Cross-border inheritances are no longer a rare exception—they’re a growing reality in an age shaped by international careers, dual residencies, and global family ties. For U.S. beneficiaries with family assets in Germany, the question isn’t just when an inheritance will come, but how it will unfold across two very different legal and financial systems.
Inheritance law in Germany relies on civil law traditions, while the United States operates under common law principles with wide state-by-state variation. Merging both systems introduces real complexity, especially when assets must cross borders. Add the layer of international taxation, bank transfer restrictions, and strict IRS reporting rules, and even a modest inheritance becomes a multi-jurisdictional puzzle.
Understanding what German probate decisions mean for U.S. residents will determine how effectively an inheritance can be received, reported, and integrated into the beneficiary’s financial life. What steps ensure compliance? How is foreign inheritance taxed in the United States? How do you move cash or property across the Atlantic?
This guide walks through the legal, tax, and financial intersections that shape transatlantic inheritance—providing clarity where dual obligations can create confusion.
Understanding German Inheritance Law When Inheriting from the U.S.
German Succession Law in a Few Words
Germany’s inheritance law is governed by the Bürgerliches Gesetzbuch (BGB), specifically Sections 1922 through 2385. It follows the principle of universal succession, meaning heirs automatically inherit both assets and liabilities of the decedent upon death. This differs significantly from many U.S. states, which require probate courts to transfer ownership.
In contrast to U.S. rules, where testators enjoy broad testamentary freedom, German law imposes mandatory shares (Pflichtteil) for close relatives, including spouses, children, and sometimes parents. If a will excludes a qualifying heir, that heir can legally claim compensation amounting to 50% of their statutory share. That right applies regardless of the heir’s country of residence, including the United States.
Intestate Succession in Germany: When No Valid Will Exists
When a German citizen dies without a valid will (Testament) or contract of inheritance (Erbvertrag), their assets are distributed according to intestate succession rules under Sections 1924–1936 BGB. These provisions define a hierarchical succession order:
- First order: children and their descendants
- Second order: parents and siblings of the decedent
- Third order: grandparents and their descendants
In the absence of legitimate heirs up to the third degree, the German state inherits the estate. Spouses hold a special status: if community property law (Zugewinngemeinschaft) applies, the surviving spouse usually receives one-quarter in addition to their regular statutory share.
Inheritance Rights of U.S. Citizens under German Law
American citizens named as heirs in a German will or entitled under intestate laws enjoy full legal recognition as beneficiaries. German law does not discriminate based on nationality or place of residence. However, foreign heirs must prove legitimate entitlement through official documentation, particularly if they reside outside the EU.
Transfer of title to a foreign heir is not automatic in practical terms. It requires official certification of heirship, and potentially legal representation within Germany. Property rights—especially concerning real estate—only transfer after formal entry in Germany’s land register (Grundbuch).
The Role of the Erbschein and Nachlassgericht
To legally claim inheritance in Germany, especially for heirs not named in a notarized will, the beneficiary must obtain an Erbschein, or certificate of inheritance. This document is issued by the Nachlassgericht (German probate court), part of the local district court (Amtsgericht) where the deceased resided.
The Erbschein confirms the heir’s right to the estate and is typically required by banks, insurance companies, and land registries before releasing or transferring assets. Applying for an Erbschein involves submitting the death certificate, proof of relationship, and—in some cases—sworn declarations. For U.S. beneficiaries, certified translations of all foreign documents must be included.
In situations where heirs have concerns about estate liabilities, they can formally disclaim the inheritance within six weeks of becoming aware of their status—extended to six months if residing outside Germany. This declaration must be submitted to the relevant probate court.
Is a German Will Recognized in the United States?
Acceptability of Foreign Wills in U.S. Probate Courts
U.S. courts routinely accept foreign wills, including those drafted in Germany, provided certain legal standards are met. The central criteria focus on authenticity, clarity of testamentary intent, and compliance with the legal requirements in the country where the will was executed. In legal terms, U.S. courts apply the “foreign will exception,” particularly under the Uniform Probate Code (UPC), adopted in full or in part by more than 18 states.
Section 2-506 of the UPC allows a will executed in accordance with the laws of the country where it was made to be valid for probate, even if not compliant with U.S. formalities. However, probate judges may scrutinize issues such as witnesses, execution method, and legal capacity under German law. States not using the UPC still regularly rely on principles of comity and case law on international wills.
