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Certified Tax Advisor, Director, National Office Tax & Legal/Quality Assurance
Senior Consultant, National Office Tax & Legal
The tax-exempt transfer of the family home to the surviving spouse or to children and descendants of deceased children generally requires under Section 13 (1) number 4b or 4c of the German Inheritance Tax and Gift Tax Act (Erbschaftsteuer- und Schenkungsteuergesetz; ErbStG) that the respective recipient use the inherited property immediately for his or her own residential purposes. According to settled German Federal Fiscal Court (Bundesfinanzhof; BFH) case law, “immediately” is to be understood as self-use “without culpable delay”, whereby a move-in within six months after the death is regularly considered sufficient. In its decision of May 14, 2025 (case No. 3 K 80/24), the Lower Saxony Fiscal Court (Finanzgericht Niedersachsen; FG) had to rule on the question of what effect a right of residence granted to a third party by will has on this time limit. The BFH decision of May 27, 2026 (case No. II B 41/25), issued in response, now confirms the lower court’s case-by-case approach.
A father who died in 2022 bequeathed, among other things, a single-family house to his son. In his will, the testator had granted his wife, who is the mother of the recipient, a lifelong right of residence. She initially exercised this right, but a few months later moved into a nursing home due to illness. Subsequently, the son carried out extensive renovations to the house and took up residence himself. The actual move-in took place only about two years after the death. The tax office denied the tax exemption under Section 13 (1) number 4c ErbStG on the grounds that the required immediate self-use of the family home was not present. The FG and subsequently the BFH decided otherwise.
According to the FG, a testamentary right of residence granted to a third party can constitute a legal obstacle to moving in. As long as the right-holder exercises the right of residence, the heir cannot freely decide on self-use. The period for the immediate determination to self-use therefore begins only when the heir is legally able to actually occupy the dwelling himself.
The BFH did not decide on the merits but dismissed the tax office’s application for leave to appeal against this FG judgment. It confirmed the FG’s ruling that the question of immediate self-use must always be assessed on basis of an overall evaluation of all circumstances of the individual case. The six-month period developed by case law is not a rigid exclusion deadline. Rather, the decisive factors are the actual and legal circumstances of the individual case. In the case at hand the heir had documented his intention to move in already within six months after the death; moreover, the mother’s right of residence had ceased within that period. That the actual move-in occurred only significantly later was considered by the FG and subsequently by the BFH to be harmless due to the necessary renovation measures.
Notice
By its decision the BFH did not hold generally that the six-month period always begins only with the lapse of a right of residence, but that immediate self-use must be assessed based on the concrete circumstances of the individual case; the six-month period is merely an orientation value. For practice it is, however, important that legal obstacles to moving in — for example a testamentary right of residence — are to be considered when assessing immediacy. Heirs should therefore carefully document all steps toward the intended self-use and any reasons for delay to be able to demonstrate the requirements for the tax exemption if necessary.
Generally, a recipient must set out and credibly demonstrate at what time he decided to self-use the dwelling for his own residential purposes, for what reasons an actual move into the dwelling was not possible earlier and why he is not responsible for these reasons.