefore three separate assessments.
Spellings: "Erbschaftsteuer" (the technical term, as written in the statute) and "Erbschaftssteuer" (more frequent colloquially). Both mean the same.
The three tax classes
The ErbStG knows three Steuerklassen (tax classes under ErbStG) that depend on the degree of kinship to the Erblasser (§ 15 ErbStG):
| Steuerklasse | Heirs | Freibetrag |
|---|---|---|
| Class I | Spouses | EUR 500,000 |
| Class I | Children, stepchildren, adopted children | EUR 400,000 |
| Class I | Grandchildren (if parents alive) | EUR 200,000 |
| Class I | Grandchildren (if parents predeceased) | EUR 400,000 |
| Class I | Parents and grandparents on inheritance | EUR 100,000 |
| Class II | Parents and grandparents on gift | EUR 20,000 |
| Class II | Siblings, nieces, nephews | EUR 20,000 |
| Class II | Divorced spouses, step-parents, sons- and daughters-in-law | EUR 20,000 |
| Class III | All others (unmarried partners, friends, foundations) | EUR 20,000 |
The Steuerklasse determines both the Freibetrag and the Steuersaetze.
Tax rates by class
Above the Freibetrag the tax is staggered (§ 19 ErbStG):
| Value over Freibetrag | Class I (children) | Class II (siblings) | Class III (others) |
|---|---|---|---|
| up to EUR 75,000 | 7 % | 15 % | 30 % |
| 75,000 – 300,000 EUR | 11 % | 20 % | 30 % |
| 300,000 – 600,000 EUR | 15 % | 25 % | 30 % |
| 600,000 – 6,000,000 EUR | 19 % | 30 % | 30 % |
| 6,000,000 – 13,000,000 EUR | 23 % | 35 % | 50 % |
| 13,000,000 – 26,000,000 EUR | 27 % | 40 % | 50 % |
| over EUR 26,000,000 | 30 % | 43 % | 50 % |
Class II was significantly increased in 2009 — siblings inherit today almost twice as expensively as children. In Class III a constant 30/50 percent applies.
Worked examples from practice
Example 1: daughter inherits EUR 700,000 from her father
Class I, Freibetrag EUR 400,000. Taxable: EUR 300,000. Steuersatz at this bracket: 11 percent. Erbschaftsteuer: EUR 33,000.
Example 2: wife inherits EUR 1,000,000 from her husband
Class I, Freibetrag EUR 500,000 plus Versorgungsfreibetrag EUR 256,000 (§ 17 ErbStG). Taxable: EUR 244,000. Steuersatz: 11 percent. Erbschaftsteuer: EUR 26,840.
Example 3: brother inherits EUR 500,000 from his sister
Class II, Freibetrag only EUR 20,000. Taxable: EUR 480,000. Steuersatz at this bracket: 25 percent. Erbschaftsteuer: EUR 120,000. Almost half more than the daughter pays!
Example 4: life partner (unmarried) inherits EUR 300,000
Class III, Freibetrag EUR 20,000. Taxable: EUR 280,000. Steuersatz: 30 percent. Erbschaftsteuer: EUR 84,000.
Step by step: reducing Erbschaftsteuer in 7 stages
In advice I typically work through this sequence:
- Asset inventory. What is actually there — real estate, bank balances, securities, life insurance, company shares? Which assets have what kind of value development?
- Clarify family constellation. Who is to inherit? Which Steuerklasse? Which Freibetraege are unused? Who needs the money most urgently?
- Plan lifetime Schenkungen (gifts under German law, governed by ErbStG). Every 10 years the Freibetrag resets (§ 14 ErbStG). Start at 60 — by 80 wealth can be transferred in three tranches.
- Examine structural change. Familienpool, Familienstiftung (family foundation), asset-managing GmbH — all of these can substantially reduce the tax burden on large estates.
- Niessbrauch / right of residence. With real estate transfers, a reserved Niessbrauch can reduce the taxable value by 30-50 percent.
- Restructure life insurance. Make policies payable to the right beneficiary — otherwise they become taxable.
- Update the will. Tax optimisation belongs in every will. The Berliner Testament is often DISADVANTAGEOUS from a tax point of view (assets are taxed twice).
Anyone who runs through all seven stages 10 years before the planned succession can typically reduce Erbschaftsteuer by 40-80 percent.
What is taxable?
Taxable is the net acquisition — that is, the estate less debts, funeral costs (a flat EUR 10,300 without proof), liabilities and legacies (§ 10 ErbStG).
Valuation of the assets:
| Asset type | Valuation |
|---|---|
| Real estate (houses, land) | Market value under ErbStG, often using the income-capitalisation method |
| Agricultural and forestry assets | Special rules under §§ 158 ff. BewG |
| Business assets | Substance or income value with relief under § 13a/b ErbStG |
| Securities | Price on date of death |
| Bank balances | Account balance on date of death |
| Life insurance | Payout amount (unless correctly structured) |
| Household goods | Flat EUR 41,000 for Class I, item-by-item value for Class II/III |
| Art, collections | Market value, possibly special relief |
For real estate there are additional special exemptions: parents' house to children up to 200 sqm living space tax-free subject to owner-occupation (§ 13 Abs. 1 Nr. 4c ErbStG).
Versorgungsfreibetraege on top
Above and beyond the Freibetrag, spouses and children also have Versorgungsfreibetraege (§ 17 ErbStG):
- Spouses: EUR 256,000
- Children up to 5 years: EUR 52,000
- Children 5-10 years: EUR 41,000
- Children 10-15 years: EUR 30,700
- Children 15-20 years: EUR 20,500
- Children 20-27 years: EUR 10,300
Important: the Versorgungsfreibetraege are reduced by survivor's pensions (state pensions, civil service pensions, company pensions). For spouses of civil servants, often almost nothing of the Versorgungsfreibetrag remains.
