UK & German Inheritance Tax – Seeking Advice

[JoolzMG]

I am a UK citizen currently living in Germany with my daughter since August 2020. I have never worked in Germany and am now a UK pensioner. Before this, my daughter signed a Verpflichtungserklärung (a formal declaration of financial support) for me.

My sibling, also a UK citizen, recently passed away intestate in the UK. The UK government has confirmed that I am the sole beneficiary of their estate. There are probate lawyers handling the estate in the UK. My sibling owned a house in the UK, which may have a mortgage, and possibly other assets. I do not yet know the full value of the estate, but it could exceed the UK inheritance tax threshold.

I would really appreciate advice on the following:

UK Inheritance Tax (IHT) – I understand the estate may be subject to UK inheritance tax if it exceeds £325,000. However, I would like clarification on how this is calculated, particularly if the house has a mortgage.

German Inheritance Tax – As I am currently living in Germany, could I also be liable for German inheritance tax? If so, how is it calculated, and are there any exemptions or tax treaties that might reduce or eliminate double taxation?

Impact of Returning to the UK – If German tax is due, would moving back to the UK before August 2025 (by which point probate may still not be settled) mean I avoid German inheritance tax? Or does my residency status at the time of inheritance determine liability?

Practical Considerations – Are there any additional legal or financial factors I should consider in handling this cross-border inheritance situation?

I would be grateful for any insights from those with experience in UK/Germany inheritance tax matters. Many thanks in advance for your help!

[Fraufruit]

Welcome to hTTi.

I'm sorry I can't help but just wanted to offer my condolences on your loss.

[JoolzMG]

Thank you. That is very kind. It was very unexpected and has come as a complete surprise.

[GaryC]

On the UK side can I ask if your sibling was married and pre-deceased by their spouse? If so, any unused Nil Rate Band (NRB) from the first-deceased can be transferred to the estate of your sibling, giving up to a further £325,000 tax-free amount of estate.

The estate must be valued by valuing all assets and all liabilities/debts, of which a mortgage would be one. Any gifts made within 7 years of death, so far as they exceed £3,000 in any tax year, may be brought back into the estate. If there was a life insurance attached to the mortgage, I am not sure how the maths is done but there is loads of information on GOV UK. Costs of funeral etc can also be deducted in the valuation.

Once the value has been ascertained any value in excess of the NRB and any transferrable NRB from any spouse, is taxed at 40%

I have a feeling we know which member will be able to advise on the German side of things...

[JoolzMG]

Hello. Thank you for replying. She was single all her life with no children. I am the only beneficiary. I am hoping the asset and debt calculation will be fairly straightforward, but you can never take anything for granted.

[PandaMunich]

I am a UK citizen currently living in Germany with my daughter since August 2020.

My sibling, also a UK citizen, recently passed away intestate in the UK. The UK government has confirmed that I am the sole beneficiary of their estate.

German Inheritance Tax – As I am currently living in Germany, could I also be liable for German inheritance tax? If so, how is it calculated, and are there any exemptions or tax treaties that might reduce or eliminate double taxation?

Impact of Returning to the UK – If German tax is due, would moving back to the UK before August 2025 (by which point probate may still not be settled) mean I avoid German inheritance tax? Or does my residency status at the time of inheritance determine liability?

Practical Considerations – Are there any additional legal or financial factors I should consider in handling this cross-border inheritance situation?

I would be grateful for any insights from those with experience in UK/Germany inheritance tax matters. Many thanks in advance for your help!

Sorry, but what matters is where you were resident on the date of her death.
So moving away now won't bring you anything, you still owe German inheritance tax.

The German tax-free allowance for inheritance tax between siblings is only 20,000€.
--> you will have to pay German inheritance tax, which will be reduced by the UK inheritance tax you paid, i.e. you will get a tax credit for them, in accordance with § 21 ErbStG: https://erbsth-bundesfinanzministerium- ... r_pto=wapp

You will have to convert the value of all her assets into € with the €/GBP date that was valid on her death and that amount will have to be declared.

