A potential overhaul of inheritance tax is being proposed in Germany, spearheaded by SPD General Secretary Tim Klüssendorf. The suggested reform focuses on introducing a lifetime allowance for inherited and gifted assets, designed to address perceived inequities in the current system.
Under the proposed model, a specific sum – designated as “X” – would be exempt from inheritance and gift tax. Amounts exceeding this allowance would be subject to standard taxation. Currently, parents are permitted to gift or bequeath up to €400,000 every ten years to their children without incurring tax. Klüssendorf argues that the existing system is being exploited by families with substantial wealth, allowing them to accumulate significant tax-free transfers over time. He described the practice as “unfair” and advocated for its termination.
Furthermore, Klüssendorf suggested decoupling the existing tax exemptions from familial relationships. He questioned the rationale behind basing the allowances solely on bloodlines, proposing that individuals should have greater flexibility in determining who benefits from their inheritance.
Regarding the size of the proposed lifetime allowance, Klüssendorf emphasized the need to protect smaller inheritances while simultaneously targeting the largest estates. He stated that the reform aims to generate a double-digit billion-euro revenue stream.
The proposal also extends to owners of large rental properties. The suggested change would link inheritance tax liabilities to rental practices. Individuals inheriting substantial portfolios of rental housing who commit to practices like maintaining rent levels at local averages or limiting rent increases could be eligible for reductions in inheritance and gift tax. This aims to disincentivize exploitative rental practices following inheritance.
