[REVISION HISTORY]

German inheritance, property law & tax trends

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2026-10-22 21:02 UTC → 2026-10-26 04:43 UTC · added ~~removed~~

In October 2026, the German Federal Constitutional Court commenced hearings regarding inheritance tax, addressing two primary legal challenges. The first involves a motion from Bavaria, which argues that the federal government lacks the authority to regulate inheritance tax and seeks to allow individual states to set their own rates and exemptions. The second challenge focuses on a constitutional complaint regarding the tax treatment of business assets. Recent data from the Federal Statistical Office (Destatis) shows that inheritance and gift tax revenues reached a record 21.4 billion euros in 2025, a 60.8 percent increase from the previous year. This surge was largely driven by large wealth transfers; taxes on transfers of at least 20 million euros more than doubled. ~~However, economist Julia Jirmann noted~~ New Destatis data highlights a ~~discrepancy, stating that while assessed taxes reached record levels, the actual amount collected was only 15 billion euros due to significant exemptions. One notable case involved the death~~ profound regional divide: in 2025, 95 percent of ~~billionaire Heinz Hermann Thiele, which~~ all taxable assets transferred through inheritances and gifts were concentrated in western states, totaling approximately 142.5 billion euros. In contrast, eastern states and Berlin accounted for ~~nearly 4~~ only 8.0 billion ~~euros~~ euros. This disparity has fueled calls from Elisabeth Kaiser, Federal Commissioner for Eastern States, for a ‘basic inheritance’ (Grunderbe) to provide young people in ~~assessed taxes.~~ the east with starting capital, as well as a financial equalization mechanism using inheritance tax revenues. The debate over exemptions has intensified. The Institute for Macroeconomics and Economic Research (IMK) suggested that exempting business assets is not economically necessary to secure jobs and warned that such privileges may distort entrepreneurial decisions. Critics point out a disparity where large-scale heirs may pay an average tax rate of approximately 2.5 percent, while smaller inheritances face much higher rates. Conversely, While the Federation of German Industries (BDI) and the DIHK maintain that relief is necessary to protect businesses with illiquid ~~assets. As the First Senate of~~ assets, critics like the ~~Federal Constitutional Court reviews~~ German Trade Union Confederation (DGB) argue these ~~regulations, the proceedings are~~ exemptions act as a massive subsidy. The court is specifically ~~examining~~ scrutinizing the ‘Verschonungsbedarfsprüfung’ (relief requirement test) and whether current ~~exemptions~~ rules violate the principle of equality under Article 3 of the Basic Law. ~~The court~~ A ruling is ~~scrutinizing relief allowances, asset demarcation rules, and the tapering model for large estates.~~ expected in 2027.

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