The estate costs lump sum (Erbfallkostenpauschale) for legatees is 15,000 euros (§ 10 (5) no. 3 ErbStG, for acquisitions where the tax arises after 31 December 2024) and reduces the taxable acquisition without any receipts being required. In a judgment of 17 June 2026 (II R 25/23), in a case with a foreign connection, the Federal Fiscal Court (Bundesfinanzhof, BFH) decided that legatees (Vermächtnisnehmer) can also claim it, and awarded it in full to the only acquirer liable to tax in Germany.
Anyone who receives a legacy must pay inheritance tax as soon as the acquisition exceeds the personal allowance. This article explains what the lump sum covers, who can claim it, what the judgment decided and what is expressly left open.
What the Estate Costs Lump Sum Is
The Inheritance Tax Act allows certain costs arising from the succession to be deducted from the acquisition. Under § 10 (5) no. 3 ErbStG these include the costs of burial, an appropriate gravestone, the customary grave maintenance (at its capitalised value) and costs that arise directly for the acquirer in handling or distributing the estate or in obtaining the acquisition. Anyone who does not want to prove these costs individually receives a lump sum without proof. Costs for administering the estate are not deductible (§ 10 (5) no. 3 sentence 3 ErbStG).
The amount has changed. The Annual Tax Act 2024 raised the lump sum from 10,300 euros to 15,000 euros. Under § 37 (21) ErbStG the new amount applies to acquisitions for which the tax arises after 31 December 2024.
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| Time the tax arises | Lump sum |
|---|---|
| up to 31 December 2024 | 10,300 euros |
| from 1 January 2025 | 15,000 euros |
What is decisive is therefore not the date of the application or of the assessment, but the time at which the tax arises. For a legacy, under § 9 (1) no. 1 ErbStG that is in principle the death of the deceased; for legacies subject to a suspensive condition or a time limit, the occurrence of the condition or the date may be decisive.
The lump sum is a deduction item and not a tax saving of the same amount. It reduces the tax base. How much tax is thereby saved depends on the allowance, the tax class and the tax rate. If the acquisition is below the allowance anyway, nothing changes. Which further adjusting screws the statute offers is described in the article Avoiding Inheritance Tax Legally.
Who Can Claim the Lump Sum
The wording of the statute speaks of the acquirer, not of the heir. In practice the lump sum was nevertheless sometimes refused to legatees; the tax administration required a legal or moral obligation to bear the costs (R E 10.9 (2) sentence 3 ErbStR 2019). The BFH sees no restriction in this for the lump sum. According to the judgment, heirs, legatees and persons entitled to a compulsory portion can claim the amount.
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| Acquirer | Basis of acquisition | Lump sum possible |
|---|---|---|
| Heir | Succession (§ 3 (1) no. 1 ErbStG) | yes |
| Legatee | Legacy (§ 3 (1) no. 1 ErbStG) | yes, according to the BFH |
| Person entitled to a compulsory portion | asserted compulsory portion | yes, according to the BFH |
For the compulsory portion, under § 9 (1) no. 1 lit. b ErbStG the tax arises only with the assertion of the claim. According to the wording of § 37 (21) ErbStG it follows that if a compulsory portion is asserted only in 2025 or later, the tax may have arisen after 31 December 2024 even if the deceased died earlier. No statement by the tax administration is known on whether it applies the higher amount in this case; those affected should check this in the individual case. It is also open how the higher amount relates to the principle that the lump sum is granted only once per succession, where the heirs have already applied the old amount for the same succession. This can matter in longer disputes over the compulsory portion. How compulsory portion claims themselves are calculated and asserted is described in the article Children’s Compulsory Portion.
The Judgment: BFH of 17 June 2026, II R 25/23
The case had a foreign connection. The deceased lived in the United Kingdom at her death. Her brother, who also lived there, became her heir; his acquisition was not subject to German inheritance tax. Her niece, who lived in Germany, received 50,000 British pounds under the will. Whether she was heir or legatee could be left open, because both are an acquisition under § 3 (1) no. 1 ErbStG; the BFH expressly awarded the lump sum to legatees too. She had incurred only small costs, namely 13.20 euros. She nevertheless claimed the lump sum, at that time 10,300 euros.
The tax office took into account only the actual costs. The Lower Saxony Finance Court (3 K 169/21) awarded the claimant part of the lump sum, in the ratio of the value of the legacy to the value of the entire estate. It regarded a full lump sum as over-privileging, because part of the estate was not taxable in Germany. The BFH set this aside. At its core the judgment makes three statements:
- The lump sum is due not only to heirs but also to legatees.