Comparative calculation: with and without preparation
Starting point: married couple, both 70, assets EUR 2,000,000 (EUR 1,500,000 real estate + EUR 500,000 securities), two children as heirs.
| Strategy | Erbschaftsteuer | Saving |
|---|---|---|
| Without preparation, both die simultaneously | approx. EUR 110,000 | Base |
| Berliner Testament (assets passed twice) | approx. EUR 220,000 | -EUR 110,000 (loss!) |
| Schenkung of EUR 800,000 to children 10 years earlier | approx. EUR 35,000 | EUR 75,000 |
| Plus reserved Niessbrauch on one property | approx. EUR 0 | EUR 110,000 |
| Plus Familienstiftung for EUR 1 m | approx. EUR 0 (with Erbersatzsteuer planning) | EUR 110,000 |
The "cheapest" variant (without preparation) is often the most expensive. The Berliner Testament is particularly dangerous from a tax point of view — assets are passed on twice, both transitions trigger tax.
Frequently asked questions
How high is the allowance on an inheritance?
It depends on the degree of kinship. Spouses EUR 500,000, children EUR 400,000 per parent, grandchildren EUR 200,000 (if parents are alive) or EUR 400,000 (if parents have predeceased), parents on inheritance EUR 100,000, siblings/nieces/nephews only EUR 20,000, all others (third parties) likewise EUR 20,000.
When do I have to pay Erbschaftsteuer?
When your acquisition exceeds the Freibetrag. For a child who inherits EUR 350,000 from one parent, no tax arises (below the Freibetrag). At EUR 500,000, EUR 100,000 is taxable — tax rate 11 percent, tax EUR 11,000.
How is Erbschaftsteuer calculated?
Net acquisition (assets minus debts minus funeral costs) minus Freibetrag = taxable acquisition. The Steuersatz is applied to this amount — staggered by class and value. More in the spoke: Erbschaftsteuer berechnen.
Do I have to report the inheritance to the tax office?
Yes, within 3 months of knowledge of the inheritance (§ 30 ErbStG). Even if the acquisition is below the Freibetrag, the report is formally mandatory above bagatelle thresholds. Breaches can become relevant under tax criminal law.
How can I reduce Erbschaftsteuer?
Three main routes: (1) lifetime Schenkungen using the 10-year Freibetraege (§ 14 ErbStG), (2) structural change via Familienpool, Familienstiftung or asset-managing GmbH, (3) reserved Niessbrauch on real estate transfers. Three to ten years' lead time is realistic.
What about life insurance?
The payout amount is taxable like the rest of the estate — unless the insurance was correctly structured (beneficiary other than heir). With the right arrangement, the policy can flow tax-free directly to the beneficiary.
How high is the allowance for siblings?
Only EUR 20,000 (Steuerklasse II). Plus tax rates from 15 percent. Anyone inheriting as the child of a sibling from a brother or sister almost always pays Erbschaftsteuer — unlike when inheriting from parents or grandparents. More in the spoke: Erbschaftsteuer Geschwister.
Are there exemptions for owner-occupied real estate?
Yes. Spouses inherit the family home tax-free if they continue to occupy it (§ 13 Abs. 1 Nr. 4b ErbStG). Children inherit the parents' house up to 200 sqm tax-free if they move in themselves (§ 13 Abs. 1 Nr. 4c ErbStG) — 10-year holding period. More in the spoke: Erbschaftsteuer Immobilien.
Deeper detail answers
- Erbschaftsteuer Freibetraege — table 2026 and practical examples
- Erbschaftsteuer for children — allowance, tax rates, strategies
- Erbschaftsteuer real estate and house — valuation, exemptions
- Erbschaftsteuer for siblings — why it becomes expensive
- Calculate Erbschaftsteuer — formula, calculator, examples
- Erbschaftsteuer table — tax rates 2026 at a glance
- Topic hub Schenkung — Taxes on lifetime gifts
- Topic hub house transfer — Optimise real estate transfers
Lead magnet: structure your Erbschaftsteuer
- Erbschaftsteuer calculator — Online calculation of your tax burden in 3 minutes.
- Erbschaftsteuer quick check — Initial assessment in 5 questions.
- Succession checklist — Structured lead-time plan for tax optimisation.
- Pflichtteil protection — Strategies for the legal reduction of the compulsory share.
- Arrange a first meeting — Individual Erbschaftsteuer strategy.
Authority sources
- § 1 ErbStG (tax liability)
- § 9 ErbStG (origination of the tax)
- § 10 ErbStG (taxable acquisition)
- § 13 ErbStG (exemptions, family home)
- § 13a ErbStG (relief for business assets)
- § 13b ErbStG (favoured assets)
- § 14 ErbStG (aggregation of earlier acquisitions, 10-year rule)
- § 15 ErbStG (tax classes)
- § 16 ErbStG (allowances)
- § 17 ErbStG (Versorgungsfreibetrag)
- § 19 ErbStG (tax rates)
- § 28a ErbStG (relief-need test)
- § 30 ErbStG (reporting duty)
- BewG (Valuation Act)
- BFH judgment of 17.06.2020 — II R 33/17 (family home exemption)
- BFH judgment of 27.11.2019 — II R 1/16 (Verschonungsabschlag for business assets)
- BVerfG judgment of 17.12.2014 — 1 BvL 21/12 (constitutionality of the ErbStG)
Free guide
Inheritance Tax Quick Check
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