Inheritance law: Everything important about wills, compulsory portions and succession

Inheritance law – Inheritance law is an extremely important area of law that affects each and every one of us. It is advisable to deal with the regulations at an early stage in order to be well prepared for one’s own family and property succession in the event of death.

The aim of inheritance law is to ensure that the will of the testator is respected with regard to the distribution of his or her assets and to avoid conflicts between the heirs.

Topics in our legal advice

Since inheritance law is important for everyone, it is advisable to deal with it at an early stage and to make sensible estate arrangements. In doing so, individual wishes and ideas can be taken into account to ensure that the assets are distributed according to one’s own wishes after death.

Table of contents

1. Introduction to the law of succession
   1.1 What is inheritance law?
   1.2 Significance of the law of succession
2. Wills and testamentary dispositions
   2.1 Types of wills
   2.2 Making a will
   2.3. execution of a will
   2.4. contestation of wills
3. Legal succession
   3.1. heirs of the first order
   3.2. heirs of the second order
   3.3. third-order heirs
4. Compulsory portion and beneficiaries of the compulsory portion
   4.1. compulsory portion and its calculation
   4.2. claiming the compulsory portion
   4.3. waiver and withdrawal of compulsory portion
5. Inheritance tax and allowances
   5.1 Tax bases of inheritance tax
   5.2. tax allowances and tax brackets
6. Inheritance contract and gift
   6.1 Differences between inheritance contracts and wills
   6.2. possible arrangements and formal requirements
   6.3. gifting as an alternative
7. International inheritance law
   7.1 Inheritance law regulations abroad
   7.2 European Inheritance Law Regulation
   7.3 Advice on inheritance law in cross-border inheritance cases
8. Conclusion and outlook

Introduction to the legal field of inheritance law

Inheritance law is a field of law that deals with the regulation of the transfer of property after the death of a person. It covers a variety of topics such as the drafting of wills, succession, heirs’ claims to a compulsory portion, and the administration and settlement of estates.

Inheritance law is about a person regulating during their lifetime what will happen to their assets after their death. Individual wishes and ideas can be taken into account to ensure that the assets are distributed according to one’s own wishes after death.

Inheritance law is regulated in the German Civil Code (BGB) and is of great practical importance, since everyone has assets and it is important to regulate these assets in a timely and sensible manner. It is therefore advisable to deal with inheritance law at an early stage in order to prevent disputes later on and to make sensible arrangements for the estate.

What is inheritance law?

Inheritance law is a branch of civil law that regulates the transfer of the assets of a deceased person (testator) to his or her heirs. It includes both tangible and intangible assets such as real estate, money, debts, copyrights and much more. In Germany, the law of succession is regulated in the German Civil Code (BGB), in particular in §§ 1922 to 2385 BGB.

Inheritance law has three main objectives in particular:

• The safeguarding of the testator’s assets and ensuring an orderly transfer of property.
• To enforce the testator’s testamentary dispositions.
• To safeguard the interests of the heirs and other parties involved, such as those entitled to a compulsory portion or creditors.

Importance of the law of succession

Inheritance law plays an important role in social and economic life, as it regulates the transfer of assets from one generation to the next. It provides security for survivors and enables them to respect the wishes of the deceased.

Some key aspects of inheritance law are:

1. Will: The testator’s testamentary disposition in which he names his heirs and distributes the estate.
2. Legal succession: The legally established succession that takes effect in the absence of a will or other dispositions.
3. Compulsory share: The minimum share of the inheritance to which certain close relatives (e.g. children and spouses) are entitled, even if the testator has passed them over in the will.

Wills and testamentary dispositions

A will or testamentary disposition is an important way of recording one’s last will and testament in relation to the distribution of assets after one’s death. It is a legally valid document that can be drawn up by any person in full possession of their faculties.

In inheritance law, there are various ways to settle one’s own estate. One of the best known and most common is the drawing up of a will or testamentary disposition. Here, individual wishes and ideas can be taken into account to ensure that the assets are distributed according to one’s own wishes after death.

