Those who inherit generally have to pay inheritance tax. Estate liabilities can be asserted in the context of inheritance tax. Whether something is considered to be an estate liability may be debatable.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: The costs pertaining to the administration of an estate are not tax-deductible. That was the ruling of the Fiscal Court of Baden-Württemberg dated December 18, 2014 (Az.: 7 K 1377/14).
In the case in question, the heirs to a neglected building and plot of land brought an action against the tax assessment notice. The testator was a so-called hoarder. Clearing out all of the rubbish would have cost around 20,000 euros and only afterwards could the plot of land have been sold. The heirs wanted to claim the costs for this as estate liabilities against tax.
However, the Fiscal Court of Baden-Württemberg reached a different decision. It stated that it is only the costs which are incurred by heirs in direction connection with the liquidation, settlement and distribution of the estate or obtaining the acquisition that are considered to be estate liabilities. This does not encompass costs pertaining to the administration of the estate, in this case for the removal of the rubbish.
Estate liabilities typically include, for instance, the cost of reading a will, issuing a certificate of inheritance, determining the scope of the inheritance as well as, where applicable, litigation costs. Put simply, the costs incurred for the heir to be able to legally accept his inheritance.
Apart from the estate liabilities, various special regulations have to be observed in the context of inheritance tax. These concern, among other things, the owner-occupied home. The bequeathed owner-occupied home can remain tax-exempt for children or spouses if certain conditions are satisfied.
Since the law of inheritance is constantly changing, sound professional expertise is necessary in order to be able to exploit the room for manoeuvre that exists in inheritance tax. Heirs and communities of heirs can turn to lawyers and tax advisors who are competent in the field of inheritance law to prevent a large proportion of the inheritance ending up in the state’s coffers. At the same time, it should not be forgotten that an inheritance must also be specified in the tax return. Heirs potentially render themselves liable to prosecution for tax evasion if they fail to do so.