Certified Translations and Apostille Requirements
For any German will to be reviewed by a U.S. probate court, an official certified translation into English is mandatory. Courts will not admit a will written in German without a certified legal translator attesting to the accuracy of the English version. Translation costs vary by state and length of the document, typically from $100 to $500 for standard 2–4 page wills.
In addition, U.S. courts generally require an apostille under the 1961 Hague Convention to confirm the authenticity of the original German document. German notaries (Notar) or local courts (Amtsgericht) can issue this certification. Without an apostille, the document may be rejected or require time-consuming alternative verification processes.
Types of German Wills and Their Compatibility with U.S. Law
German inheritance law recognizes several will formats, each with different implications for recognition in the U.S.:
- Eigenhändiges Testament (Holographic Will): Fully handwritten, dated, and signed by the testator. U.S. courts in UPC jurisdictions generally accept holographic wills if they comply with German formalities. In states like Texas or California, they may even be valid without witnesses if the handwriting is verified.
- Notarielles Testament (Notarized Will): Drafted and certified by a German notary. This type of will carries high evidentiary weight in U.S. courts. When submitted with a translation and apostille, notarized German wills are typically probated without objections.
- Gemeinschaftliches Testament (Joint Will): Often used by spouses and commonly in the form of a Berliner Testament. Joint wills can create enforceability issues in the U.S., especially if they include mutual binding or irrevocable clauses. Courts assess these case-by-case and may need expert testimony on German contract law before granting probate.
When presenting any of these wills in the U.S., family members or beneficiaries should retain counsel experienced in both civil law and U.S. estate litigation. Probate courts often require affidavits from legal professionals familiar with German inheritance law to interpret a foreign testament accurately.
Understanding U.S. Tax Implications When Inheriting from Germany
U.S. Estate Tax and Its Global Reach
The United States imposes an estate tax on the total value of a deceased person’s worldwide assets if they were a U.S. citizen or resident at the time of death. This includes real estate, financial accounts, and other tangible or intangible property located both in and outside the U.S.
For 2024, the federal estate tax exemption is $13.61 million per individual. This means no federal estate tax applies unless the decedent’s global estate exceeds that threshold. If a U.S. citizen dies with assets over this limit—including property inherited from German relatives earlier in life—then those previously acquired foreign assets may contribute to a taxable estate.
However, foreign decedents—individuals who were neither U.S. citizens nor residents at the time of death—are not subject to U.S. federal estate tax on assets located outside the U.S. Only their U.S.-situs assets, such as American real estate or shares in U.S. corporations, are exposed to potential estate tax, and they receive a much smaller exemption, generally just $60,000.
No Federal Inheritance Tax, but State-Level Exceptions Exist
The federal government does not levy an inheritance tax on beneficiaries. Therefore, U.S. individuals receiving an inheritance from a German estate will not pay inheritance tax to the federal government on what they receive.
However, six states—Nebraska, Iowa, Kentucky, Pennsylvania, Maryland, and New Jersey—do charge inheritance taxes. The rate and exemption depend on the relationship between the decedent and the beneficiary. In most cases, direct heirs such as children or spouses fall into the lowest tax brackets or are fully exempt, but distant relatives and unrelated parties may face higher rates.
Beneficiaries residing in one of these states should check relevant thresholds and rates to determine any potential state-level tax obligations.
Receiving an Inheritance from a Non-U.S. Person
When a U.S. citizen or resident inherits directly from a non-U.S. decedent—such as a German parent or relative—the inheritance itself is not taxable in the U.S. There is no federal tax imposed on the receipt of foreign inheritance funds, whether in cash, securities, or property.
This exemption applies regardless of the size of the inheritance. However, reporting obligations may still exist (covered in a later section). The tax rules focus less on the act of inheritance and more on what happens next—especially if the inherited assets are sold or generate income.
Step-Up in Basis and Its Impact on Capital Gains
Assets inherited by a U.S. beneficiary receive a step-up in basis to their fair market value as of the date of the foreign decedent’s death. This adjustment has a crucial effect on capital gains tax.
For example, suppose a German parent bought a Munich apartment decades ago for €100,000 and it was worth €900,000 at the time of their death. When a U.S. beneficiary inherits the property, the cost basis is stepped up to €900,000. If the property is later sold for €920,000, the capital gains taxable in the U.S. would be calculated only on the €20,000 difference—not the entire increase since the original purchase.
