Inherited Real Estate: Keep, Rent, or Sell?

Inherited Real Estate: Keep, Rent or Sell?

Every year, real estate worth over 300 billion euros is inherited in Germany. Very few heirs are prepared for the complex decisions that come with it.

In Schleswig-Holstein, real estate is the most common item of inheritance and, at the same time, the most complex. Tax issues, co-ownership arrangements,

tenancy law regarding inherited properties, and emotional family decisions collide with a real estate market where wrong decisions can easily cost six-figure sums.

Inheritance tax on real estate: How the tax authorities assess property—and how to save legally

The tax office assesses inherited real estate using a standardized procedure—which often results in a value above or below the actual market value. For inheritance tax purposes, the tax office uses the property value determined in accordance with the Valuation Act (BewG). This can differ significantly from the market value.

Important: If the market value is demonstrably lower than the property value, a counter-appraisal can reduce the assessed value to the lower market value — saving on inheritance tax.

Exemptions: Spouse €500,000 / Children €400,000 per parent / Grandchildren €200,000

Owner-occupied family homes: If the spouse or children continue to live there (for at least 10 years), they are exempt from inheritance tax—regardless of value.

• Take advantage of the family home rule: If one spouse survives the other and continues to live in the family home: completely exempt from inheritance tax—even for properties worth millions.
• Commission a second appraisal: For high property values, an independent market value appraisal is worthwhile—costs €1,500–3,000, saves significantly more in individual cases.

Community of heirs and real estate: Why this is the most common source of conflict — and how to resolve it

Nothing destroys sibling relationships as effectively as jointly inherited real estate without a clear agreement. Communities of heirs are joint tenancy — every co-heir can block decisions; no one can act alone.

The result: Deadlock situations, pressure to make hasty sales, disputes over rental income and maintenance costs.

Options for resolution:

• Division of the estate: Agreement on distribution (who keeps what).
• Joint sale: Proceeds are divided.
• Buying out a co-heir: One heir takes over the property and pays out the others.
• Partition auction: As a last resort—usually uneconomical because below

Inherited property: Keep or sell? The complete decision matrix

The most emotional and financially significant decision in an inheritance: What to do with the property?

Keep and use yourself:

• Makes sense if: Location suits your own life situation, property meets personal needs, no inheritance tax burden.
• Disadvantage: tied-up capital, responsibility for maintenance.

Keep and rent out:

• Makes sense if: return is attractive, no urgent need for equity, no inheritance tax liquidity problem.
• Note: Take over existing leases — the right to raise rent after inheritance is limited.

Sell: Makes sense if:

• The community of heirs wants to split up, liquidity is needed for other investments, the property does not fit into your own portfolio. Tax considerations
• Consider timing: Was the property purchased over 10 years ago? Then the sale is tax-free.

EXPERT TIP OF THE WEEK

Inheriting real estate correctly: Pre-estate planning saves significant taxes.

Those who plan early can save significant inheritance tax — an overview of the tools:

• Use lifetime gifts: Exemptions (€400,000 per child) can be used every 10 years. Gradual transfer saves significant inheritance tax. Start early.
• Retention of usufruct: Parents transfer property to children and retain usufruct (rental income). The gift tax value is significantly reduced by usufruct.
• Family home provision: Bequeath an owner-occupied family home to a spouse or children (if they move in for at least 10 years): completely tax-free.
• Will and inheritance contract: Without a will, statutory succession applies—often not in the testator’s best interest. A will or inheritance contract enables targeted tax optimization.
• Advice from experts: Inheritance law, tax law, and real estate law together—this requires a team of a notary, tax advisor, and real estate specialist. We coordinate.

Inherited Real Estate - Advice for the Event of Inheritance

An inherited property is a gift—but only if you handle it well. Making the right decision requires market knowledge, tax expertise, and sometimes emotional detachment.

We are happy to advise you on this topic