In this context, various sub-topics are of importance. These include, for example, the question of which forms of testamentary disposition exist and which formal requirements must be observed. The question of who is eligible as an heir and what claims to a compulsory portion exist also plays an important role. In addition, there are various aspects relating to the execution of wills and the possible contestation of wills.

In the following, these subtopics will be examined in more detail in order to provide a comprehensive understanding of how a sensible inheritance arrangement can be made by means of a will or testamentary disposition.

Types of wills

A will is a legally binding statement by a person specifying how their assets are to be distributed after their death. There are different types of wills recognised under German law:

I. Handwritten will: According to § 2247 of the German Civil Code, a handwritten will must be written and signed entirely by hand. It should also contain the date and place of writing in order to avoid possible disputes about its validity.

II. Notarial will: A notarial will is made before a notary. The testator declares his or her testamentary disposition orally or in writing, and the notary draws up a record which he or she then presents to the testator for signature (§ 2232 BGB).

Joint will: According to § 2265 BGB, spouses or life partners can draw up a joint will. In doing so, they appoint each other as heirs and/or designate heirs in the event of the death of the last deceased.

Drawing up a will

When drawing up a will, the following aspects should be taken into account:

1. Formal requirements: The formal requirements for the different types of wills must be observed to ensure the effectiveness of the will (§§ 2247, 2231, 2265 BGB).
2. Clarity and definiteness: The testamentary disposition should be formulated in a clear and definite manner in order to avoid difficulties of interpretation and disputes between the heirs.
3. Testamentary capacity: The testator must be capable of making a will in accordance with § 2229 BGB, i.e. he or she must be at least 16 years old and capable of recognising the meaning and scope of his or her disposition.

Execution of wills

The execution of a will serves to secure the testator’s will and the settlement of the estate. The testator may name an executor in his will who will carry out the dispositions laid down in the will (§ 2197 BGB). The executor’s duties may include, for example

• the administration of the estate
• the fulfilment of legacies or
• the settlement of the community of heirs.

Contestation of wills

A will can be contested under certain conditions (§§ 2078, 2079 BGB).

Legal succession in German inheritance law

Legal succession applies if there is no effective testamentary disposition, such as a will or contract of inheritance. It regulates the distribution of the estate according to the orders and degrees of relationship laid down by law. The statutory regulations on succession can be found in §§ 1922 to 1936 of the German Civil Code (BGB).

First-order heirs

First-order heirs under German inheritance law are the descendants of the deceased, i.e. his children, grandchildren and great-grandchildren.

There are some special features to be noted here:

• According to § 1924 BGB, the children inherit in equal shares.
• If a child of the deceased is already deceased, his or her descendants (grandchildren) take his or her place according to the principle of representation (§ 1924 para. 3 BGB).
• Adopted children are treated in the same way as natural children (§ 1923 BGB).
• Children born out of wedlock are entitled to inherit if paternity has been acknowledged or judicially established (§ 1924, para. 1, BGB).

Example: Hans has two children, Anna and Ben. Ben has died and has two children, Carla and David. The first-order heirs in this case are Anna (50%), Carla (25%) and David (25%).

Second order heirs

If there are no first-order heirs, the parents of the deceased and their descendants become second-order heirs. The regulations on this are found in §§ 1925 and 1926 of the Civil Code.

• If the parents of the deceased are still alive, they inherit in equal shares.
• If one parent is already deceased, his or her descendants (siblings of the deceased) take his or her place.

Example: Hans has no children. His parents are deceased, but he has two siblings, Anna and Ben. In this case, Anna and Ben are the second-order heirs and inherit in equal shares.

Third-order heirs

If there are no first- or second-order heirs, the third-order succession applies, which is based on the deceased’s grandparents and their descendants (§ 1927 BGB).

• If the grandparents are still alive, they inherit in equal shares.
• If one grandparent is already deceased, his or her descendants (uncles or aunts of the deceased) take his or her place.

Compulsory portion and beneficiaries of the compulsory portion

The compulsory portion is a statutory minimum share of the estate to which certain close relatives of the deceased are entitled if they have been excluded from the succession by a will and / or a contract of inheritance. In the following, we will discuss the various aspects of the compulsory portion and those entitled to it.