This treatment applies regardless of whether the inherited asset is located in Germany, the U.S., or another country. The step-up effectively resets unrealized appreciation to zero for U.S. tax purposes, limiting capital gains taxes upon later sale.
This principle also applies to financial securities, business interests, and other eligible capital assets.
Double Taxation Treaties Between Germany and the USA
Overview of the German-U.S. Estate Tax Treaty Provisions
The 1980 Estate and Gift Tax Treaty between Germany and the United States—officially titled the Convention for the Avoidance of Double Taxation with Respect to Taxes on Estates, Inheritances and Gifts—provides an essential legal structure for cross-border inheritances. This bilateral agreement clearly allocates taxing rights between the two countries to prevent individuals from being taxed twice on the same inherited assets.
Under Article 4 of the treaty, each country retains the right to tax assets situated within its territory. However, the treaty grants primary taxing rights to the country of domicile of the deceased for intangible property, such as shares or investment accounts, while real property is typically taxed in the country where it is located. When both countries claim taxing jurisdiction, specific tie-breaker rules apply to determine domicile based on factors like permanent home, center of vital interests, and citizenship.
Eliminating Double Taxation on Inherited Foreign Assets
Article 11 of the treaty introduces mechanisms to eliminate or reduce double taxation. When an estate is subject to German inheritance tax and U.S. estate tax simultaneously, tax credits come into play. The country of the heir’s tax residence often allows a credit for inheritance or estate taxes already paid to the other country, but only up to the amount attributable to the foreign asset’s value.
For instance, if a U.S. beneficiary inherits German real estate and both countries tax the property, Germany would exercise primary taxing rights due to situs. The U.S. would then grant a foreign tax credit for the portion of U.S. estate tax that applies to that asset, based on form 706 and related schedules.
How the Treaty Determines Tax Residency and Domicile Relevance
Domicile, not citizenship or residency alone, drives the allocation of taxing rights under the treaty. The treaty applies if the deceased and/or the beneficiary is domiciled in one of the two countries. Determining domicile involves examining multiple criteria, including:
- Duration and nature of physical presence in either country
- Location of the person’s main home and family connections
- Nationality, habitual abode, and business interests
A U.S. citizen residing permanently in Germany with financial and social ties to Germany will more likely be deemed domiciled in Germany, triggering German primary taxing rights. Conversely, a German citizen living long-term in the U.S. may be treated as domiciled in the U.S. for treaty purposes, especially if the estate consists largely of intangible U.S.-based assets.
Claiming Foreign Tax Credits Under the Treaty
Claiming credit for inheritance or estate taxes paid to Germany involves detailed documentation. U.S. residents must file IRS Form 706 for estate tax purposes and submit supplementary schedules to document foreign tax payments. The U.S. allows a foreign death tax credit under IRC Section 2014, but only if the tax was imposed on property that is also taxed by the U.S.
To support the credit claim, the estate executor must provide:
- Official tax assessments issued by the German tax authority (Finanzamt)
- Proof of payment with bank statements
- Valuations and asset location confirmations translated into English
Expect processing delays if translations or asset valuations do not meet IRS standards. Inconsistencies in asset classification between the two tax codes—such as treatment of retirement accounts or business shares—also affect credit eligibility. Close coordination between German legal counsel and U.S. tax advisors ensures the proper application of the treaty’s credit-relief provisions.
Filing Requirements for Foreign Inheritances in the U.S.
Form 3520: Reporting Inheritances from Foreign Persons
U.S. citizens and residents who receive an inheritance from a foreign individual are required to report certain foreign gifts and bequests to the Internal Revenue Service. Specifically, Form 3520 must be filed if the total value of the inheritance exceeds $100,000 during the tax year.
This threshold applies to the aggregate value of property received from a nonresident alien individual or a foreign estate. There’s no income tax on the inheritance itself, but the reporting obligation is non-negotiable, and the form must detail:
Deadlines and Penalties
Form 3520 must be filed by the due date of the taxpayer’s income tax return, including extensions. For most individuals, that’s April 15, with an automatic extension until October 15 if requested.
Failing to file the form on time—or providing incomplete or inaccurate information—triggers a penalty of 5% of the amount of the foreign inheritance for every month the form is late, up to 25%. In many cases, the penalty will apply even if the inheritance itself wasn’t taxable.
