Can I Deduct the Costs for Lawyers, Executors, and Agents from the Estate?

Yes, in many cases, the costs associated with settling an estate can be deducted directly from the estate’s assets. This ensures that you are not personally burdened by these expenses. Here’s a breakdown of what is typically deductible under German inheritance law and international practices.

 
1. Legal Fees
If you hire a lawyer to assist with the estate settlement, these costs are generally deductible:

Probate and Inheritance Law: Legal fees for assistance with probate or inheritance law matters are typically considered estate expenses.
Dispute Resolution: Costs incurred for resolving disputes among heirs or with other parties can also be covered by the estate.
 
2. Executor Fees
If the deceased appointed an executor (Testamentsvollstrecker), their fees are often deductible:

Administration Costs: The executor’s fees for distributing assets, paying debts, and ensuring compliance with the will are usually taken from the estate.
Professional Executors: If a professional executor (e.g., a lawyer or accountant) is appointed, their charges are included as estate expenses.
 
3. Real Estate Agent Fees
For estates that include property, agent fees are typically deductible if:

Sale of Property: The property is sold as part of the estate settlement.
Property Valuation: Costs for professional property appraisals or inspections.
 
4. Tax Advisor Costs
If you engage a tax advisor to handle the estate’s tax matters, these costs are deductible:

Inheritance Tax Returns: Preparation and filing of the inheritance tax return.
Income Tax for the Deceased: Assistance with filing any outstanding income tax returns for the deceased.
 
5. Administrative Costs
Costs related to administering the estate can also be deducted, such as:

Court Fees: Probate court fees for processing the will and issuing an inheritance certificate.
Translation and Notarization: Fees for translating and notarizing documents for international estates.
 
6. Dispute Costs
If disputes arise during the settlement process:

Legal Representation: Fees for legal representation in court or mediation.
Mediation Services: Costs associated with resolving disputes out of court.
 
How to Deduct These Costs
Pay Directly from the Estate: Most of these expenses can be paid directly from the estate’s assets before distribution to the heirs.
Keep Documentation: Retain all invoices and receipts to justify the deductions during the estate settlement process.
Consult a Professional: Engage a lawyer or tax advisor to ensure all eligible costs are appropriately deducted.
 
What Costs Are Not Deductible?
It’s important to note that not all costs can be deducted from the estate:

Personal Expenses: Costs unrelated to the estate, such as personal travel or accommodation, are not typically deductible.
Unapproved Services: Expenses for services not directly tied to the estate settlement may not be covered.
 
Conclusion
The costs for lawyers, executors, agents, and other professionals involved in settling an estate are generally deductible, ensuring that these expenses do not become a personal financial burden. Proper planning, documentation, and professional advice are key to navigating this process efficiently and respecting the wishes of your loved one.