Delay in moving into family home does not always prevent it being exempt from estate tax

News  >  Delay in moving into family home does not always prevent it being exempt from estate tax

Arbeitsrecht-Anwalt-Rechtsanwalt-Kanzlei-MTR Legal Rechtsanwälte
Steuerrecht-Anwalt-Rechtsanwalt-Kanzlei-MTR Legal Rechtsanwälte
Home-Anwalt-Rechtsanwalt-Kanzlei-MTR Legal Rechtsanwälte
Arbeitsrecht-Anwalt-Rechtsanwalt-Kanzlei-MTR Legal Rechtsanwälte

If an heir is unable to move into the family home immediately, it may still be possible for the property to be inherited tax-free if the delay is attributable to renovation work. That was the verdict of Germany’s federal court of appeal for tax matters, the Bundesfinanzhof (BFH) (case ref.: II R 6/21).

Provided certain criteria are met, a family home can be handed down without having to pay estate tax. The heir is generally required to move into the property without delay – normally within six months – and to personally live there for a period of at least ten years, explains MTR Legal Rechtsanwälte, a commercial law firm whose areas of expertise include tax law.

But even if the heir does not move into the family home immediately, an exemption from estate tax is still possible in exceptional circumstances, for example if extensive removal or renovation work needs to be carried out in the house first.

Such were the circumstances of the case in question that was heard by the BFH. The heir in that case did not move into the family home until 18 months had passed following the death of the testator. It had not been possible for her to move in earlier due to delays to necessary renovation work caused by a shortage of tradesmen. Citing this failure to move into the family home immediately, the relevant tax office nonetheless decided to impose estate tax.

This decision was later successfully appealed by the heir, with the BFH ruling that an exception could be made in this case. Despite finding that the heirs were obliged to promptly find suitable tradesmen to ensure that the renovation work could be completed as soon as possible, the court concluded that the heirs could not be blamed for the tradesmen’s inability to carry out the work sooner. They were required to prove, however, that they went about hiring the tradesmen without delay.

Indeed, heirs are obliged to act promptly in this regard and to search for alternatives if this proves necessary. Ultimately, whether or not it is possible to obtain an exemption from estate tax despite a delay in moving into the family home is always determined on a case-by-case basis.

Heirs are also potentially able to benefit from such an exemption, by way of exception, if they find themselves unable to continue occupying the family home until the end of the ten-year period due to health reasons.

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