Sooner or later, inheritance law affects almost everyone – whether as a testator, as an heir or as a person entitled to a compulsory share. Yet many people have only a vague idea of its basic principles. The following overview shows how the assets of a deceased person pass by law and what options exist for planning during one’s lifetime.
1. The basic idea: the heir steps into the shoes of the deceased
When a person dies, their estate passes as a whole to the heir or heirs (section 1922 BGB). Lawyers call this universal succession. The heir does not have to do anything for this to happen. The heir takes over all the rights and obligations of the deceased – bank accounts, real estate and receivables as well as debts (section 1967 BGB). An inheritance can therefore also be a burden.
2. Intestate succession or a will?
If the deceased left neither a will nor a contract of inheritance, the rules of intestate succession apply (sections 1924 et seq. BGB). Relatives then inherit by class: first the descendants, then parents and siblings, then grandparents and their descendants. The spouse has a separate right of inheritance (section 1931 BGB), the extent of which depends largely on the matrimonial property regime. Under the statutory regime of community of accrued gains (Zugewinngemeinschaft), the spouse’s share of the inheritance is increased by a flat-rate one quarter (section 1371 (1) BGB).
Anyone wishing to depart from these rules can determine who is to inherit by means of a testamentary disposition.
- Holographic will: It must be written entirely by hand and signed (section 2247 BGB). A will written on a computer is invalid.
- Notarial will: It offers greater legal certainty and in many cases makes a certificate of inheritance unnecessary (section 2232 BGB).
- Joint will: It is available only to spouses and registered civil partners (section 2265 BGB). The best-known example is the “Berlin will” (section 2269 BGB).
- Contract of inheritance: It binds the parties more strongly than a will and must be recorded by a notary (sections 2274 et seq. BGB).
3. The compulsory share: the limit of testamentary freedom
Close relatives can be disinherited, but they cannot be passed over completely. Descendants, the spouse and, in certain circumstances, the parents are entitled to a compulsory share (Pflichtteil) amounting to half of their intestate share (section 2303 BGB). This is a monetary claim against the heirs, and in practice it frequently leads to disputes – particularly where the estate consists essentially of a single property.
4. Acceptance and disclaimer
Anyone who does not wish to accept an inheritance, for example because the estate is over-indebted, can disclaim it. The time limit is generally only six weeks from the date on which the heir learns of the succession and of the basis of their entitlement (section 1944 BGB). Anyone who lets this period expire is deemed to be an heir and is in principle also liable for the debts of the estate, unless they subsequently limit their liability to the estate.
5. Several heirs: the community of heirs
Several heirs form a community of heirs (section 2032 BGB). As a rule, they can only dispose of the estate jointly. In practice, this is a frequent cause of deadlock and conflict. If no agreement can be reached, a partition auction is often the only option left.
6. Inheritance tax
Every acquisition on death must be reported to the tax office within three months (section 30 ErbStG, Inheritance and Gift Tax Act). This does not apply if the acquisition is based on a will opened by a German court or a German notary and the relationship between the recipient and the deceased is clearly evident from it. Whether tax is payable depends largely on the personal allowances (section 16 ErbStG):
- Spouse and registered civil partner: €500,000
- Children and stepchildren: €400,000 each
- Grandchildren: €200,000 (€400,000 if the relevant parent has predeceased)
- Parents and grandparents (on inheritance): €100,000
- All other recipients: €20,000
Surviving spouses additionally receive a special maintenance allowance of €256,000 (section 17 ErbStG). Subject to strict conditions, the owner-occupied family home can pass to the spouse or the children tax-free (section 13 (1) nos. 4b, 4c ErbStG). Among other things, the heirs must live in it themselves for ten years; for children, the exemption is limited to 200 m² of living space. The portion of the acquisition exceeding the allowances is taxed at between 7 and 50 %, depending on the tax class (section 19 ErbStG).
Strategically important: the allowances also apply to lifetime gifts and are available again every ten years (section 14 ErbStG). A timely and well-planned transfer of assets can therefore often reduce the tax burden on the next generation considerably.
Conclusion
Inheritance law opens up far-reaching planning options, but it also holds considerable pitfalls. A will that is formally invalid, an overlooked compulsory share or a missed deadline for disclaiming an inheritance can generally no longer be corrected once the succession has occurred. Early, expert advice is therefore the most effective protection against later disputes among the bereaved and against avoidable tax disadvantages.