I have two nieces in Germany and would like to gift some money to them before I die. Will they have to pay tax on the money ? Can I just send them a bank draft in Euros ?
You'll have to research the Canada side of things on your own or maybe someone else can answer that side.
For the Germany side, there is a gift tax (Schenkungssteuer) which depends on the relationship (Verwandschaftsgrad) of the giver and receiver.
steuerklassen.com has an overview here which shows the tax class (Steuerklasse) and tax free amount (Freibetrag).
So according to the overview, nieces get 20 000 € tax free amount, anything over 20 000 € within 10 years from the same gift giver will be taxed with tax class 2, which can range from 15% to 43% depending on the gifted amount.
The full article is here
It also mentiones a few "tricks" for example if you want to gift 40 000 € to your niece, you could gift 20 000 € directly and 20 000 € to your brother or sister who then gifts it to their daughter - you'll have to trust them to do that, though, because you can't put that in a contract. Bottom line of this: If you want to gift more than 20 000 €, your niece should contact a tax advisor (Steuerberater).
About the bank transfer: Your niece will have to declare any bank transfers over 12 500 € that she receives. Her bank will know how to do that so she should just ask them. It also might be helpful for her to have a letter from you stating that the money came from you and is a gift, just in case the tax office (Finanzamt) doesn't believe that the money isn't from moonlighing (Schwarzarbeit).