Foreign Accounts and the FBAR Requirement
If the inheritance includes foreign bank or financial accounts—such as a savings account held in Germany—another reporting obligation comes into play. U.S. persons must file the FBAR (Foreign Bank Account Report) using FinCEN Form 114 if they have a financial interest in or signature authority over foreign accounts with an aggregate value exceeding $10,000 at any time during the calendar year.
This form is not submitted with the IRS tax return but must be filed electronically through the Financial Crimes Enforcement Network’s (FinCEN) BSA E-Filing System by April 15. An automatic extension to October 15 applies if the deadline is missed.
Non-compliance carries significant consequences. Civil penalties can reach up to $10,000 per violation for non-willful failures. Willful violations trigger far steeper fines: up to the greater of $100,000 or 50% of the account balance at the time of the violation.
Interconnected Obligations
Receiving a foreign inheritance worth over $100,000 and holding the money in a German bank account? That scenario activates both Form 3520 and FBAR filing obligations. Missing one or both submissions increases audit risk and exposes the beneficiary to compounded penalties.
Have you determined whether the inherited assets include securities or physical property? Consider how their valuation and structure affect your reporting strategy. The IRS evaluates fair market value, not historical value, so accurate appraisals matter.
Probate and Inheritance Procedure in Germany
Initial Notification to Heirs
When a person dies in Germany, the probate process starts with the notification of heirs. If a last will exists and has been deposited with a German probate court (Nachlassgericht), the court opens and reads it. All identified heirs listed in the will—or those recognized under intestate succession—receive official notice of their inheritance rights.
This formal communication, typically by mail, includes either a copy of the will or a legal summary outlining inheritance shares. Heirs living in the United States should expect delays due to cross-border correspondence, but under German law, they must be given sufficient time to respond before further steps are taken.
Applying for the Certificate of Inheritance (Erbschein)
Heirs generally must apply for an Erbschein—a German certificate of inheritance—to prove their legal status. Financial institutions, real estate registries, and public offices in Germany require it before allowing any claims or asset transfers. This document is issued by the local probate court upon request.
Applicants may submit a petition directly to the court or through a notary. When multiple heirs exist, each can apply individually, or one can apply on behalf of others by submitting a notarized power of attorney. If a U.S. beneficiary applies from abroad, the German court may require documents translated into German and certified with an apostille under the Hague Convention.
Role of a German Notary and Probate Court
The Nachlassgericht (local probate court) supervises the inheritance process, but the involvement of a notary (Notar) is common when formalizing declarations or authenticating documents from abroad. The court evaluates the will, verifies heir eligibility, and administers the estate if necessary—including managing debts and asset distribution.
For foreign heirs, coordination between attorneys in both countries is often essential. A German notary may help facilitate cross-border legal steps, especially for document verification and communication between the court and heirs residing in the U.S.
Required Documents for U.S. Beneficiaries
To complete the inheritance process and obtain an Erbschein, American heirs must present specific documentation:
- Valid identification: A notarized and apostilled copy of the passport.
- Proof of family relationship: Birth certificates, marriage certificates, or other civil status documents, translated and apostilled.
- Acceptance declaration: An official statement of inheritance acceptance (Annahme der Erbschaft), typically signed before a German notary or a U.S. notary with apostille.
- Will and death certificate: If the will was made privately, the original or a certified copy, plus the death certificate, must be submitted.
Have you received an inheritance notification from Germany? The next step will involve preparing these legal documents correctly to apply for the Erbschein—essential for gaining access to any part of the estate.
Managing Currency and Financial Procedures in a German-to-U.S. Inheritance
Transferring Foreign Assets: Legal and Banking Procedures
German banks will not release inherited funds before all legal documentation is in order. That includes a German certificate of inheritance (Erbschein) or a notarized will with probate approval. Once verified, banks process the transfer to a U.S. beneficiary’s account, typically via international wire through the SWIFT network. However, the beneficiary must provide identification, banking details, and often a tax identification number.
If real estate or securities form part of the estate, their liquidation may involve additional steps. Property sales, for instance, require notary supervision in Germany, and proceeds can only be transferred once all land register updates are completed.
Currency Exchange: Converting Euros to U.S. Dollars
Exchange rates fluctuate daily and affect the final sum received in U.S. dollars. German banks usually convert funds to USD before transfer, unless instructed otherwise. The European Central Bank provides benchmark rates, but individual banks add a margin—often between 1.5% and 3%—above the interbank rate. U.S. beneficiaries seeking more control sometimes employ foreign exchange brokers to obtain better rates and lock in conversion values.
