Transfer of inheritance tax privileges

September 13, 2024

Members of a community of heirs can transfer business assets and real estate to each other as part of the distribution of the estate. In the context of such a distribution, the corresponding tax privileges for business assets (section 13a ErbStG), residential real estate (section 13c ErbStG) or owner-occupied real estate (section 13 (1) no. 4c ErbStG) can also be transferred.

However, the tax authorities have so far required the estate to be settled and divided within six months of the inheritance (H E 13a.11 of the notes on the 2019 inheritance tax guidelines).

In its ruling of 15 May 2024 (II R 12/21), the Federal Fiscal Court has now contradicted this administrative opinion: It is therefore not necessary to divide the estate within a period of 6 months.

If the decision to divide the estate and to transfer in the process favoured (business) assets in exchange for non-favoured assets is based on a new decision by the community of heirs, who initially left the estate undivided at their own will, the transfer is not favoured.

For the preferential transfer under Section 13 (1) no. 4c sentence 4 ErbStG, it is necessary that the tax exemption under Section 13 (1) no. 4c sentence 1 ErbStG applies at all to the assets acquired during the division of the estate. The acquisition must therefore relate to a dwelling that the acquirer intends to use as their own without undue delay. The Senate considers a period of six months after the inheritance to be appropriate for this. The subsequent distribution of the estate, on the other hand, does not have to take place within this period of time.