German tax perspective · Germany–USA
Inheritance & gifts between Germany and the United States
An inheritance or gift involving the United States can be subject to German inheritance or gift tax even where the deceased, donor or a substantial part of the assets is located in the U.S. The key issues are German tax liability under the ErbStG, the separate Germany–U.S. estate, inheritance and gift tax treaty, the type of property transferred and, for trust structures, the interaction with German inheritance tax and the attribution rules of Section 15 AStG.
German inheritance and gift tax
The analysis starts with German taxing jurisdiction
Germany can generally impose unlimited inheritance or gift tax where the deceased at the time of death, the donor at the time of the gift or the recipient at the relevant time is a German resident within the meaning of Section 2 ErbStG.
Where unlimited tax liability applies, Germany generally taxes the entire acquisition. This can include U.S. real estate, brokerage accounts, business interests and trust-related assets.
Even if neither the deceased or donor nor the recipient is a German resident, limited German tax liability can still arise for certain German-situs assets.
Three levels of analysis
How a Germany–U.S. inheritance or gift case is structured
German tax liability
Residence, habitual abode, German citizenship following emigration and, where relevant, German-situs property determine whether Germany taxes the worldwide acquisition or only specific assets.
Germany–U.S. treaty
The separate estate-and-gift-tax treaty determines in particular treaty residence, allocation of certain asset categories and the method used to relieve double taxation.
German tax calculation
Valuation, personal allowances, tax class, tax rate, business-property relief and any credit for U.S. tax are then determined under German domestic law and the treaty.
Estate & gift tax treaty
Inheritance and gift tax is governed by a separate Germany–U.S. treaty
The Germany–U.S. income tax treaty is not the relevant treaty for inheritance and gift tax. Germany and the United States have a separate convention covering estate, inheritance and gift taxes.
From the German perspective, three questions are particularly important: Where is the deceased or donor resident for treaty purposes? Which country may tax particular asset categories? And which country must grant a credit for tax imposed by the other country?
- Article 4: treaty residence and tie-breaker
- special ten-year rule in certain migration cases
- Articles 5–9: allocation of asset categories
- special rules for real estate and permanent-establishment property
- Article 11: relief from double taxation
- Article 12: special relevance for estates and trusts
Article 11
The treaty often provides a tax credit rather than a complete exemption
A common misconception is that a tax treaty automatically prevents Germany from taxing an inheritance or gift. In particular, where the heir or donee is resident in Germany, Germany can continue to tax the entire acquisition.
If the United States also has a taxing right under the treaty, the next question is whether and to what extent U.S. estate or gift tax can be credited against German inheritance or gift tax.
A U.S. income tax should not simply be treated as equivalent to an estate or gift tax for this purpose.
U.S. trusts: proposed reform of Section 15 AStG
A U.S. trust should not be analyzed solely under German inheritance and gift tax law. Under current law, Section 15 AStG can already result in ongoing German attribution taxation for foreign family foundations and comparable pools of assets.
In November 2025, the German Federal Ministry of Finance published a draft for a substantial reform of Section 15 AStG. The proposed rules address, among other matters, the relevant group of beneficiaries, the exemption test, downstream foreign companies and foundations, and the later treatment of income that has previously been attributed for German tax purposes.
Of particular relevance to U.S. trusts, the proposed exemption test would no longer be limited to EU/EEA structures. It is intended to become available for third-country structures as well where the foreign arrangement is not based on an artificial arrangement and the necessary international exchange of information is available.
Important: The proposed reform is currently a legislative proposal. Until legislation enters into force, the existing version of Section 15 AStG must be distinguished from the proposed new rules.
Transfer to the trust
The first question is whether assets have effectively been transferred to an independent pool of assets for German inheritance and gift tax purposes or remain attributable to the settlor.
Ongoing trust income
Section 15 AStG can attribute trust income to a German taxpayer even where the trust has made no actual distribution.
Trust distributions
Distributions can be relevant for German gift tax, particularly under Section 7(1) No. 9 ErbStG. German income-tax consequences must also be reviewed separately.
Termination and distribution of trust assets
The termination of a trust and transfer of trust property to beneficiaries can trigger a separate German inheritance or gift tax event.