- The Bundesbank exchange rate archives offer historical data for audit or reporting purposes.
- For large transfers, using forward contracts via FX specialists can mitigate currency risk.
Handling Transfer Delays and Compliance Checks
Banks on both sides enforce strict anti-money laundering (AML) and anti-terrorism financing regulations. OFAC (Office of Foreign Assets Control) oversees funds flowing into the United States and may block or flag transactions that originate from or involve sanctioned entities. Though Germany is not a high-risk jurisdiction, compliance departments still scrutinize large or unusual transfers.
Delays often arise when:
- The origin of funds lacks adequate documentation.
- The transfer exceeds automated threshold limits, triggering enhanced due diligence.
- Recipient information is incomplete or mismatched.
Proactive communication with both the sending and receiving banks will minimize waiting times. Submitting all estate-related documentation in advance accelerates internal review procedures.
Reporting Requirements: IRS Forms and Bank Declarations
Any U.S. person receiving more than $100,000 from a foreign individual must file IRS Form 3520. The form isn’t taxed in itself, but failure to report can result in penalties starting at $10,000. If inherited funds are deposited into foreign accounts controlled by the beneficiary, Form 8938 may also be required under FATCA regulations.
U.S. banks may file Currency Transaction Reports (CTRs) or Suspicious Activity Reports (SARs) for large inbound wires, particularly those over $10,000. The beneficiary doesn’t need to take action in those cases, but may be asked to clarify the nature of the deposit.
- Form 3520 is filed with the annual tax return but sent separately to the IRS Austin Service Center.
- Form 8938 applies when worldwide foreign financial assets exceed $50,000 for single filers ($100,000 for joint returns).
Both forms serve informational compliance purposes and do not in themselves trigger taxation.
Managing and Transferring Foreign Assets to U.S. Beneficiaries
Types of Assets Commonly Inherited from Germany
U.S.-based beneficiaries often inherit various types of assets located in Germany. These may include:
- Real estate – family homes, investment properties, or agricultural land
- Bank accounts – savings, checking, and fixed deposit accounts held in German financial institutions
- Securities and investments – shares in German companies, German government bonds, and mutual funds
Each category presents unique legal and logistical challenges. For example, transferring real property may require compliance with German land registry procedures and physical signatures from heirs or their representatives. In contrast, liquidating a bank account or moving securities involves proof of inheritance, as well as tax and identity documentation.
Keeping or Liquidating Foreign Assets
Beneficiaries must decide whether to retain the inherited German assets or liquidate them and transfer proceeds to the U.S. This decision depends on financial goals, market conditions, and regulatory preferences.
- Retention may be attractive if the beneficiary wishes to preserve a family home or expects future capital appreciation.
- Liquidation provides simplified asset management and ease of transfer, especially if the heir does not plan to maintain financial ties with Germany.
If the assets are generating income, such as rental property or dividends, U.S. beneficiaries must declare that income to the IRS. Moreover, holding foreign investments may trigger additional reporting duties, including the FBAR (FinCEN Form 114) and Form 8938.
Tax Considerations When Selling Inherited Property in Germany
When a U.S. beneficiary sells inherited real estate in Germany, several tax implications arise. Germany generally exempts inherited property sales from capital gains tax if the decedent owned the property for over ten years, or the property was used exclusively for private residential purposes by the decedent or the heir.
The buyer and seller must both be registered with the German tax authorities, and the notarial sale process includes mandatory reporting to the German Finanzamt. After sale, the beneficiary may be subject to U.S. capital gains tax on gains exceeding the inherited stepped-up basis, unless a corresponding foreign tax credit is claimed under IRS rules.
Establishing Legal Authority via Power of Attorney or Local Representative
Managing German assets from the U.S. often requires someone on the ground. Beneficiaries can:
- Execute a German-specific power of attorney (Vollmacht) – This empowers a trusted individual to act on one’s behalf in legal and financial matters, including banking and property transactions.
- Appoint a local estate representative (Nachlasspfleger) – Courts may require or facilitate this if the inheritance process is complex or if multiple heirs exist.
German powers of attorney must usually be notarized and sometimes apostilled to be accepted by German authorities or financial institutions. Multi-language documentation and certified translations may also be necessary if issued in the U.S.
Being proactive in assigning local authority ensures that probate proceedings, property sales, and bank account access move forward without unnecessary delay. Have you identified who will represent your interests abroad if you’re not able to travel to Germany yourself?
