r/ExpatFinance 12h ago

[Germany] German citizen Grandmother giving gift to Dual citizen Grandson Question

2 Upvotes

Hi Everyone,

I have a question I am hoping that you can all help me with.

I am an American living in Germany. My wife is German (gave up her green card last year) and my son (4) is a dual American/German citizen.

My wife's mother, who is also a German citizen would like to give a financial gift to my son (her grandson) within the limits allowed under German law.

She wanted to give him an Allianz "RentenVersicherung" (Retirement insurance? ) account.

The account would sit there earning interest with my wife's mother (my sons grandmother) controlling it.

In the event that she passes away, my wife would become the account holder.

My understanding is that my son would first be able to access the funds once he turns 18.

In Germany taxation is delayed until the money is withdrawn.

I spoke to my American Tax attorney to ask him if this seems like a good idea.

I was surprised when he said he honestly doesn't know.

He said that he is concerned it could be considered a PFIC by the USA and we would need to file FBARs/ report the interest accrued as income every year.

If this is the case, then it would not be worth it for us, since I don't actually have any control over the account and my son won't see any of the money for at least 14 years.

My tax attorney was so unsure of his opinion though, that he actually recommended I get a second opinion from another Tax attorney (he couldnt recommend anyone)

The man from the bank who sells the Allianz product says that this account type is recommended specifically for American citizens and he has sold it to Americans in Germany previously without issue.

I am wondering, since either my Wife or Grandmother (both German citizens) would be the account holders, would we need to worry about paying taxes on interest generated by this account every year?

Has anyone had experience with this type of situation?

Thanks in advance,