You can calculate the German inheritance tax that will be due here: https://www.smart-rechner.de/erbschafts ... echner.php
You need to change the entry in the first menu to "Schwester/Bruder" since you are the sibling of the deceased.
Input the total value in € of the estate into the field "Privatvermögen".
For example, if the value of the estate on the date of her death was 550,768€, the German inheritance tax (before the UK tax credit) would be 132,675€:

German inheritance tax calculator

SmartSelect_20250314_104052_Chrome.jpg (240.23 KiB) Viewed 2522 times

German inheritance tax calculation for sibling

SmartSelect_20250314_104243_Chrome.jpg (141.41 KiB) Viewed 2522 times

By law, you have to tell the Finanzamt that is responsible for inheritance tax about the inheritance within 3 months of getting to know of the duty to report this to the Finanzamt, see § 30 (1) ErbStG: https://erbsth-bundesfinanzministerium- ... r_pto=wapp
Which would be, because you onlyfound out about this duty today, today 14.03.2025 plus 3 months, i.e. by 14.06.2025.

The contents of this notification that you have to send the Finanzamt are laid down in § 30 (4) ErbStG.
You can also just use this form, which contains all the tjings asked for: https://www.finanzamt.bayern.de/Informa ... en-ges.pdf

You have to send the notification to the Finanzamt that is responsible for inheritance tax for your region, which is not your normal income tax Finanzamt.
You can find out the address of your inheritance tax Finanzamt by inputting your postal code where is says Suchbegriff in the red box here: https://www.bzst.de/DE/Service/Behoerde ... _node.html
In the results, scroll down to "Erbschaft- und Schenkungsteuer" and click on the name of the Finanzamt that is shown to get its postal address.

Since you live in Munich, it is:

• Finanzamt Kaufbeuren m. ASt Füssen
  Remboldstr. 21
  87600 Kaufbeuren

The Finanzamt will then tell you to file a German inheritance tax return, you would file it by the deadline they set you, would then process it and would the issue a German inheritance tax Bescheid which would state how much German inheritance tax you have to pay by what date.

Howver, UK estates take notoriously long to settle, to you may want to schedule a meeting with a German Steuerberater to ask "officially" this question only after you have actually received the money.
And would only count the 3 months from that date.

Because otherwise, you risk having to pay German inheritance tax before you have actually got the money to be able to afford to.
This way you avoid the iterative process of having to correct the inheritance German tax return once you have actually paid the UK inheritance tax, in order to get the German tax credit for it.
Apso, if you only file the German inheritance tax return after you have paid the UK inheritance tax, you could already fill in that amount.

Please note that any income the estate has starting with the date of her death counts as your income under German law.
I know that under UK law, it doesn't, but you also have to follow German law since you live here

Which is why there is article 21 (2) in the double taxation agreement between Germany and the UK which states that any estate income gets considered "yours" and any tax paid by the estate also gets considered as having been paid by you: https://www.bundesfinanzministerium.de/ ... onFile&v=1

Please also read: viewtopic.php?t=22

[JoolzMG]

Thank you so much for your full and comprehensive reply. My sister was actually found dead many months ago. I have only just been told. The estate will have to go to probate I imagine before it is confirmed that I am the sole beneficiary. I have placed all the complicated legal stuff with a team in the UK but I imagine they will know very little about German tax law.
It is all so very sudden and came as quite a shock and I am finding it difficult to absorb the implications of something that I thought would never happen.
Thank you again, I really do appreciate your valuable help.

[GaryC]

Hello. Thank you for replying. She was single all her life with no children. I am the only beneficiary. I am hoping the asset and debt calculation will be fairly straightforward, but you can never take anything for granted.

This might be helpful https://www.gov.uk/valuing-estate-of-someone-who-died