Inheritance tax discussion: Karlsruhe has the last word

Inheritance tax is currently more in the spotlight than it has been for years. This has been triggered by the SPD’s reform proposals, which it claims are intended to prepare for a possible decision by the Federal Constitutional Court . In fact, the political debate is gaining momentum precisely because the constitutional review is still ongoing – and its outcome is open.

This is a crucial phase for you as an heir. Because nothing has been decided yet, neither politically nor legally.

What exactly is the Federal Constitutional Court examining?

The Federal Constitutional Court is currently hearing a constitutional complaint on inheritance tax is currently pending. The central question is whether the current rules are compatible with the principle of equality in the German Basic Law.

Specifically, the main issue is the extensive tax privileges for business assets:

• Company assets can currently be inherited 85% or even 100% tax-free

• This is subject to certain payroll and retention rules

• In practice, this often benefits very large estates, while smaller private inheritances are significantly more heavily burdened

The Federal Constitutional Court has already criticized these exemption rules in previous decisions as being too extensive and forced the legislator to make improvements. This is precisely where the current proceedings come in.

👉 It remains to be seen whether and to what extent these privileges may remain in place.
👉 The last word on inheritance tax has not yet been spoken.

The Federal Constitutional Court is decisive – not politics

Regardless of political announcements:
The Federal Constitutional Court alone, not politicians, decides on the constitutionality of inheritance tax.

Political reform plans cannot replace or anticipate a ruling from Karlsruhe. The court merely sets the constitutional framework – how this is subsequently shaped by law is another question.

This is precisely where the current political debate comes in.

What are the SPD’s specific plans for inheritance tax?

On January 13, 2026, the SPD presented a reform concept for inheritance tax which, according to the SPD, is also intended as a response to the pending proceedings in Karlsruhe. In terms of content, however, it goes far beyond mere preparation.

The central points of the concept:

1. new lifelong allowance

• 1 million euros tax-free allowance per person for their entire life

• Of which:

  • 900,000 euros within the family

  • 100,000 euros to third parties

• The previous tax classes and degrees of relationship are to become less important

2. severe restriction of corporate privileges

• Allowance for business assets: 5 million euros

• Above this amount, progressively increasing taxation will apply

• The previous extensive tax exemption for large company transfers would no longer apply

3. deferral instead of tax exemption

• It should be possible to pay the tax over a period of up to 20 years

• The prerequisite is to secure jobs

• Tax exemption is thus effectively replaced by long-term payment obligations

4. outstanding charges above the allowances

• It remains to be seen how high the tax will actually be beyond the tax-free amounts

• The SPD speaks of a political negotiation

• It is precisely this lack of clarity that is currently causing massive criticism

Why the reform proposals are controversial

Criticism comes from business, SMEs and the opposition. The main complaints are:

• Lack of clarity about the specific tax amount

• Risks for family businesses and business succession

• Additional uncertainty in economically tense times

At the same time, it is clear:
The SPD is using the ongoing proceedings in Karlsruhe to set political guard rails in advance – even though the Federal Constitutional Court has not yet made a decision.

What does this mean for you with a current inheritance tax assessment?

As long as the proceedings in Karlsruhe are ongoing, the legal situation is open. If you receive an inheritance tax assessment notice now and do nothing, it will become final.

This has consequences:

• Subsequent decisions by the Federal Constitutional Court generally do not have retroactive effect

• Even political reforms will not automatically help you

• Your individual situation is not taken into account

An objection to the inheritance tax assessment is therefore not an attack, but a purely protective measure to keep your rights open.

Sample objection and first aid advice from PepperPapers

PepperPapers provides you with a sample objection to inheritance tax at your disposal. It addresses the unresolved constitutional situation and is designed to keep your decision open in a legally secure manner.

If you are unsure whether an objection makes sense in your specific case, you can also contact the first aid advice service. There, we will assess your situation in a structured manner – without lengthy procedures and without obligations.

Conclusion

Inheritance tax is at a legal and political turning point.
While politicians are discussing reform plans, the Federal Constitutional Court is reviewing the current rules.

👉 If you are currently affected, you should use this phase to secure your rights.