If you have an inheritance in mind, you can look to the future with less worries. Times of crisis then weigh less heavily. In Germany in particular, more people inherit wealth than earn it with their own hands. And the trend is increasing in this country. A look at inheritances in the Federal Republic and the effects on wealth inequality in the country.
One of the truths about wealth in Germany is that more is inherited or given as gifts. This affects more than half of all private wealth. Wealth is earned less and less. Build something yourself “with your own hands”? It still does, but not as often as it used to.
Now save articles for later in “Pocket”.
It is also true that inheritances and gifts have been increasing for years – and this has fueled the inequality in the distribution of wealth in the country. Marcel Fratzscher, Professor of Macroeconomics at Humboldt University and President of the German Institute for Economic Research (DIW) in Berlin, writes on Twitter that inheritances and gifts have increased by 20 percent since 2002. One reason for this: the post-war generation, which is now passing on its wealth to its children. A process that is also described by the term wave of inheritance.
This is all the more evident when looking at the periods from 1986 to 2001 and 2002 to 2017. A study by the DIW shows that every seventh adult has received at least one inheritance in the past 15 years. That’s a little over 7 percent. The inflation-adjusted amount of inheritances or larger gifts in the period 1986 to 2001 averaged around 72,500 euros, between 2002 and 2017 it climbed by 17 percent to 85,000 euros. A table from the study makes this clear. The wave of inheritances is slowly but surely reaching the population.
!function(){var t=window.addEventListener?”addEventListener”:”attachEvent”;(0,window[t])(“attachEvent”==t?”onmessage”:”message”,function(t){if(“string”==typeof t.data
The overview also shows that just over four percent received donations in the first period. In the period that followed, this figure fell to around three percent. However, the average amount of donations increased from 74,500 euros to almost 89,000 euros.
Fratzscher emphasizes that those inheritances and gifts are not evenly distributed among the German population, but – on the contrary – only ten percent received such a transfer in the period 2002 to 2017, and of these, the top ten percent have half of all transfers receive.
According to the study, between 2002 and 2017 an average of 134 billion euros was inherited or given as gifts. Almost 50 percent of the inheritance and gift volume goes to the ten percent with the highest amounts. This means that the top ten percent of the heirs and recipients together receive about as much as the bottom 90 percent. The bottom line is: “The overall inequality of inheritances and gifts is about as great as that of individual net assets,” write the study authors.
And those who are already among the privileged in the country are usually also heirs. Fratzscher writes: “These are mostly:
The economist also makes a difference between the inheritances in the east and west of the republic. The chart shows that not only are individual net assets in eastern Germany less than half the average in western Germany, but also that inheritances and gifts differ greatly from one another.
!function(){var t=window.addEventListener?”addEventListener”:”attachEvent”;(0,window[t])(“attachEvent”==t?”onmessage”:”message”,function(t){if(“string”==typeof t.data
Donations and inheritances are not only much rarer in eastern Germany – the inheritance rate in eastern Germany is six percent, in western Germany almost eight percent – the amount of transfers is also significantly smaller in the east than in the west. Circumstances that are reflected in the net wealth: In East Germany it is around 55,000 euros, West Germans have an average net wealth of around 121,000 euros.
Fratzscher also writes that inheritances and gifts continue to increase the absolute inequality of wealth and income in Germany. Because “two-thirds of all inheritances go to the 20 percent of the people with the greatest wealth.” As the study shows, inheritances and gifts can significantly influence the social position of the following generation.
The results show that only two percent of the poorest fifth of the population received an inheritance or gift in the period 2012-2017. Over time, it becomes clear that the greater the wealth, the higher the inheritance rate. The same applies to the amount of transfers: The group with the lowest individual net worth received transfers of 10,000 euros on average and therefore the fewest. In the middle wealth groups, the median value fluctuates between 21,000 and almost 40,000 euros. According to the study, the value of the wealthiest more than triples to 145,000 euros.
The state also benefits from inheritance. A look at the net assets of private German households in Germany reveals net assets of 13.8 trillion euros – a doubling in the past 20 years. According to DIW estimates, up to 400 billion euros could be inherited or given away every year. In 2019, for example, the German state was able to collect seven billion euros in inheritance taxes. According to Fratzscher, this is around two percent of the inherited sum.
On Twitter, Fratzscher goes on to explain how inheritances from companies are structured in Germany. He writes: “Of 144 billion euros of tax-free business transfers (2011 to 2014), 37 billion euros went to minors. 90 children under the age of 14 received 29.4 billion euros.”
According to a DIW publication quoted by Fratzscher, the large number of company transfers to minors and children under the age of 14 make clear the dilemma of company privileges when it comes to inheritance and gift tax. Because people are favored “who are not actively involved in the company and do not bear any particular entrepreneurial risks, but are pure shareholders,” it says. In the case of many adult heirs of shares in larger family companies, high tax advantages are also granted without the existence of these companies being directly threatened. “In contrast, if you inherit or give away “normal” wealthy real estate or financial assets, they will be noticeably burdened by inheritance tax if the personal allowances of the purchaser are exceeded,” write the authors of the study.
Also read:
Also striking: two-thirds of inheritances from companies went to male heirs. According to the publication, women are disadvantaged when it comes to large inheritances. “This signals that inheritances are often about claims, traditions and the preservation of vested interests,” says the economist.
The DIW President also explains that 43 percent of the assets of millionaires are business assets and 40 percent are real estate. “Inheritances of business assets are hardly taxed so as not to endanger the substance of the company.”
The inequality is shown even better by an example: “Heirs of up to 500,000 euros pay an average of more than 10 percent inheritance tax. Heirs of more than 20 million euros pay an average of 1.8 percent (2011 to 2014).” The mood on the subject of inheritance tax, on the other hand, is as follows: “70 percent of citizens in Germany are AGAINST an inheritance tax.”
In order to counteract the problem of increasing inequality and create equal opportunities, the expert recommends “an objective debate on how we can deal with the increasing absolute inequality of assets and opportunities through inheritance and how as many people as possible can
