The family home can be inherited tax-free under certain conditions. However, the tax exemption can only apply to one property, as a ruling by the FG Munich shows (Az. 4 K 692/20).
Tax law provides that the family home can be inherited tax-free if certain conditions are met. Among other things, it is necessary that the decedent lived in the property themselves before the inheritance event, and that the heirs use it for their own residential purposes for at least ten years afterward. If the decedent owned several properties that they used successively for residential purposes, the tax exemption can only apply to one property, explains the business law firm MTR Legal Rechtsanwälte, which also advises its clients on tax law and inheritance tax issues.
This is also demonstrated by a judgment of the Munich Finance Court. Here, the decedent had lived with her daughter in her House X and was registered there. The decedent also owned another house Y, which was occupied by her son. When the mother passed away, the daughter and son each inherited half. They agreed that the daughter would inherit House X and the son would inherit House Y as sole ownership. In their respective inheritance tax declarations, both stated that the house was a family home exempt from inheritance tax.
The tax office did not go along with this and imposed inheritance tax on the house inherited by the son. The son opposed the tax assessment, arguing that his parents bought the house in 1954 and had lived there themselves since then. When the decedent’s predeceased husband became ill and further use of the home was not possible, the couple moved out in 2002. The son subsequently occupied the house.
The FG Munich decided that the house was nevertheless not exempt from inheritance tax. By moving out, the decedent had relinquished her household and established a new one for more than a decade, shifting her center of life to House X. Therefore, the new residence was considered a family home, and the tax exemption could only apply to this house.
Lawyers experienced in tax law advise on inheritance tax issues at MTR Legal Rechtsanwälte.