- It is granted only once for the succession as a whole.
- If the legatee is the only acquirer subject to German inheritance tax under § 2 ErbStG, the full amount is due to them. The statute does not provide for a proportionate reduction because other participants are not liable to tax in Germany.
That the actual costs were far below the lump sum is irrelevant. The purpose of the lump sum is precisely to spare individual proof.
The judgment was published on 20 August 2026 (press release no. 043/26 of the Federal Fiscal Court).
Only Once per Succession: What Applies with Several Acquirers
The lump sum is a total amount. The statute says that an amount is deducted “in total”. It therefore does not multiply with the number of acquirers. For the special case decided by the BFH, in which there is only one acquirer liable to tax in Germany, the legal position is now clear.
The situation differs if several acquirers are subject to German inheritance tax. The lump sum is then to be divided; how is not regulated by statute. The BFH decided only the case of a single German acquirer. If the acquirers agree, the tax administration bases taxation on that division (R E 10.9 (3) sentence 4 ErbStR 2019). Several acquirers should therefore coordinate early.
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| Situation | Assessment |
|---|---|
| One acquirer is subject to German tax, the others are not | full lump sum for this acquirer (BFH II R 25/23) |
| Several acquirers are liable to tax in Germany | division not regulated by statute, the acquirers’ agreement is taken as a basis (R E 10.9 (3) sentence 4 ErbStR 2019) |
| Actual costs exceed the lump sum | individual proof possible, no additional deduction alongside the lump sum |
An example with invented names and figures: the deceased, Ms Berger, who has lived abroad for many years and is not a resident within the meaning of § 2 ErbStG, leaves her niece Lena, who lives in Germany, a cash legacy of 60,000 euros; the rest of the estate goes to a nephew who likewise lives abroad and is not liable to tax in Germany. Lena is the only one subject to German inheritance tax. On the BFH’s line she can claim the full lump sum. Tax class II applies to nieces, with an allowance of 20,000 euros. The acquisition of 60,000 euros is reduced by the lump sum of 15,000 euros and the allowance to a taxable acquisition of 25,000 euros; at a tax rate of 15 percent in this bracket the result is 3,750 euros. Without the lump sum it would be 40,000 euros and 6,000 euros of tax. The calculation shows how strongly the lump sum works for smaller legacies and higher tax classes. The tax rates and classes are in § 15 and § 19 ErbStG and should be checked in the individual case.
Foreign Connection: When the Case Matters
The BFH’s case was a foreign case, and it is precisely there that the questions arise. Personal tax liability is governed by § 2 ErbStG. It is unlimited if the deceased or the acquirer is a resident at the time the tax arises; this includes German nationals who have not stayed permanently abroad for more than five years without having a domicile in Germany. In other cases there is only limited tax liability for domestic assets within the meaning of § 121 BewG.
Three points are often disputed in foreign cases:
- Which tax liability applies to the acquirer? A legatee resident in Germany is as a rule subject to unlimited tax liability, even if the deceased lived abroad and the estate is abroad. For the question whether you can claim the lump sum, this is the starting point.
- Special rule for limited tax liability. § 10 (6) ErbStG limits the deduction of debts and burdens connected with non-taxable assets and provides for proportionate consideration under limited tax liability. According to the wording of the statute this also concerns costs under § 10 (5) no. 3 ErbStG. For the lump sum itself this does not apply under § 10 (6) sentence 6 ErbStG: paragraph 5 no. 3 sentence 2 remains unaffected. The proportionate reduction therefore hits the individually proven costs, not the lump sum (for acquisitions where the tax arises after 31 December 2024, § 37 (21) ErbStG). On the taxation of persons with limited tax liability, for example on the allowance, see Inheritance Tax Allowance Under Limited Tax Liability.
- Double taxation. Foreign inheritance or estate tax is not affected by the German lump sum. Whether a double taxation treaty exists is explained in the article Inheritance Tax and Double Taxation Treaties. Rules of the foreign state on costs, allowances and deductions should be checked by a local adviser.
Anyone who acquires assets abroad also has notification duties. Under § 30 ErbStG a taxable acquisition must be notified within three months of knowledge of the devolution. The exemption for acquisitions based on a will opened before a German court or notary does not apply if the acquisition includes foreign assets. More on this in the article Duty to Notify Foreign Assets.
