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German heirs uncover legal ways to slash inheritance taxes and claim IRS refunds

A landmark court decision could put money back in your pocket. Discover how heirs are reclaiming overpaid taxes—and avoiding future bills—with smart legal moves.

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1 min read
In this image we can see a wooden house, here is the pillar, here is the window, here is the wall.
In this image we can see a wooden house, here is the pillar, here is the window, here is the wall.

German heirs could save significantly on inheritance taxes by understanding the law and seeking expert advice. Recent rulings and strategies offer opportunities for tax savings and refunds.

The Supreme Administrative Court recently declared that taxing inherited shares is illegal. This means that heirs who have overpaid taxes may be eligible for irs refunds. Previously, selling inherited shares required paying income tax until early 2025.

There are several legal ways to save or avoid inheritance tax in Germany. One strategy is to utilize extensive tax exemptions for business assets (Betriebsvermögen). Heirs of family businesses can often pay little or no inheritance tax if they keep the business operational and maintain payroll for at least seven years. Another method is to make early gifts to exploit personal tax-free allowances that reset every ten years. Additionally, applying for reductions if the ultimate heir has a closer relationship to the first deceased spouse (Schlusserbenbegünstigung) can be beneficial. Requesting tax deferrals on inherited real estate can also help avoid forced sales, especially when liquidity for tax payment is lacking.

Transferring assets while still alive does not save money on taxes but can prevent disputes among heirs. Selling the entire inherited share, including property, before dividing the estate can avoid capital gains tax.

Thousands of Portuguese citizens may be overpaying taxes when receiving or passing on an inheritance. Understanding and utilizing these legal strategies can lead to substantial savings or refunds. It is recommended to consult with legal experts to navigate the complex tax landscape and ensure compliance with the latest rulings.

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