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Gift and inheritance tax allowances

General information

There are three tax classes in inheritance and gift tax law according to § 15 ErbStG.

Tax class I

Tax class I includes spouses, children (and stepchildren), grandchildren (and subsequent generations) and parents and grandparents (only in the case of inheritance).

Tax class II

Tax class II includes parents and grandparents (in the case of gifts), siblings, nephews, nieces, step-parents, children-in-law, parents-in-law and divorced spouses.

Tax class III

All other persons fall under tax class III. From your neighbor to your best friend to your great cousin. A tax-free allowance of (only EUR 20,000.00) applies to all acquisitions in tax classes II and III. Significantly higher allowances apply within tax class I: Spouses have an allowance of EUR 500,000.00. For children, the allowance is currently EUR 400,000.00 per parent per child, while the allowance for grandchildren is EUR 200,000.00 per grandchild. For all subsequent generations, the tax-free amount is still EUR 100,000.00. These tax-free amounts apply to both inheritances and gifts, covering a period of 10 years. This means that in the case of gifts, all gifts within the last 10 years are always taken into account in the ratio of donor to donee, so that a previously tax-free transfer may have to be taxed retrospectively.

Spouse	EUR 500,000
Children	EUR 400,000
Grand Children	EUR 200,000
Later generations	EUR 100,000
Others	EUR 20,000

Additional characteristics of inheritance tax

Pension allowance

In addition to the above-mentioned allowances, there is a further special pension allowance of up to EUR 256,000.00 for spouses in the event of death. This allowance is granted in addition, whereby any pension entitlements acquired through the inheritance must be deducted from this.

Different tax classes

Parents and previous parents (grandparents, great-grandparents and so on) generally receive gifts from children in tax class II. However, in the event of death, they then fall under tax class I and the tax-free amount increases from EUR 20,000.00 to EUR 100,000.00.

Our experienced specialist lawyers in Frankfurt and Berlin will be happy to advise you.