No higher inheritance tax allowance due to parental generation’s renunciation of inheritance – Recent decision by the Federal Fiscal Court (BFH)
With its recent decision dated 05.06.2024 (Case No. II R 13/22), the Federal Fiscal Court (BFH) has provided a clarifying statement regarding the eligibility of inheritance tax allowances in cases of succession within families. A central question was whether a renunciation of inheritance by the preceding generation, thereby shifting the succession line, could lead to a higher utilization of the tax-free allowances stipulated for children under § 16 (1) No. 2 ErbStG.
Background and Scope of the BFH Decision
In the underlying case, the parents waived their right of inheritance in favor of their children as part of an anticipated succession arrangement. The parties involved then claimed a multiple application of the allowance for children, as they argued they should be entitled to the allowance both as children of their parents and as grandchildren of their grandparents. However, the tax authorities did not share this view and only granted the lower allowance applicable to grandchildren. After the objection procedure proved unsuccessful, the case was referred to the BFH for final clarification.
Structure of Allowances in Inheritance Tax Law
Relevant Allowances and Their Function
Current inheritance tax law provides for personal allowances for acquisitions upon death (§ 16 ErbStG), the amount of which depends on the degree of kinship to the deceased. Children thus receive a higher allowance than grandchildren (EUR 400,000 versus EUR 200,000). The decisive factor is the legal relationship between the beneficiary and the decedent—that is, whether the acquisition is as a child or as a grandchild.
Assessment of a Renunciation of Inheritance
A notarized renunciation of inheritance prevents the person renouncing from acquiring by reason of death. According to the BFH, however, such action does not change the fact that subsequent heirs—here, in particular, grandchildren—cannot claim an additional or cumulative allowance from the case (child) that was effectively bypassed. Inheritance tax privileges are strictly tied to actual heir status; hypothetical considerations or arrangements designed to create loopholes are thereby excluded.
Legal Rationale and Consequences of the Decision
Principle of Single Assessment per Acquisition Case
The BFH clarifies that for each taxable acquisition only the allowance relevant to the specific legal acquisition situation will be granted. The tax relief for children applies exclusively if the acquisition is as a child of the decedent. If a direct descendant (the child) does not exercise their inheritance right due to renunciation, the next family member (grandchild) is favored upon succession, but can only claim the allowance applicable to them as a grandchild. The assumption of multiple claims or accumulation is legally excluded.
Tax Planning Considerations
The decision provides legal certainty regarding classic transfer models and the possibility of deliberately transferring higher allowance volumes to the next generation through renunciations of inheritance in the parental generation. This is expressly excluded by the BFH in order to prevent abusive tax arrangements and to ensure uniform application of the regulations.
Consequences for Heirs and Asset Transfers
The decision is of considerable importance for wealthy private individuals, entrepreneurs, and investors, as it clearly delineates the limits of tax optimization possibilities. Structural arrangements within the family aimed at reducing the taxable acquisition through strategic renunciations face clear legal boundaries. The case law thereby reinforces the doctrinal principle that the personal relationship to the decedent takes precedence, rather than serving as an abstract, cross-generational calculation factor.
For businesses and their shareholders whose succession planning may involve significant interests, the BFH decision is of fundamental importance. It ensures that transfers remain predictable but cannot be exploited for tax purposes through deliberate circumvention of inheritance law provisions.
Conclusion and Outlook
The clarification by the BFH dated 05.06.2024 provides an important guideline for succession arrangements and definitively rules out the possibility of achieving a doubling or increase in the inheritance tax allowance by means of a parental generation’s renunciation of inheritance. The legislator assesses each acquisition individually and does not permit cumulative claims from the skipped generation. This once again underscores that tax privileges in inheritance law are subject to strict legal requirements and that structuring opportunities are tightly limited.
For legal questions on succession planning, inheritance tax allowances, and structuring of individual succession concepts, the experienced team at MTR Legal Rechtsanwalt provides clients with thorough assessment and support.
