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This probably wouldn't happen for property that's low value and bulky, like furniture. But for property like yachts, planes, artwork, jewellery, etc., it seems easy to move it to a country without inheritance taxes since the relocation costs would only be a small percentage of the total value.

Am I missing something here?

(I know the U.S. has a special law to tax overseas citizen, which almost no other country has. But the inheritance tax system predates that, and international travel was still straightforward back then for those with means.)

EDIT: Originally mentioned luxury cars but then realized it isn’t a good example as cars need to be legally imported back into the country, and thus pay import taxes, to be useful. This doesn’t apply to planes or yachts though in countries that allow foreign flagged yachts or foreign registered planes to operate. Personal items such as jewellery would probably also not have any import taxes imposed when the heir brings them back.

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    The point of all taxes is either to restrict behavior (making it expensive to do things that the government doesn't want to outright prohibit) or to generate revenue. Clearly, the point is to generate revenue. Are you really asking what the point is?
    – user6726
    Nov 8, 2022 at 19:37
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    One thing that isn't being discussed is customs taxes. Often moving property out side a country for tax purposes (as opposed to just temporary removal that would not change the inheritance tax situation) results in customs duties that are higher than the inheritance tax would be.
    – user1937198
    Nov 9, 2022 at 10:40
  • @user6726 I'm asking why it exists for valuable, movable, property if it seems like it could be trivially circumvented?
    – M. Y. Zuo
    Nov 9, 2022 at 16:04
  • @user1937198 Really? Which country has customs taxes for exporting personal property?
    – M. Y. Zuo
    Nov 9, 2022 at 16:05
  • Personal items are not generally exempt from import duties. That is why for high-value jewellery it is often recommended to obtain a certificate before leaving for a trip and coming back. Exemptions exists for the relocation of immigrants and temporary residents, but countries often have different treatments of former residents.
    – xngtng
    Nov 9, 2022 at 16:48

3 Answers 3

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In inheritance tax (Erbschaftsteuer) taxes someone receiving an inheritance (or a gift - they are treated the same). If the heir is (inheritance tax) resident in Germany, German inheritance tax is due in principle on the whole received property, regardless of where that property is.

  • Paid foreign inheritance tax on particular types of property and in accordance with tax treaties can be deducted. (Details: see §21 ErbStG and §121 BewG)

    Wrt the scenario in the question: if that foreign country collects low/no inheritance tax, the heir gets accordingly low or no deduction from the due German inheritance tax.

  • Whether the "more mobile" property in the question counts as foreign property or not depends on whether the deceased was German resident in the sense of inheritance tax law or not (e.g. moved their residence to the foreign country > 5a before their death), but again, that wouldn't lower the total amount of taxes due, it only shifts who gets them.

In order to actually avoid German inheritance tax on the mobile property of the question, the heir would need to move their tax residency away from Germany.

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    In general, the term "inheritance tax" usually means a tax on a person receiving a gift, while an "estate tax" is a tax on the assets of a person who has died prior to its distribution to heirs and devisees.
    – ohwilleke
    Nov 8, 2022 at 21:40
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    @ohwilleke That is not true in England and Wales. The current Inheritance Tax has to be paid by the estate before probate is granted (unless it is deferred to allow the sale of real property).
    – Martin Bonner supports Monica
    Nov 9, 2022 at 9:37
  • It seems trivial though for the wealthy German heir to stay for 183 days, or however long the exact cutoff is, in whichever foreign country that has no tax and then inherit the movable property there?
    – M. Y. Zuo
    Nov 9, 2022 at 16:08
  • @M.Y.Zuo: Sure it's trivial: since the wall fell, all Germans are free to leave Germany, even permanently. However, see gesetze-im-internet.de/erbstg_1974/__2.html: the heir needs to have stayed permanently outside Germany without any German residence for > 5 a before the death in question. And make sure neither they nor anyone else in their household has a German employer. Once that is achieved, only the listed property types if inside Germany will be taxed in Germany.
    – cbeleites unhappy with SX
    Nov 9, 2022 at 16:52
  • In addition to the uncertainty when to start those 5 years, the wealthy heir may find it cheaper to instead e.g. use the zero-tax option for the family home - which is available only if they permanently reside in said family home for the next 10 years.
    – cbeleites unhappy with SX
    Nov 9, 2022 at 16:55
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In the United States, inheritance taxes don't depend on the location of the property. They depend on the location where the estate was probated.

Usually inheritance taxes are only state taxes and are applied in the state where the person was resident at the time of their death. However, if the total value of the estate exceeds $12 million, then there is a Federal inheritance tax as well.

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  • How does this address the scenario of someone close to death having all their valuable, movable, property moved overseas?
    – M. Y. Zuo
    Nov 8, 2022 at 14:59
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    @If the property is part of their estate and they are an American citizen, it does not matter where the property is physically located. What matters is where the person is resident.
    – Cicero
    Nov 8, 2022 at 15:25
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    @M.Y.Zuo Cirero is close, but not quite right. The venue of a primary probate proceeding is based upon the domicile of the person who died without regard to citizenship. A non-U..S. citizen who resides, for example, in Boston, still has their estate probated in MA. Also, if someone not domiciled in a state has tangible property (real or personal) located physically in a state or intangible property that takes state intervention (like a right to a state income tax refund) the property in that state is subject to ancillary probate there even if the decedent isn't domiciled there re those assets.
    – ohwilleke
    Nov 8, 2022 at 21:43
  • @ohwilleke Ahh the usual US approach, you live here and have property elsewhere? We tax you. You live elsewhere and have property here? We tax you too. At least in the US the taxes tend to be bearable, in the EU we're learning this approach and the taxes are high.
    – DRF
    Nov 9, 2022 at 11:49
  • @ohwilleke I don't quite get how that works for a US citizen close to death moving their property overseas to be inherited by a non-U.S. citizen a few months later. How exactly does the U.S. collect taxes on the non U.S. citizen heir in another country?
    – M. Y. Zuo
    Nov 9, 2022 at 16:11
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Let’s say your grandma owned a diamond ring worth 100,000. If you take it abroad after she dies to avoid inheritance tax, that’s tax evasion. If you move it before she dies, you might have to pay custom taxes, you may have to pay taxes for receiving a gift worth 100,000, you might have to pay inheritance tax abroad, and if you don’t tell other heirs who would like their share of the 100,000, that might be fraud or theft.

So I don’t see any reason not to have inheritance tax.

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  • None of those apply if it's done in a country without inheritance taxes, import taxes on diamond rings, or gift taxes.
    – M. Y. Zuo
    Nov 19, 2022 at 17:48

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