Estate liabilities can be asserted when making an inheritance tax declaration, but only if the debts had already been incurred by the testator by the time of his death.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: The debts of the testator are tax-deductible as estate liabilities for the purposes of inheritance tax. To this end, the testator’s statutory, contractual and non-contractual obligations need to have existed prior to his death, even if the consequences do not arise until after the inheritance has accrued. Moreover, the liabilities have to have been incurred by the testator at the time of his death, i.e. liabilities which would ordinarily have had to be met by the testator. This comes from the Finanzgericht Münster’s (Münster Fiscal Court) ruling of April 30, 2015 (Az.: 3 K 900/13 Erb).
The third senate of the FG Münster had to rule on the legal action of an heir who wished to assert oil-related damage as an estate liability. He, in addition to other heirs, had inherited a plot of land with a semi-detached house from his uncle. Prior to his death, the uncle had obtained heating oil which damaged the heating system because it was not the correct grade of oil. Without giving rise to any indication that there had been a malfunction, the oil leaked from the heating installation and reached a height of several centimetres in the room where it was being held. It was not until after the death of the uncle that the damage was detected and fixed. The claimant wanted to assert the costs arising from this based on his pro rata share of the inheritance in his inheritance tax declaration as an estate liability. This was not allowed by the competent tax office and his claim before the FG Münster was also unsuccessful.
The Court stated that while the damage was the result of the uncle purchasing the wrong oil, he was prompted neither by the authorities nor the tenants of the house to fix the damage and thus did not incur any liability during his lifetime in this respect. The Court went on to state that it could not be established whether the damage already existed at the time of the testator’s death. Accordingly, the FG Münster argued that the costs could not be asserted as estate liabilities.
Aside from the matter of estate liabilities, inheritance tax features other aspects where there is room for manoeuvre. Heirs can turn to lawyers and tax advisors who are competent in the field of succession law in order to make optimal use of this.
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