Last updated: 6 Nov 2025

Germany–US Cross-Border Inheritance Tax – Planning

Actionable planning for cross-border estates between Germany and the United States: use allowances and the 10-year rule, place assets efficiently by situs, structure lifetime gifts, leverage family-home and business-asset reliefs, plan liquidity for US estate tax, and optimize across multiple heirs—while coordinating treaty rules and § 21 ErbStG credits.

1) Scope, residency & situs (high level)

• Germany (ErbStG): worldwide taxation if decedent or heir is German-resident; otherwise German-situs assets only.
• US: estate tax (federal) based on decedent’s status; plus possible state-level estate/inheritance taxes.
• Cross-border relief: use treaty allocation where applicable and § 21 ErbStG to credit foreign death taxes on foreign-asset slices.

See: Treaty · Coordination & §21

2) Allowances & the 10-year rule

• German personal allowances per recipient (typical: spouse €500k, child €400k, grandchild €200k, others €20k) reduce the taxable base.
• For lifetime gifts, allowances reset every 10 years per donor–donee pair (use staging to multiply relief).
• Model allowance usage per person; in multi-heir setups, distribute assets to maximize effective use.

Try scenarios with the calculator.

3) Lifetime gifts (timing & stacking)

• Use multi-step gifting (e.g., spouse → children) and time windows to recycle allowances.
• Track aggregation for German law (prior gifts within 10 years affect brackets and residual allowance).
• Coordinate with US gift/estate regime (annual exclusions, lifetime exemption) to avoid friction.

4) Family home exemption (spouse/children)

• Spouse/partner: tax-free acquisition of the owner-occupied family home if self-use continues (min. ~10 years).
• Children: tax-free up to ~200 m² if self-use continues; excess area proportionally taxable.
• Plan occupancy, valuation, and fallback rules; beware clawback on early sale or ceased self-use.

Related: Real estate & business assets

5) Business relief (§§13a/13b ErbStG)

• 85% (regular) or 100% (option) exemption for qualifying business assets / shareholdings; retention periods (≈5/7 yrs).
• Watch wage-sum tests, passive assets, cash thresholds, and restructuring effects.
• Align with US FMV valuation and potential discounts; document eligibility and monitoring.

6) Liquidity planning for US estate tax

• Estimate potential US estate tax and any state tax early; secure liquidity (cash, life insurance, facility lines).
• Avoid forced sales by staging distributions or using executor powers; map due dates & interest risks.
• Synchronize with German filing and §21 timing to credit foreign tax efficiently.

See also: Coordination & §21 credits

7) Multi-heir optimization

• Allocate assets to beneficiaries with higher allowances / lower rates where appropriate.
• Use legacies vs. heirship shares to steer situs exposure and liquidity.
• Consider executor-led staging to fund forced-share or foreign-tax cash needs.

8) Asset location & debt allocation

• Place assets mindful of situs rules (DE vs. US) to reduce overlap and maximize treaty/§21 relief.
• Match debt to assets where deductible and respected by both systems; document purpose and security.
• For property and company shares, align valuation basis (BewG vs. FMV) and keep consistent appraisal evidence.

Deep dive: Real estate & business

9) Trusts & foundations (when and how)

• US trusts require careful German classification (transparent/non-transparent); avoid unintended tax leakage.
• Foundations (Stiftungen) can centralize governance and mitigate cross-border friction if designed correctly.
• Coordinate legal, tax, and administration early; define beneficiary rights and distribution policies.

Read more: Trusts & Foundations (cross-border). For implementation: Foundation structuring · Foundation management.

Next steps

Related resources: Treaty (Germany–US) · Real estate & business · Executor & administration · FAQ