Cross-Border Experts: The Role of International Estate Planners and Legal Advisors
Involving Cross-Border Specialists from the Start
Estate planning across national borders introduces complex legal, tax, and administrative challenges. Coordinating inheritance from Germany to the U.S. requires early involvement of professionals trained specifically in international estate law. These advisors map out the inheritance landscape and immediately identify conflicts of law, which commonly arise between German civil law and U.S. common law systems.
Armed with this knowledge, they prevent procedural missteps that could delay asset transfers or trigger unexpected tax liabilities. A U.S. beneficiary receiving assets from Germany will benefit from legal advisors who don’t merely interpret domestic regulations but understand how those regulations interact across jurisdictions.
Coordinating Between German and U.S. Legal and Tax Advisors
Effective estate planning across the Atlantic depends on the ability of legal and tax professionals in both countries to align objectives. U.S. advisors guide beneficiaries through IRS requirements and estate tax implications, while German experts handle the Erbschein (certificate of inheritance), asset registration, and local tax filings.
By building a joint strategy, coordinated teams ensure that documents such as wills and powers of attorney hold legal weight on both sides. They also examine whether testamentary documents drafted under German law conform to formalities recognized under U.S. probate procedures.
Overcoming Language and Jurisdiction Barriers
Legal language does not translate directly. Misinterpretations not only waste time but also invite legal disputes. Working with bilingual attorneys—ideally those with dual licensure in both the U.S. and Germany—resolves this issue before it arises. These experts decode terminology, clarify legal nuances, and file precise documentation with the appropriate courts or tax authorities.
Cross-border firms with established partnerships across continents also streamline coordination. Instead of patchwork communication between unfamiliar professionals, beneficiaries work with a unified team following a shared legal strategy.
Compliance Review: Ensuring Document Validity in Both Jurisdictions
Every international inheritance case must stand up to scrutiny from both German and U.S. authorities. That means legal advisors evaluate documents for bilateral compliance. For example, they examine notarization, witness requirements, and doctrinal validity under both legal systems. They also verify administrative filings—such as inheritance declarations (Erbschaftsteuererklärung) in Germany and U.S. Form 3520 reporting foreign gifts or bequests.
Without this dual review, heirs risk delays, penalties, or partial invalidation of their inheritance. Advisors enforce consistency between the intent of the deceased and legal execution of the estate, even when property spans multiple legal systems and financial institutions.
- Cross-border estate planners create integrated inheritance plans that reflect both German and U.S. legal frameworks.
- Bilingual, dual-licensed professionals remove language and procedural barriers while defending legal interests in both jurisdictions.
- Synchronizing tax planning through specialized advisors prevents double taxation and ensures full reporting compliance.
- Document certification and review guarantee validity, enforceability, and streamlined probate procedures internationally.
Case Study: A Simple Example of a U.S. Citizen Inheriting from a German Parent
Background Scenario and the Deceased’s Estate in Germany
Emma Bauer, a U.S. citizen residing in Illinois, inherited from her mother, Helga Bauer, a lifelong resident of Munich, Germany. Helga passed away in 2023, leaving behind a notarized German will. The estate included a mortgage-free apartment in Schwabing valued at €650,000, €120,000 in a checking account at Deutsche Bank, and a 10% stake in a family-owned consulting firm (estimated value €60,000).
Emma was named as the sole heir in the will, with no other legal claimants under German intestacy law since her mother had no surviving spouse or other children. She held no German citizenship and had minimal knowledge of German legal procedures.
Steps Taken by the U.S. Beneficiary
- Will Translation and Validation: Emma had the will translated into English by a certified legal translator. Her German attorney confirmed its compliance with German inheritance regulations (BGB §§ 2229–2385).
- Certificate of Inheritance: The lawyer helped Emma file for an Erbschein, Germany’s official certificate of inheritance, through the local probate court (Nachlassgericht) in Munich.
- Appraisal and Inventory: A certified real estate appraiser assigned by the court verified the property’s market value, while a financial accountant itemized the liquid assets.
- Tax Disclosure: Emma filed the required inheritance tax declaration (Erbschaftsteuerformular) with the German tax office.
- Notification to U.S. Authorities: She reported the inheritance on her IRS Form 3520 since the total value exceeded the $100,000 threshold.
