Last updated: 7 Nov 2025

Germany–US Inheritance: US State Estate/Inheritance Taxes

Where a US state estate or inheritance tax applies in addition to (or instead of) US federal estate tax, it can be part of the foreign death duties credited in Germany under §21 ErbStG — provided it taxes the same foreign asset slice that Germany includes in the assessment.

1) State tax landscape (orientation)

Some US jurisdictions impose an impôt sur les successions (on the estate) and a few impose an droits de succession (on recipients). A small number apply both. Below are illustratif states practitioners frequently encounter in Germany–US files.

This is not an exhaustive list. Always confirm the current rule set for the relevant state(s) and year of death.

2) How state taxes feed into Germany’s §21 credit

• Concept: Germany may credit foreign death duties (federal and/or state) paid on the same foreign assets included in the German assessment.
• Credit ceiling: For each foreign slice (here: US assets), the credit is capped at the German tax attributable to that slice.
• Estate vs. inheritance tax: If a state imposes à la fois (e.g., estate and inheritance), you can include both payments for the slice—just don’t exceed the German cap.
• Per-beneficiary lens: German inheritance tax is beneficiary-based. Where a state levy is recipient-based (inheritance tax), align the state assessment and payment proof to the same beneficiary.

3) Allocation across multiple states

When assets or domicile ties span several states:

• Map the situs of each asset (e.g., real estate by location; brokerage by estate domicile rules; business interests by state law).
• Track payments by state (and county, if applicable) and by beneficiary where a state inheritance tax applies.
• Compute the German cap on a US-slice basis (Germany credits by foreign country). Internally, keep a sub-allocation schedule by state to tie proofs to assets.
• Avoid double counting: If federal estate tax and a state tax both apply to the same US slice, the sum of those payments is still limited by the German cap for the US slice.

4) Worked mini-examples

A) WA real estate + DE securities (child as heir)

• Assets: WA house €800k; DE brokerage €400k. Child (Class I). No debts. German taxable base after allowance = €(800k+400k−400k)=€800k. German rate (Class I, ≤€600k? exceeds → 19%). German tax ≈ €800k×0.19=€152k.
• US slice proportion (by gross): €800k/€1.2m = 66.67% → German tax attributable to US slice ≈ €152k×66.67% ≈ €101k.
• WA estate tax paid on house: €95k → Credit in Germany = €95k (min of €95k and €101k). German tax payable ≈ €152k−€95k=€57k.

B) MD estate + inheritance components (spouse as heir)

• Assets: MD brokerage €600k only. Spouse (Class I). German base after €500k allowance: €100k at 15% → German tax €15k.
• Foreign duties paid: MD estate €10k + MD inheritance €4k = €14k on the same slice.
• German cap on US slice = €15k → Credit = €14k; residual German tax €1k.

C) PA inheritance tax for siblings (Class II in DE)

• Assets: PA bank €300k to a sibling. German allowance €20k → taxable €280k at Class II (20% up to €300k) → German tax €56k.
• PA inheritance tax paid (recipient-based): €27k. Cap = German tax on US slice (here, entire base) → €56k. Credit €27k; German tax due €29k.

These are simplified illustrations. In practice, include debts, lump-sum costs, special exemptions, and any federal estate tax payments in the §21 worksheet.

5) Documents Germany expects

• State assessment(s): official notices (estate/inheritance) per state; if county-level, include the court order.
• Proof of payment: receipts, cleared bank statements, IRS/state transcripts, or county confirmations.
• Situs memo: mapping of US-situs assets by state; link each asset to the corresponding assessment.
• Allocation schedule: summary that totals state + federal payments for the US slice versus the German tax attributable to that slice.
• Translations & apostilles: where requested by the Finanzamt; keep originals and certified copies.

6) Common pitfalls

• Using state totals without asset mapping: Results in §21 queries. Always tie payments to the assets/beneficiaries Germany taxes.
• Double counting federal + state beyond the cap: The German credit is capped—document the cap computation.
• Ignoring inheritance-tax beneficiaries: State inheritance taxes can differ by recipient; reflect this also in German per-beneficiary filings.
• Mismatched dates/FX: Align date-of-death values, payment dates, and FX conversion methods across filings.

Next steps & services

Trusts & foundations support: Foundation structuring - International executor