German Federal Fiscal Court clarifies inheritance tax exemption for unintentional loss

The Federal Fiscal Court (Bundesfinanzhof) ruled on 25 February 2026 that heirs may receive an inheritance‑tax exemption when an inherited asset is lost without fault, provided they have taken all reasonable protective measures and continue to pursue any restitution claims. The decision emphasizes that market‑related value declines do not qualify for tax relief and that the exemption is limited to cases of proven non‑culpable loss.

In a separate ruling, the Higher Regional Court of Brandenburg (Oberlandesgericht Brandenburg) held that a forced fine cannot be imposed on an heir who is unable to produce required documents because statutory retention periods have expired, as long as the heir has made all reasonable efforts to obtain the records. The court rejected the imposition of a fine, noting that the measure would not achieve its intended coercive effect.