German Federal Fiscal Court
Important decisions involving U.S. estates and trusts
German tax treatment of U.S. trusts in particular has been shaped significantly by decisions of the Bundesfinanzhof, Germany's Federal Fiscal Court.
Distributions from a U.S. trust
The BFH treated distributions from a U.S. trust to an intermediate beneficiary as potentially subject to German gift tax and included distributed trust income as well as trust principal.
Who qualifies as an intermediate beneficiary?
The BFH clarified the circumstances in which a trust beneficiary can qualify as an intermediate beneficiary and emphasized the importance of rights arising under the applicable foreign trust law.
Whether trust assets are truly independent
If the settlor retains such extensive control that the trust cannot freely and effectively dispose of the assets, the property may continue to be attributed to the settlor for German inheritance tax purposes.
Termination of a trust
The relevant tax event can depend on when the restricted trust assets effectively pass to the ultimate beneficiary under the applicable foreign law.
U.S. income tax is not automatically creditable inheritance tax
U.S. Federal Income Tax Withheld was not creditable against German inheritance tax under Section 21 ErbStG or the Germany–U.S. estate tax treaty.
Treaty rules and a German-resident recipient
The decision illustrates the importance of the separate residence and taxing-right provisions of the estate-and-gift-tax treaty for recipients living in Germany.
Detailed Germany–U.S. guidance
Detailed tax guides are currently available in German
The English overview explains the structure of Germany–U.S. inheritance and gift tax cases. More detailed articles on treaty residence, U.S. assets, trusts, real estate, business interests and individual cross-border scenarios are currently published in German.
U.S. tax side
Taxrep.de covers U.S. estate & gift tax only to the extent necessary for the German analysis
For German tax purposes, it may be necessary to determine whether U.S. estate or gift tax was actually imposed, which property the tax relates to and whether it can be credited against German tax under Article 11.
The standalone calculation of U.S. federal estate tax and gift tax, U.S. exclusions, Forms 706 and 709 and other U.S. filing requirements are covered separately on taxrep.us.
German personal allowances
Personal allowances are determined under German law
€500,000
Personal allowance for spouses and registered partners.
€400,000
Personal allowance particularly for children.
€200,000
Personal allowance for grandchildren where no higher allowance applies.
In addition to personal allowances, the German tax class, applicable tax rate, prior acquisitions within ten years, valuation rules and potential business-property relief must be considered.
Common mistakes
Issues frequently overlooked in U.S.-connected inheritance and gift cases
Looking only at where the deceased lived
The German residence of the heir or donee can itself trigger comprehensive German inheritance or gift taxation.
Applying the income tax treaty
Estate, inheritance and gift taxes are governed by a separate treaty with its own rules.
Assuming the treaty means exemption
Double taxation is frequently relieved through a tax credit rather than by completely eliminating German taxation.
Treating U.S. income tax as estate tax
Not every tax imposed in the United States is creditable against German inheritance tax under Article 11 or Section 21 ErbStG.
Reviewing a trust only under inheritance tax law
In addition to inheritance and gift tax, German income tax and Section 15 AStG can create separate ongoing taxation.
Automatically following the U.S. classification of a trust
A U.S. classification such as grantor trust or revocable trust does not automatically determine the treatment of the arrangement under German tax law.
Frequently asked questions
Inheritance & gifts between Germany and the U.S.
Do I have to pay German inheritance tax if I inherit from the United States?
Does the normal income tax treaty apply to inheritances?
What does the estate-and-gift-tax treaty regulate?
Can Germany tax even if the deceased lived in the U.S.?
Is U.S. estate tax always creditable against German inheritance tax?
How are distributions from a U.S. trust treated in Germany?
Is there German case law on U.S. trusts?
Is Section 15 AStG being changed?
Related topics
Further guidance
Germany–U.S. tax advice
Are you planning a gift or dealing with a cross-border inheritance?
We analyze German inheritance and gift tax, application of the Germany–U.S. estate-and-gift-tax treaty, treaty residence and asset allocation, the credit of U.S. taxes and, for trust structures, the German inheritance tax, income tax and AStG treatment.
Schedule an initial consultation