Compulsory portion and its calculation

In principle, the compulsory portion amounts to half of the statutory share of the inheritance that the beneficiary of the compulsory portion would have received without a will or inheritance contract. The compulsory portion is calculated on the basis of the value of the estate at the time of inheritance. Both the assets and the debts of the testator must be taken into account.

An example to illustrate this: Let us assume that the testator leaves assets of 500,000 euros and has two children. Without a will, the two children would each inherit 250,000 euros. If one of the children were disinherited in the will, he would be entitled to a compulsory share of 125,000 euros (half of the legal share of the inheritance).

According to § 2303 of the German Civil Code (BGB), the following persons are entitled to a compulsory share:

• Descendants of the deceased (children, grandchildren, great-grandchildren, etc.)
• Spouses or civil partners
• Parents of the deceased (only if there are no descendants)

Claiming the compulsory portion

Persons entitled to a compulsory portion must assert their claim to a compulsory portion within three years of becoming aware of the inheritance and the disinheritance (§ 2332 BGB). The claim is generally directed against the heirs and is to be settled in money. The heirs are obliged to provide information on the inventory of the estate so that the beneficiary of the compulsory portion can calculate his or her claim (§ 2314 BGB).

Waiver and withdrawal of the compulsory portion

In some cases, the beneficiary of the compulsory portion can waive his or her compulsory portion. This is usually done by a notarised contract between the testator and the beneficiary of the compulsory portion (§ 2346 BGB). The renunciation can be made both in return for a settlement and free of charge.

The deprivation of the compulsory portion is only possible under certain conditions, which are regulated in § 2333 BGB.

These grounds include serious misconduct on the part of the beneficiary of the compulsory portion.

Inheritance tax and allowances

Inheritance tax is a tax levied on the value of assets transferred by inheritance or gift. In Germany, inheritance tax is regulated in the Inheritance Tax and Gift Tax Act (ErbStG). The amount of tax depends on the relationship between the testator and the heir as well as the value of the assets. The most important aspects of inheritance tax and the associated allowances are explained below.

Tax basis of inheritance tax

In accordance with § 1 ErbStG, inheritance tax is levied on the acquisition of assets by gift inter vivos or due to death. The tax is calculated on the basis of the taxable acquisition, which is the value of the assets less any inheritance liabilities and less personal allowances.

The tax rates and tax classes are laid down in §§ 15 to 19 ErbStG. There are three tax classes, depending on the degree of relationship between the testator and the heirs:

• Tax class I: spouses, registered civil partners, children, stepchildren, grandchildren and parents in the case of inheritances.
• Tax class II: siblings, nieces, nephews, step-parents, children-in-law and parents-in-law in the case of inheritances
• Tax class III: All other heirs and donees

Tax allowances and tax classes in inheritance law

Each heir or donee has a personal tax-free amount, which depends on the tax class and the degree of relationship. The tax-free amounts are laid down in § 16 ErbStG and are as follows:

• Spouses and registered civil partners (tax class I): 500,000 euros.
• Children and stepchildren (tax class I): 400,000 euros
• Grandchildren (tax class I): 200,000 euros
• Parents and forefathers in the case of inheritance (tax class I): 100,000 euros
• Siblings, nieces, nephews, step-parents, children-in-law and parents-in-law (tax class II): 20,000 Euros
• All other acquirers and donees (tax class III): 20,000 euros

Inheritance contract and gift in inheritance law

In addition to wills, inheritance contracts offer another possibility to regulate the succession of property. In the following, we will discuss the differences between inheritance contracts and wills, the structuring options and formal requirements as well as the gift as an alternative to inheritance regulation.

Differences between inheritance contracts and wills

An inheritance contract is a two-sided binding contract concluded between the testator and the future heir. Unlike a will, which is unilateral and revocable at any time, an inheritance contract binds both parties and can only be revoked by joint agreement or under certain circumstances – e.g. breach of contract.

Some advantages of the contract of inheritance over the will are:

1. Legal certainty: Since both parties are bound by the contract, the inheritance contract cannot be unilaterally changed and/or revoked.
2. Obligation: Through the contract, both parties can enter into obligations, e.g. securing the deceased’s nursing home by the heir.
3. Protection against contestation: Inheritance contracts are more difficult to contest than wills, as they must be notarised.

