Inheritance and Gifts in Germany

Schenkung unter Nießbrauchsvorbehalt-Gift with Retained Usufruct – Form 3520
Inheriting Real Estate, Shares in GmbH, Shares in Partnerships, and PFICs

Kontaktieren Sie uns für eine vertrauliche Beratung.

Günther Grewe-Wirtschaftsprüfer (WP), Rechtsanwalt (RA), Steuerberater (StB), Certified Public Accountant (CPA) Deutschland USA
Dr. Günther Grewe, WP RA StB CPA
+49 89 2351 3218 (15-23h CET / 9am-5pm EST)
+1 914 816 1115
Microsoft Teams Dr. Günther Grewe, Wirtschaftsprüfer (WP), Rechtsanwalt (RA), Steuerberater (StB), Certified Public Accountant (CPA)

Antje-Klaunig-Wirtschaftsprüfer (WP) Steuerberater (StB) Certified Public Accountant (CPA) Deutschland USA
Antje Klaunig, WP StB CPA
+49 89 6151 5973 (15-23h CET / 9am-5pm EST)
+1 914 205 6002

Maximizing Compliance and Minimizing Tax Liabilities: A Guide for US Citizens Inheriting Assets from Germany


US citizens inheriting assets from a German citizen and resident must navigate a complex web of tax implications and reporting requirements in Germany and the United States. Consulting with a Wirtschaftsprüfer und Steuerberater in den USA® (Certified Public Accountant and Tax Consultant in the USA) is essential to ensure full compliance and minimize potential tax liabilities.

Navigating US Tax Implications and Reporting Requirements

Understand the Tax Landscape

Inheriting or receiving gifts from a German citizen introduces various tax challenges for US citizens, including liabilities in Germany and the US. Comprehensive knowledge of tax implications and reporting requirements for assets such as real estate, GmbH shares, partnership interests, and PFICs (Passive Foreign Investment Companies), like ETFs, is crucial.

Report Gifts and Inheritances: Form 3520

US citizens must report gifts or inheritances from a German citizen on Form 3520 if they exceed specified thresholds to remain compliant with US tax regulations.

Determine Tax Basis for Inherited Assets and Gifts

The US tax basis for inherited assets is typically the fair market value at the decedent’s death, while the basis for gifts is usually the donor’s. These factors impact the calculation of capital gains tax on future sales.

Special Considerations

Consider Gift with Retained Usufruct: “Schenkung unter Nießbrauchsvorbehalt”

This German legal concept involves gifting an asset while retaining the right to use and benefit from it. For US tax purposes, this gift remains subject to tax rules and reporting requirements, with valuation possibly considering the retained usufruct rights.

Tax Implications for Specific Asset Types

Evaluate Real Estate, GmbH Shares, Partnerships, and PFICs

Inheriting these assets may trigger German inheritance or gift tax, with obligatory reporting on US tax returns. Income or gains from these assets are typically taxable in the US, with strict reporting requirements and significant penalties for non-compliance.

PFICs, such as foreign ETFs, present additional complexity. The US taxes gains at ordinary income rates, with potential interest charges on deferred tax amounts. File Form 8621 to report PFIC holdings and transactions.

Penalties and Appeals

Understand Penalties for Non-Compliance

Failure to comply with reporting requirements or paying applicable taxes can result in substantial penalties. These may include monetary fines, interest charges, and in severe cases, criminal prosecution.

Appeal Penalties When Appropriate

If you believe you have been unfairly penalized, consider appealing the decision. Gather supporting documentation and consult with a tax professional to determine the best course of action. Appeals can be made through the IRS appeals process or, if necessary, through the US Tax Court.

US Taxation of Assets After Receipt

Comply with Ongoing Tax Obligations

After receiving inherited assets or gifts from a German citizen, US citizens must continue to comply with US tax regulations. This includes reporting income generated by the assets, such as rental income from real estate or dividends from GmbH shares, on their US tax returns.

Plan for Future Tax Liabilities

Consider the tax implications of holding or selling the inherited assets. Consult with a tax professional to develop a strategy that minimizes future tax liabilities, such as timing the sale of assets to optimize capital gains tax or utilizing tax-efficient investment vehicles.


US citizens inheriting assets from a German citizen must stay informed and seek expert guidance to ensure compliance with tax regulations and minimize potential liabilities.

Contact Us for Expert Assistance

Contact our experienced tax advisors for tailored guidance at +49 89 2351 3218 or +1 914 816 1115 (15-23h CET / 9am-5pm EST).