Germany anticipates Federal Constitutional Court ruling on inheritance tax

The German Federal Constitutional Court is expected to issue a ruling on inheritance tax laws in early 2025. The decision may significantly impact entrepreneurs, the middle class, and heirs of large estates.

While the principle of exempting business assets during generational transfers is likely to remain, specific rules regarding very large acquisitions exceeding 26 million euros are under scrutiny. Additionally, the “Verschonungsbedarfsprüfung” (relief requirement test) is a central point of contention. Critics argue this mechanism unfairly burdens heirs of large companies by focusing on the heir's private wealth rather than the actual capacity of the business.

Political debate is already intensifying. The SPD has proposed the ‘FairErben’ model, which suggests replacing current exemptions with a one-time lifetime allowance of one million euros and limiting tax-free business assets to five million euros. Meanwhile, Bavaria has advocated for higher exemptions, noting that property values have risen significantly since the last major tax reforms in 2009.