Possibilities for drafting and formal requirements

An inheritance contract can contain various provisions, such as the establishment of an inheritance, legacies, conditions or the arrangement of an execution of a will. The regulation of compulsory shares and their waiver can also be stipulated in a contract.

Inheritance contracts must be notarised to be valid (§ 2276 BGB). Both parties must be present in person at the notarisation, and the notary must read out and explain the content of the contract to ensure that both parties understand and voluntarily agree to it.

Gift as an alternative in inheritance law

Donation is another alternative for regulating the succession of property. It enables assets to be transferred to the beneficiary while the donor is still alive. Gifts can also be advantageous from a tax point of view, as they can be repeated every ten years and the personal allowances for gift tax can be claimed (§§ 16, 17 ErbStG).

International inheritance law

In a globalised world, it is increasingly the case that inheritance cases have cross-border aspects. International inheritance law comes into play when the deceased and/or the heirs have different nationalities, assets exist in several countries or the deceased had his or her last habitual residence abroad.

This section deals with inheritance law regulations abroad, the European Inheritance Regulation and inheritance law advice in cross-border inheritance cases.

Inheritance regulations abroad

Inheritance regulations can vary considerably from country to country. In many countries there are different laws and procedures governing inheritance, compulsory portions, wills and other inheritance law issues. Therefore, it is important to inform yourself about the inheritance regulations in the respective country and, if necessary, to seek the help of a lawyer specialising in international inheritance law.

European Inheritance Regulation

The European Inheritance Regulation (EU Regulation No. 650/2012), which has been in force since 17 August 2015, aims to simplify international inheritance law within the EU and create legal certainty. The Regulation determines which national law is applicable to a cross-border succession and which courts have jurisdiction.

In principle, according to Art. 21 of the Regulation, the law of succession is that of the state in which the deceased had his habitual residence at the time of his death. However, the testator may also expressly stipulate in his will that the law of his home country shall apply to his estate (choice of law, Art. 22).

The European Succession Regulation does not apply in Denmark, Ireland and the United Kingdom. In these cases, as well as in inheritance cases involving countries outside the EU, the respective national conflict-of-law rules apply.

Advice on inheritance law in cross-border successions

Cross-border successions can involve legal and tax complexities. It is therefore advisable to consult an experienced international succession lawyer or a tax advisor who has experience with cross-border successions.

Conclusion on the subject of inheritance law

Inheritance law is a complex area of law that is of great importance to every citizen, as it concerns the rules for the transfer of assets and debts after the death of a person. In this section, we summarise the most important points in inheritance law, take a look at recent changes in the law and developments, and draw a final conclusion.

The main aspects of inheritance law covered in the blog post include:

Wills and testamentary dispositions: Drawing up a will makes it possible to regulate one’s estate individually and according to personal wishes. Attention must be paid to compliance with formal requirements.

• Legal succession: Without a will, the legal succession applies, which determines the next of kin as the legal heirs according to a tier system.
• Compulsory portion: The compulsory portion serves to protect close relatives who have been disadvantaged by a will. It consists of half of the legal share of the inheritance and can be claimed by those entitled to the compulsory share.
• Inheritance tax: Inheritance tax is a tax on the acquisition of assets by inheritance or gift. Exemptions and tax brackets ensure that in many cases there is no or only a reduced tax burden.
• Inheritance contract and gift: An inheritance contract offers a further possibility to regulate the estate, while gifts during one’s lifetime can offer tax advantages.

Herfurtner Law Firm – expertise and support in inheritance law

Our Herfurtner law firm is experienced in advising and representing clients in all matters of inheritance law. If you have any questions or need legal support in the field of inheritance law, we will be happy to assist you. Our lawyers can advise and represent you competently and reliably.

You can reach us by telephone, e-mail or via the contact form on our website.

We take the time to listen to your concerns and offer you individual advice. We understand that every case is unique and therefore requires a tailored approach.

We would be delighted to help you with your inheritance law matter. Please do not hesitate to contact us.

Wolfgang Herfurtner | Lawyer | Managing Director | Shareholder

Current articles from the legal field of inheritance law