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Can I give away or pass on a life insurance policy in Germany?

In short

Can I give away or pass on a life insurance policy in Germany? Yes. To give it away, you transfer the policy to someone else with the insurer's consent; the tax office values it at its surrender value. To pass it on, you name a beneficiary or let it go into your estate. A child can receive 400,000 euros tax free from each parent, renewed every ten years.

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What it costs

Allowances and rates from the German Inheritance and Gift Tax Act, as of October 2026. They apply equally to gifts and inheritances.

Example	Typical range
Allowance for a spouse	500,000 euros
Allowance per child from each parent	400,000 euros
Allowance for a grandchild	200,000 euros
Allowance for siblings, unmarried partners, friends	20,000 euros
Tax rate class I up to 75,000 euros	7 percent
Tax rate class III up to 6 million euros	30 percent

Figures from sections 15, 16 and 19 of the Inheritance Tax Act.

The surrender value in the example is an assumed figure and the tax is simplified.

For large amounts or compulsory share questions, ask a tax adviser or an inheritance lawyer.

Worked example

A mother gives away an endowment policy with a surrender value of 60,000 euros

The maturity payout is expected to be 80,000 euros. For tax, only the 60,000 euros surrender value on the day of transfer counts.

To her daughter: surrender value	60,000 euros
Allowance for a child	400,000 euros
Gift tax for the daughter	0 euros
To her nephew: 60,000 minus 20,000 euros allowance	40,000 euros taxable
Gift tax for the nephew, 15 percent	6,000 euros

The same policy is tax free for the daughter and costs the nephew 6,000 euros. If the mother gives the nephew more within the next ten years, everything is added together.

Two routes: beneficiary or new policyholder

You have two levers. With the beneficiary designation (Bezugsrecht) you decide who receives the payout when you die. You stay the policyholder, keep paying and can change everything. With a change of policyholder you hand over the whole contract: the new owner pays the premiums, may cancel and decides about the money.

A revocable beneficiary only acquires a claim when the insured event occurs. An irrevocable designation takes effect immediately, and you can no longer withdraw it on your own. This is set out in section 159 of the German Insurance Contract Act (VVG).

Route	What happens	Tax
Revocable beneficiary	money flows only on death, you keep control	inheritance tax for the beneficiary
Irrevocable beneficiary	claim arises at once, changes need consent	inheritance tax on death
Change of policyholder	the contract passes to the new owner today	gift tax on the surrender value
No beneficiary named	payout goes into the estate	inheritance tax for the heirs

Giving it away during your lifetime

You have no right to make the insurer accept a new policyholder. The insurer has to agree, usually with its own form signed by the old and the new policyholder. Ask for it in writing.

For gift tax, what counts is not the future payout but the surrender value on the day of transfer, under section 12(4) of the German Valuation Act. The insurer reports the change, including the surrender value and the new owner's details, to the tax office.

Selling is different from giving. Someone who buys another person's policy pays income tax on the death benefit as investment income under section 20(1) no. 6 sentence 7 of the Income Tax Act, and the half rate for long contracts does not apply. A gift is not affected by this rule.

Passing it on when you die

If a beneficiary is named, the insurer pays them directly, without a certificate of inheritance and regardless of your will. The money is then not part of your estate. For tax purposes it still counts as an acquisition on death under section 3(1) no. 4 of the Inheritance Tax Act.

Without a beneficiary, the money goes into the estate and is shared under your will or the statutory rules. If the policyholder dies but the insured person is still alive, for example parents holding a policy on their child's life, the heirs inherit the contract itself. It is then also valued at its surrender value.

Recipient	Allowance	Tax rate up to 75,000 euros above the allowance
Spouse or registered partner	500,000 euros	7 percent
Child, stepchild	400,000 euros	7 percent
Grandchild	200,000 euros	7 percent
Parents on inheritance	100,000 euros	7 percent
Parents on a gift, siblings, nieces, nephews	20,000 euros	15 percent
Unmarried partners, friends	20,000 euros	30 percent

Two traps that cost families money

First, the silent beneficiary. If the beneficiary knows nothing during your lifetime, the gift is only completed after your death. Until the insurer passes on the offer, your heirs can revoke it. In one case the beneficiary had to hand the money back to the heirs (Regional Court Frankenthal, judgment of 12.10.2022, 8 O 165/22). So tell the person while you are alive.

Second, the compulsory share (Pflichtteil). If you leave children or your spouse out and favour someone else through a beneficiary designation, expect claims to top up the compulsory share. According to the Federal Court of Justice, the relevant value is what you could have realised from the policy in the last second of your life, as a rule the surrender value (judgment of 28.04.2010, IV ZR 73/08).

When giving it away is not the best choice

Once transferred, you have no control left. A 19 year old son as new policyholder can cancel the next day. If your main goal is to provide for your family on death, a beneficiary designation is often enough.

For parents as recipients, the allowance on inheritance is five times higher than for a gift. And if you stay below the allowances anyway, giving the policy away saves no tax. Then the only question is who should control the contract.

If you live outside Germany or your heirs do, other countries may also tax the payout. In that case get cross border tax advice before you act.

Step by step

Ask the insurer for the current surrender value.
Decide whether to hand over the whole contract or only change the beneficiary.
Check the recipient's allowance and add any gifts from the last ten years.
Request the insurer's change of policyholder form and have both parties sign it.
If the value is above the allowance, have a tax adviser estimate the tax first.
If you use a beneficiary designation, tell the person while you are alive, ideally in writing.

Checklist

Surrender value on the transfer date known
Allowance and tax class of the recipient checked
Insurer's consent in writing
Beneficiary updated after marriage, divorce or birth
The beneficiary knows about the designation
Relatives entitled to a compulsory share considered

Common mistakes

Calculating with the sum insured instead of the surrender value
Giving the policy away when a beneficiary designation would have been enough
Keeping a beneficiary designation secret, so the heirs can revoke the gift
Overlooking the low allowance for unmarried partners
Forgetting gifts from the last ten years

Questions and answers

Frequently asked

Does the insurer have to agree?

For a change of policyholder, yes.

A revocable beneficiary designation you can change without the insurer's consent.

Which value counts for gift tax?

The surrender value on the day of transfer, which is what the insurer would pay if you cancelled.

Is the life insurance part of my estate?

Not if a beneficiary is named.

The insurer then pays that person directly.

Without a beneficiary, your heirs receive the money.

Do heirs pay tax on the death benefit?

Inheritance tax yes,

but only above the allowances: 400,000 euros for a child and 500,000 euros for a spouse.

Can I give a policy to my minor child?

In principle yes.

Ask the insurer in advance which documents it needs,

and remember that your child can decide freely about the contract at 18.

Is selling the policy better than giving it away?

Usually not for the buyer: with a purchased policy,

even the death benefit is taxable as investment income.

Can disinherited children claim anything from the life insurance?

Yes, through a top up of the compulsory share.

As a rule the surrender value on the date of death is used, not the amount paid out.

Sources

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