Inheritance: will, compulsory portion, tax and spouse – all facts and tips

Correct and advantageous to heirs but above all to bequeathing can be difficult under certain circumstances. There are many things that have to be observed, many formalities that have to be adhered to in order to secure the inheritance. A will is always the simplest solution to ensure that one’s own interests are safeguarded even after death and that there are no disputes about the inheritance in the family.

Pass on right during lifetime

Without a will, the estate will be distributed according to the rules of legal succession. However, this is not always in the interest of the testator. If a will exists, the estate can be distributed differently than provided for by law and even persons who are not blood relatives can inherit. The drawing up of a will is therefore not only important to regulate the last will and testament exactly, but also to avoid disputes in the family.

Frequently asked questions are above all:

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  • What is the compulsory portion of the heir?
  • What is the compulsory portion of the heir?
  • What does the spouse inherit?
  • What is the legal succession?

The will regulates everything

A will overrides the legal succession and can therefore determine a new succession. The testator determines who is to inherit. If several persons are named, the assets are usually divided according to quotas. Writing a will also enables the testator to leave individual things to certain persons, such as a car, jewellery or real estate. However, these are not legally regarded as heirs, but as bequests. In order to avoid disputes about the estate, the estate can be distributed in a will in such a way that no points of dispute can arise.

Wills can be drawn up with or without a notary. If a will is drawn up without a notary, a number of things must be taken into account. The author must be at least 16 years old and “testable”, i.e. in full possession of his intellectual powers. The will must be written by hand, because computer printouts are not sufficient as a valid will. If the will is several pages long, each page should be numbered, stapled together and each page uniformly dated and signed. A clear heading, like “Testament” or “My Last Will” is recommended to make the purpose of the writing clear.

However, if a will is drawn up with the help of a notary, this means that the testator has given his last will and testament verbally to a notary for the record. This is particularly important if real estate is part of the estate, as either a certificate of inheritance or a notarial will is required for transfer to the land register. If a notarial will exists, the heirs are spared the costly and time-consuming inheritance certificate procedure.

Heaving without a will – the legal succession takes effect

The legal succession regulates both the order of the heirs and the individual quantities that are inherited. First the next relatives inherit, like children and grandchildren and afterwards the more distant relatives, like nephews and nieces. Closer relatives generally exclude more distant relatives from the succession. The rate at which the individual heirs inherit is documented in the certificate of inheritance. The legal succession depends on the Parantel or order system. It divides the relatives into different orders. According to this, children and grandchildren of the testator belong to the first order. Parents, siblings, nieces and nephews of the testator are assigned to the second order. The third order includes grandparents, uncles and aunts as well as cousins of the testator. Spouses and registered civil partners are not regarded as relatives, but have the right of spouse inheritance. This gives them a special position and restricts the right of inheritance of the relatives. Relatives of the previous order always exclude relatives of a subsequent order from the succession.

The spouse

The spouse or registered partner is not considered a relative in the legal succession, but has a special position. If the deceased leaves behind both spouse and children, the spouse inherits half of the estate and the children the other half. However, if there are more than three children, the spouse receives only a quarter and the children divide the rest among themselves. If there are only second order relatives or grandparents, the spouse receives half of the estate and the second and third order relatives share the other half. If there are no relatives of the first, second or third order, the spouse inherits everything.

The first-order heirs

The children and grandchildren of the testator are counted to the first order. Nonmarital children born after 1 July 1949 are also entitled to inheritance. If a child of the testator and the spouse lives at the time of death, both inherit half. If several children live, the inheritance is divided between them and the spouse. If the deceased’s children have already died, the grandchildren inherit.

The heirs of the second order

If there are no children or grandchildren, the heirs shall be of the second order. The second order includes parents, siblings, nephews and nieces. If both parents of the deceased live at the time of death, the estate is divided equally. However, if one parent has already died, the descendants of that parent, i.e. siblings or nieces and nephews of the deceased, take this place.