Legal, Tax, and Financial Processes Involved
German inheritance tax applied to the estate. As a Class I heir under German tax classifications, Emma benefitted from a €400,000 exemption. Her total inherited value (€830,000) resulted in a taxable base of €430,000. The applicable tax rate for this amount was 11%, leading to a tax bill of €47,300 paid directly to the Munich tax authority.
In the U.S., the IRS did not impose federal inheritance tax, but Emma was required to document the foreign assets and their fair market value on FinCEN Form 114 and the IRS foreign asset reporting forms. Because Germany and the U.S. do not have a treaty for inheritance tax exemption, there was no credit transfer for the €47,300 paid, but she did not face double taxation at the federal level.
Emma’s German attorney coordinated with a U.S. CPA to avoid triggering foreign financial account reporting penalties and ensured full transparency with the IRS. The German account was closed after conversion of the euros to USD, handled through a Frankfurt-based foreign exchange broker to secure a competitive rate.
Timeline and Outcome
- Month 1–2: Initial document gathering, certified translation, engagement of legal counsel in Germany and the U.S.
- Month 3–5: Filing for Erbschein and court verification; real estate appraisal and bank interactions.
- Month 6: Receipt of Erbschein; initiation of tax declaration and valuation confirmations.
- Month 7: Tax payment in Germany; report filed with IRS and FinCEN.
- Month 8–9: Transfer of real estate title; liquidation of bank assets; forex conversion completed.
The final transfer of funds and legal ownership of the apartment concluded within nine months of Helga’s passing. Emma retained the property for rental income under U.S. tax reporting obligations and saw net proceeds of approximately €775,000 after tax and legal fees.
Practical Checklist for U.S. Beneficiaries of German Inheritances
1. Confirm Heir Status Under German Law
Start by verifying legal entitlement to the inheritance. If a German will exists, check whether it was formally executed according to §2247 BGB (Bürgerliches Gesetzbuch) or registered in Germany’s Central Register of Wills (Zentrales Testamentsregister). If not, inheritance will follow the rules of intestate succession as defined under §§1924–1936 BGB. In both cases, proof of kinship or designation as heir must be documented.
2. Obtain the Erbschein and Probate Documentation
The Erbschein is a court-issued certificate that officially identifies the heir(s) and outlines their inheritance rights. Apply for it through the local German probate court (Nachlassgericht) with jurisdiction over the deceased’s residence. Provide identity documents, death certificates, and the will or family records. Expect processing to take several weeks, sometimes longer if translation or apostille certification is required.
3. Engage a Cross-Border Estate Planner
Work with a licensed advisor who understands both U.S. and German estate and tax frameworks. This specialist will coordinate the determination of asset values, manage filings, and ensure compliance with laws in both jurisdictions. Advantage lies in minimizing tax exposure and avoiding double reporting errors.
4. Notify the IRS and Submit Mandatory Filings
- Form 3520: Report receipt of the inheritance if its value exceeds $100,000, as per the IRS instructions.
- Form 8938 (FATCA): Required if inherited assets are held in foreign financial accounts and their total value surpasses reporting thresholds ($50,000 for individuals, varying based on filing status and residency).
- FBAR (FinCEN Form 114): Must be filed separately if any foreign financial account had a value exceeding $10,000 at any point during the year.
Ensure filings occur annually and on time. Penalties for noncompliance can be significant—up to $10,000 per violation under FATCA and $100,000 or 50% of the account value under FBAR rules.
5. Transfer of Assets and Currency Conversion
Coordinate with German banks and notaries to initiate transfer of liquid assets. Euro-to-dollar currency exchange may require timing consideration, as intra-annual fluctuations influence total inherited value. Use recognized financial institutions to process transfers securely. For real estate or other non-liquid assets, proper legal sale or valuation must precede conversion and repatriation.
6. Preserve All Inheritance Documentation
Maintain copies (in original or certified form) of the will, Erbschein, identity documents, probate court rulings, asset valuation reports, transfer confirmations, and all tax filings. Digital backups with indexed tagging will streamline audits, amendments, and future reporting requirements. U.S. tax authorities have the right to audit foreign inheritance disclosures retroactively.
Frequently Asked Questions: Inheriting in the U.S. from Germany
Do I owe U.S. tax on an inheritance from Europe?
Inherited money or property is not subject to federal income tax in the United States. However, if the inherited assets produce income — such as interest, dividends, or rental payments — you must report and pay income tax on that income. In addition, if the estate in Germany exceeds certain thresholds, German inheritance tax may apply before the assets are transferred to you.