Lump Sum or Actual Costs
If the costs actually incurred and deductible exceed the lump sum, individual proof can be more favourable. This occurs with elaborate burials, a gravestone or extensive handling costs. Two rules must be observed:
- Costs may not be taken into account twice. Alongside the lump sum, an additional deduction of the same costs is excluded. According to the BFH this also applies to proven costs of obtaining the acquisition; it does not share the divergent view of the tax administration in R E 10.9 (5) ErbStR 2019.
- Anyone who chooses individual proof must document the costs. Receipts for burial, gravestone, fees, translations and certifications should therefore be kept even if the lump sum is applied for at first.
Costs for administering the estate are not deductible (§ 10 (5) no. 3 sentence 3 ErbStG).
Typical Mistakes in Practice
Lump sum not applied. Anyone who does not expressly claim the lump sum in the return or in an objection risks its being disregarded. Legatees who themselves had no handling costs easily assume they are entitled to nothing. In the decided case too, the tax office at first did not take the claimed lump sum into account.
Lump sum attributed to every acquirer. The lump sum is available only once per succession. Anyone who applies 15,000 euros each for several taxpayers risks a correction and back payments.
Overlooking deadlines. An assessment becomes final if no objection is lodged within one month of notification (§ 355 AO). A final assessment can generally not be changed merely because a later judgment assesses the legal position differently. Open assessments with a reduced or refused lump sum should therefore be reviewed while an objection is still possible.
Wrong point in time. Anyone who determines the amount by the date of death overlooks that with the compulsory portion and with conditional legacies the tax may arise later.
Under § 31 ErbStG the tax return is to be filed on request of the tax office; the period must be at least one month. Discuss the sequence with the authority before deadlines expire.
Open Legal Questions and Binding Ruling
The judgment is recent, and it is still open how the tax administration will apply it generally. Whether it will publish the decision in the Federal Tax Gazette (Bundessteuerblatt) and adjust the Inheritance Tax Guidelines (R E 10.9 ErbStR 2019) is not known and remains to be seen. Anyone planning a larger structure or having a complex case with several acquirers can apply to the tax office for a binding ruling (verbindliche Auskunft) under § 89 (2) AO before implementation; how the procedure works is explained in the article Binding Ruling Before Emigration. A fee may be charged for the ruling under § 89 (3) to (7) AO. With a foreign connection, a ruling from the tax authority in the other state may additionally be sensible.
Conclusion
The estate costs lump sum of 15,000 euros is due not only to heirs. According to the BFH judgment of 17 June 2026, legatees too can claim the amount, even if their actual costs are small. If the legatee is the only acquirer liable to tax in Germany, the lump sum is not reduced merely because other participants are taxed abroad. With several domestic taxpayers the amount is to be divided; the manner of division is not regulated by statute. Under limited tax liability the proportionate reduction under § 10 (6) ErbStG does not hit the lump sum. Check assessments while the objection period is running, and keep receipts ready in case the actual costs are higher.
Frequently Asked Questions
How high is the estate costs lump sum?
For acquisitions where the tax arises after 31 December 2024 it is 15,000 euros. For earlier acquisitions the amount of 10,300 euros applies. Proof of the costs is not required.
Can legatees claim the lump sum?
Yes. In its judgment of 17 June 2026 (II R 25/23) the Federal Fiscal Court decided that legatees can also claim the lump sum. According to the judgment, the same applies to persons entitled to a compulsory portion.
Is the lump sum reduced if other heirs are not liable to tax in Germany?
Not according to the BFH, if the legatee is the only acquirer subject to German inheritance tax. The BFH rejected a proportionate reduction by the value of the legacy.
Can every acquirer deduct 15,000 euros?
No. The lump sum applies only once in total per succession. It is to be divided among several acquirers liable to tax in Germany; how is not regulated by statute, and the tax administration takes an agreement of the acquirers as a basis (R E 10.9 (3) sentence 4 ErbStR 2019).
What applies if my costs were higher than 15,000 euros?
Then you can claim the actual, proven and deductible costs instead of the lump sum. Both side by side for the same costs is excluded. Keep the receipts.
Attorney Dr. Johannes Fiala and the law firm, with a focus on international inheritance law, tax law and asset protection in Munich, advise heirs and legatees on the inheritance tax treatment of estates with a foreign connection, from the review of tax liability through the return and objection to coordination with foreign advisers. Dr. Fiala has published extensively on questions of emigration and asset protection. Contact the firm without obligation to discuss your individual situation in an initial consultation.
