GERMANY Law and Practice Contributed by: Christian von Oertzen and Philipp Windeknecht, Flick Gocke Schaumburg
2. Succession 2.1 Cultural Considerations in Succession Planning The transfer of assets through generations is regu - larly performed with control rights in favour of older generations, especially if minors or inexperienced persons are involved. The donor of such assets can retain a usufruct right on the transferred assets, so that they can claim the emoluments of the assets after the transfer. The withholding of a usufruct right is an estate planning strategy that has been practised for hundreds of years. The insertion of broad reclaim regulations in gift agree - ments or the appointment of executors in last wills, as well as the establishment of binding partnership structures, are used to divide control and wealth. 2.2 International Planning Advising high net worth individuals and their families has become an international matter, as younger gen - erations are often not as deeply rooted in their native countries as former generations were. Nowadays, family members frequently change their life circum - stances in accordance with their study and business plans, and it is not uncommon for children of high net worth individuals who have spent several years abroad to be married to partners of other nationalities. Consequently, estate structuring requires the interac - tion of estate planning teams from different jurisdic - tions. One of the major issues in this area concerns exit tax planning. The cross-border donation of business assets can trigger gift tax as well as exit tax. Man - agement holding partnerships are used in an effort to combat this tax burden. 2.3 Forced Heirship Laws The German forced heirship regime depends on the applicable succession law. The EU Directive on suc - cession has been applicable since 17 August 2015, meaning that in principle the succession law of the last habitual residence of the deceased applies. However, the testator has the right to opt for the laws of the testator’s citizenship in the testator’s last will. If the testator had their last domicile in Germany or was a
1.5 Taxation of Real Estate Owned by Non- Residents and Non-Citizens The limited inheritance and gift tax liability is appli - cable when a non-resident, non-citizen directly owns real estate situated in Germany. The same applies to German real estate held via a partnership. However, a ruling of the German fiscal court held that a bequest of German real estate was not subject to limited inher - itance tax liability. Following the ruling, the German legislature amended the IGTA to put domestic and foreign legatees on an equal footing. Liabilities linked to real estate may be deducted from the taxable acquisition. In the case of limited tax liabil - ity, a pro rata deduction of debts and encumbrances has been possible since 2024, even if they are not economically related to assets that are subject to lim - ited tax liability. The transfer of foreign corporations holding German real estate is not subject to German inheritance and gift tax. Rental income derived from German real estate is generally subject to German income tax. 1.6 Stability of Tax Laws The German transfer tax regime is currently in a rather stable phase. Germany elected a new federal parlia - ment ( Bundestag ) in 2025, with a government led by the Christian Democratic Union. So far, no major changes in transfer taxes have been announced. However, it remains unclear if the gift and inheritance tax exemptions for business assets are constitutional. It can be expected that within the next two years the German Federal Constitutional Court will render a decision in this regard. 1.7 Transparency and Increased Global Reporting Since July 2020, there has been a reporting obliga - tion for cross-border tax arrangements in Germany. Moreover, there is a publicly accessible transparency register in Germany. German-registered commercial partnerships and legal persons governed by German private law, as well as German-based trustees, must report their beneficial owners or beneficiaries.
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