A bequest doesn't always bring money. For example, if the descendants have to pay inheritance tax on assets that they never received in this amount.
Hamburg \u2012 It is not only a person's physical characteristics that can be inherited within a family. Jewelry, capital assets, paintings and villas, but also debts, can also be transferred to the testator's clan. Stock portfolios, securities and cryptocurrencies are also included. They have the advantages but also disadvantages that, depending on the mood on the stock market, they can rise sharply – but can also lose a lot of value.
Inheritance tax cases: The date of death of the testator is decisive
"This can mean luck or – very expensive – bad luck for the heirs. Because only the value of the estate, i.e. the inherited assets, on the day of the testator's death is decisive for the amount of inheritance tax," says tax consultant Sascha Matussek of the Bild newspaper. This means, for example, that if the value of a stock portfolio falls due to falling stock market prices since the date of the testator's death, "the amount of inheritance tax is still calculated according to the value on the date of death," Matussek continues.
A calculation example: A nephew inherits a stock portfolio from his uncle
Value of the inheritance on the day of death: 120,000 euros
Allowance: 20,000 euros
Taxable acquisition of: 100,000 euros
Tax rate: 20 percent
Inheritance tax to be paid: 20,000 euros
Source: Calculation example by S. Matussek at Bild.de
The online financial portal aktien.net gives a crucial tip for heirs: "Testators should definitely clarify before their death who has access to the custody account so that the securities can be sold quickly in the event of a crash." Otherwise, inheritance tax often results in a tax trap that can only be circumvented by applying for remission of inheritance tax or not accepting the inheritance.
Inheritance tax: Anyone who inherits shares should be prudent. An inheritance can quickly turn into financial ruin. (Symbolic image) © Ralf Poller/Imago
Inheritance tax cases: Long waiting periods before an inheritance can be accepted
But it doesn't have to come to a stock market crash immediately after the death of a deceased, sometimes a noticeable price slide is enough to lose money with the heir. For example, if the value of the custody account falls from 120,000 euros to 80,000 euros since the day of death – as in our calculation example – until the inheritance can actually be accepted. This is because there are often long waiting times before an heir or heiress "really holds the estate in his or her hands," tax consultant Matussek knows from experience. In concrete terms, this means that heirs still have to pay 20,000 inheritance tax, even though they have not inherited 120,000 euros, but only 80,000 euros due to the loss of value on the stock exchange. This is because the value of the portfolio is determined by the share prices on the day of death.
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If the nephew had inherited these 80,000 euros, only 20,000 euros would have been taxable after deduction of an allowance of 60,000 euros. He would then have had to pay only 15 percent inheritance tax on this, since in this case a different tax rate applies up to 75,000 euros. Then an inheritance tax of 9000 euros would have arisen for him. So a total of 11,000 euros less.
When it comes to inheritance, it also makes no difference whether it is shares, funds or an ETF, i.e. a listed index fund. When testators bequeath a custody account, they should therefore make sure that access is as easy as possible for heirs and that it is clearly regulated by law before their death. "However, the upcoming difficulties can also be easily prevented during one's lifetime," reports aktien.net. This is because shares or portfolios could be given away during one's lifetime. This would also eliminate the so-called final withholding tax. To ensure that the most profit remains in the end, investors should pay tax on their profits on the stock market correctly, the experts advise. But a clarifying conversation during the testator's lifetime can also be helpful for heirs in order to avoid later losses.
Inheritance tax cases: these options have heirs
Anyone who inherits shares or other listed securities should act prudently. However, those who have to save themselves from financial ruin also have the option of not taking up the testator's inheritance. Heirs have six weeks to reject the inheritance. Heirs should also be aware of other rules on inheritance. Anyone who sees their existence endangered by an inheritance can also apply for inheritance tax waiver at their tax office. If you reject your inheritance, the state will take over the debt.
Inheriting shares - not so easy
How much tax heirs of stock and securities accounts have to pay depends on the value of the inherited custody account and the family relationship. "The inheritance tax allows the use of a generous allowance, which is measured according to the family relationship and can amount to up to half a million euros," explains the online financial portal aktien.net. For the time being, there are no taxes outside of inheritance tax for the inheritance of the share portfolio. Only profits realized by the shares are subject to withholding tax. The decisive factor for this is the year in which the testator acquired the shares.
According to aktien.net's report, heirs who apply for a waiver from the tax office should definitely point out that at the time of the price losses on the stock exchange, access to the share or securities account was not possible because, for example, "the certificate of inheritance was missing". In this case, heirs have not put themselves in distress. The Federal Fiscal Court had already upheld corresponding claims.
Testators who want to spare their family and other relatives the tiresome topic of "inheritance" can also bequeath their assets on a non-profit basis. Around 84 billion euros were passed on in Germany in 2020 through inheritances and gifts