Widow’s Pension and Tax in Germany – Everything You Need to Know

The death of a spouse is associated with a great shock, much stress, and a severe emotional blow. Nothing can replace this loss for us, but the German state wants to support its citizens during this difficult time of mourning and offers them a widow’s or widower’s pension. The widow’s pension helps to cope with the financial changes after the loss of a partner and to secure economic existence. The topic of the widow’s pension is quite complex, so in today’s article, we will try to explain to you the more complicated questions related to receiving additional money after the death of a partner.

Taxes on pensions and widow’s pensions – who is entitled?

People whose deceased spouse was insured in the pension system for at least five years are entitled to a widow’s pension. This period is the so-called minimum insurance period if the partner had previously fulfilled a waiting period or already received a pension. The second requirement is that you were married to your partner up to their death (whether you lived together or separately does not matter), and the third requirement is that the marriage lasted at least one year. In the following cases, you will not receive a widow’s pension:

• finalized divorce,
  ● the marriage was declared invalid,
  ● you were only engaged previously.

Taxation of the widow’s pension (taxable) – old versus new law

You are entitled to a widow’s pension under the old law if your spouse died before January 1, 2002, or if your marriage was concluded before this date and at least one of you was born before January 2, 1962. The new law applies, however, if you married after December 31, 2001, or if both of you were born after January 1, 1962.

Tax – widow’s pension and amount of the benefit (Tax with widow’s pension)

The amount of the widow’s pension primarily depends on whether the person is entitled to a small or large pension. To ease the widow’s (or widower’s) adaptation to the changed financial situation, the widow’s pension is paid in full for the three calendar months following the month of death. These three months are often referred to as the ‘death quarter,’ in which one’s own income is not considered.

Taxation of the small widow’s pension

You can receive a small widow’s pension if you have not yet reached the age of forty-seven, are incapable of working, or do not raise a child. Before you receive this, the German pension insurance will check what pension entitlements your deceased partner would have had at the time of their death. According to this calculation, the small widow’s pension amounts to 25% of the pension your deceased spouse would have received. However, if your spouse died before reaching the age of sixty-five, you must expect a deduction. It is important that the small widow’s pension is limited to 24 calendar months after your spouse’s death, unless the old regulation still applies to you – in this case, you receive an unlimited small widow’s pension.

Taxation of the widow’s pension – large widow’s pension

To apply for a large widow’s pension, you must meet one of the following conditions:

• You must be at least 47 years old,
  ● You must be unable to work,
  ● You are raising a child of your own or a child of your deceased partner who has not yet reached the age of eighteen.

The amount of the large widow’s pension also depends on what pension entitlements the deceased spouse would have had. The German pension insurance can also consider the amount of pension you already receive. Ultimately, you are entitled to 55% of the insured’s pension. However, if your spouse dies before reaching the age of 65, the large widow’s pension is reduced by a deduction.

Taxation of the widow’s pension and remarriage

Upon remarriage, both the small and large widow’s pensions expire at the end of the calendar month in which the marriage took place. In the event of a later marriage, however, there is the possibility of applying for a pension settlement in the form of a one-time payment. In the case of a large widow’s pension settlement, the pension settlement corresponds to the two annual amounts of the widow’s pension that you have received on average over the past twelve calendar months. The calculation is based on the amount of the pension after deducting income, but before deducting health and long-term care insurance contributions. The quarter of the year in which the death occurred is not taken into account in this calculation.

Taxation of the widow’s pension and income credit

If you have additional income besides your survivor’s pension, for example from a private pension, this will be credited to your widow’s pension over a tax allowance of up to 40%. The German pension insurance calculates the net income based on the gross earnings – if this exceeds the tax allowance, 40% of the remaining net income is deducted from the pension. The deduction primarily depends on how high your income is exactly. Each situation is considered individually. It is worth knowing that the widow’s pension is a so-called derived pension entitlement, which means it is paid from the deceased’s insurance. This means that if a pension is drawn from one’s own insurance in addition to the widow’s pension, this is considered as income and is deducted from the survivor’s pension.

Taxation of the widow’s pension (Taxation with widow’s pension) and splitting of the pension

An alternative to the widow’s pension in Germany is the so-called ‘pension splitting’ – the pension entitlements from the marriage are divided equally between the two parties. This solution is particularly advantageous for the partner who has fewer pension entitlements. When opting for pension splitting, it is not possible to return to the widow’s pension. All information on pension splitting can be found in the brochure ‘Pension Splitting – Splitting in Partnership’ from the German pension insurance.

Do you have to pay taxes on your widow’s pension?

The same rules apply to the taxation of the widow’s pension as to a normal pension. Those who take advantage of the pension allowance have part of their pension tax-free. A special German tax program can help you recognize the tax situation of your deceased partner. It is based on the most current tax guidelines and can also be used from anywhere (in an app on your phone or via a web browser on your computer).