What if I inherit real estate in Germany?
You become the legal owner of the property, but the title transfer must be registered in the German land registry (Grundbuch). As a non-resident beneficiary, this process often requires representation by a notary in Germany. If you choose to sell the property, capital gains are generally not taxed in Germany if the property has been held for more than ten years, but U.S. capital gains tax rules will apply for tax residents of the U.S.
Can I keep the money in a German bank account?
Yes, but you must report foreign bank accounts if the total exceeds $10,000 at any time during the year, under the Foreign Bank Account Report (FBAR) regulations. Additionally, if the value of your foreign financial assets surpasses certain thresholds ($50,000 for single filers or $100,000 for joint filers at year-end), you must file IRS Form 8938 under FATCA (Foreign Account Tax Compliance Act).
What documents do I need to prove inheritance in the U.S.?
- Erbschein (Certificate of Inheritance): Issued by a German probate court as official proof of heirship.
- Death certificate: Must be translated and, if necessary, certified for use in the U.S.
- Testament or will: If applicable, a certified copy may be required by U.S. financial institutions.
- Bank or property transfer records: These confirm the value and nature of the inherited assets.
Some documents may need to be translated into English and accompanied by an apostille under the Hague Convention to be legally recognized in the U.S.
Strategic Planning for Cross-Border Inheritances Between Germany and the U.S.
Receiving inheritance across national borders introduces legal complexity, financial responsibility, and tax exposure on both sides of the transaction. When a U.S. beneficiary inherits assets from a deceased relative in Germany, timing and precision in legal and financial planning will determine the outcome. Without coordinated actions, even straightforward successions can lead to asset access delays, double taxation, and penalties under both U.S. and German rules.
Preventing Delays and Tax Conflicts Through Early Intervention
International inheritance involves two jurisdictions enforcing separate systems of inheritance and tax law. Germany imposes inheritance tax (Erbschaftsteuer) at the moment of death, while the U.S. Internal Revenue Service monitors any foreign asset transfer with strict filing duties such as IRS Forms 3520 and 8938. Missteps in timing asset transfers or mismatching currency valuations can trigger tax assessments far above what’s legally necessary.
Working with lawyers and tax advisors licensed in both countries eliminates inconsistent strategies. For example, legal firms that coordinate German probate with IRS reporting requirements can preserve deductions for estate-related expenses across jurisdictions. Synchronizing title transfer, valuation, and distribution schedules ensures both Legal validity and compliance with complex U.S. reporting thresholds.
Cross-Border Estate Planning Reduces Future Burdens
Planning doesn’t start when the deceased passes—it begins when foreign ownership is still active. Families with members in the United States and Germany gain direct advantages by pre-structuring inheritance pathways through official will recognition, coordinated asset titling, and optimization of trust or corporate structures. Avoiding German probate through joint ownership or by establishing succession rules through notarized contracts can shrink wait times by months and minimize total taxable value on both sides of the Atlantic.
Let’s assume an American son is set to inherit his German mother’s property, investment accounts, and business shares. If he’s named as heir without a legally valid international will, the estate will fall into German intestate succession and face lengthy probate—whereas advanced documents can bypass this entirely. When property titles reflect cross-jurisdictional planning, execution occurs far more efficiently.
Choosing the Right Advisors Matters More Than Ever
No single attorney or accountant can navigate transatlantic succession alone. Optimizing foreign asset transfers to a U.S. beneficiary demands a core team: a German notary (Notar), a U.S.-qualified international estate planner, and a tax specialist with cross-border experience. This trio can proactively answer questions like:
- Should the family restructure ownership of real property before death?
- What is the most tax-efficient sequence of asset transfers?
- How can both countries’ treaty provisions be activated to eliminate double tax?
- What reporting deadlines apply under FATCA, the IRS, and German fiscal law?
Anyone expecting to receive inheritance from a country like Germany while residing in the U.S. needs guidance based on statutes, not assumptions. In many cases, pre-planning saves tens of thousands of dollars and extensive time delays.
Thinking Ahead Pays Off in Cross-Border Succession
Global families aren’t exempt from local tax enforcement. Aligning inheritance plans early turns confusion into clarity. Families that map out succession structures together—before conflict arises—limit risks, control outcomes, and enable smoother asset transitions.
To learn more, visit Florida Probate Lawyer today!
