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US estate tax: the German resident

What the Germany–US treaty changes, in concrete terms, for a German resident holding US-listed ETFs.

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The treaty in two dates

Germany and the United States are bound by an estate and gift tax treaty signed in Bonn on 3 December 1980, amended by a protocol of 14 December 1998. Like the French treaty, it is a “modern” domicile treaty: it assigns exclusive taxing rights according to the decedent's domicile and extends to the German resident a fraction of the US allowances.

The fate of ETFs: attribution to domicile

The treaty lists exhaustively what the United States may tax in the estate of a decedent domiciled in Germany who is not a US citizen: real estate located in the United States, the assets of a permanent establishment or fixed base operating there, and partnership interests to the extent of such property. Everything else — securities, shares, fund units, ETFs, accounts — is taxable in Germany only.

For the ETF holder, the conclusion is the same as in France: the US securities of a German resident who is not a US citizen fall outside the scope of estate tax, by treaty attribution, whatever their amount. One detail nonetheless deserves emphasis, because it illustrates why each treaty must be read in its own text: the German treaty has no article reserving to the United States the tangible movable property located there — where the French treaty does. The perimeter that Germany cedes to the United States is therefore even narrower than the French one.

US citizens and the ten-year rule

Two categories of person fall outside this protection. US citizens, first: the United States retains the right to tax its own citizens, wherever they are domiciled. Recent expatriates, next: the treaty provides that an individual domiciled for less than ten years in one of the two States may, under conditions, continue to be treated as domiciled in the State of their nationality — an American who settled in Germany seven years ago remains, for treaty purposes, a US domiciliary. Dual nationals and former long-term green card holders are subject to their own rules: for them, this page is not enough.

US real estate: the prorated credit

For the property the United States can still tax — US real estate first and foremost — the 1998 protocol gave the estate of a German resident the same mechanism as the French protocol of 2004: a unified credit equal to the greater of two amounts — the US citizens' credit prorated to the share of taxable US-situs assets in the worldwide estate, or the ordinary non-resident credit.

With a federal allowance of $15 million per person in 2026 (an amount made permanent and indexed), the mechanics protect massively. The example is the same as for France: a worldwide estate of $4M including an $800,000 house in Florida gives an effective exemption of $15 million × (0.8 / 4) = $3M — no tax. And the general rule holds: as long as the worldwide estate stays under the federal allowance, the proration always covers the US share.

The surviving spouse

The treaty and its protocol contain protections specific to the surviving spouse for the property the United States can tax — including a rule of its own for community property and a treaty marital deduction, subject to conditions relating to the spouses' domicile and nationality. For ETFs the question does not arise: they are already outside the US scope. Couples with US real estate, on the other hand, have a genuine reason to have these clauses computed.

What does not change: the procedure

Treaty attribution removes the tax, not the friction. At death, the US broker freezes the assets until the IRS transfer certificate; to obtain it, the estate files Form 706-NA, claiming the benefit of the treaty. No tax, full file, delays measured in months: everything the general page describes remains true for the German resident. The heirs' survival liquidity is to be planned outside US accounts.

The German side

What the United States cedes, Germany taxes under its own rules — and they differ profoundly from the US model: the German Erbschaftsteuer taxes each beneficiary on their share (not the estate as a whole), with personal allowances by degree of kinship and a schedule by class. The US ETFs of a decedent domiciled in Germany enter this base like any worldwide asset. The treaty avoids double taxation; it neither creates nor removes the German tax.

Design responses

For the German resident who is not a US citizen, the picture is the same as in France, and even cleaner: the US tax risk on ETFs is removed by the text; what remains is the procedural risk (freeze, 706-NA, delays) and the possible US real-estate pocket, covered by the proration as long as the worldwide estate stays under the allowance. Hence the same responses: a prepared estate file, the heirs' liquidity outside US accounts, and the UCITS substitution reserved for those who want to remove even the procedure, not the tax. One extra point of vigilance for transatlantic life paths: the ten-year rule can shift the treaty domicile to where one does not expect it.