Third order heirs

If the deceased leaves only heirs of the third order, the estate shall be divided as follows. The grandparents and their descendants shall inherit the estate of the deceased. If a grandparent is already deceased, the inheritance also falls to the aunts, uncles, cousins and cousins of the testator.

Adopted children

An adoption gives a child the legal relationship. If the child is a minor at the time of adoption, it acquires the legal status of a joint child of both spouses and thus belongs to the heirs of the first order. Thus not only the adoptive child inherits from the parents, but also vice versa. With the adoption, however, the child loses every claim, all rights and duty to the blood relatives and is therefore no longer entitled to inherit from the natural parents. This is not the case for adopted children who are of full age. The relationship to the biological parents does not expire and so an adopted child of full age can be entitled to inherit from up to four parts of the inheritance, the biological and the adoptive parents. However, there is no legal right of inheritance against the relatives of the adoptive parents.

Herit debts – reject inheritance or not?

An inheritance does not primarily mean wealth and new possessions. An inheritance is often burdened with debts and means a lot of responsibility for the heirs. After death, the heirs not only take over the assets, but also the rights and obligations of the deceased. If this includes debts, the heirs are also liable with their private assets. If it is clear from the outset that the debt is inherited, the inheritance can be rejected within the six-week period. If it only becomes apparent later that the estate is encumbered with debts, an application for insolvency can be filed. The private assets of the heir are thus protected and the debts only have to be repaid from the estate. If there is an inheritance case, the inheritance should be carefully examined and examined for debts. The inheritance can be refused by any heir. This is particularly useful if debts or real estate in need of renovation are part of the estate.

Reverse the inheritance – depending on the situation, sensible

The inheritance does not always provide only good things for the descendants. Even if many dream of riches and expensive jewellery, debts or dilapidated real estate can also belong to the inheritance. In such cases it is possible to reject the inheritance within a certain period of time and taking into account certain criteria.

No heir is obliged to accept the inheritance. This is possible above all for the protection of the heirs, because this gets not only the fortune, but also the debts of the deceased, for which it is responsible with the own private fortune. So before an heir is started or struck, each heir should first of all get a precise overview of the financial circumstances and debts of the deceased. These include bank balances, securities, valuables, land and real estate as well as funeral expenses, loans, maintenance arrears and compulsory portion claims. The costs of administering an estate or opening a will can also be added. If this examination reveals that there is more debit than credit, it makes sense to reject the inheritance. If the estate includes real estate in need of renovation, a detailed examination is also necessary. If the inheritance is taken up, a lot of money has to be invested in the renovation work, which can be very expensive depending on the case. So consider carefully whether or not you want to take up the inheritance in such a case.

Once an inheritance has been accepted or the deadline has been exceeded, there is usually no turning back. However, here again exceptions confirm the rule. In certain cases it is possible to withdraw from the inheritance afterwards. If, for example, it comes to light after acceptance of the inheritance that the estate contains a high credit of the deceased, of which you knew nothing until then, the acceptance of the inheritance can be challenged. As a prerequisite, however, you must have had comprehensive knowledge of the assets and debts of the estate. However, if the heir wishes to challenge the assumptions because the six-week period was not known or it was not clear when it would begin, a good lawyer can do the same.

Heirloom rejected due to overindebtedness

In the opposite case, there are also some possibilities. If the inheritance has been rejected due to over-indebtedness and it turns out afterwards that the inheritance does not contain as many debts as initially assumed, the rejection cannot be contested. However, if it turns out afterwards that securities or real estate belong to the estate of which you had no knowledge at the time of the disbursement, a challenge is indeed possible. The challenge must be made in writing and justified to the probate court within six weeks of the error being discovered.

Free heir’s allowance

In order to protect the heirs from a large financial burden, different tax rates and allowances apply depending on the degree of kinship. These allowances include various things that do not have to be taxed so that the heirs do not have to pay most of the tax, especially in the case of a large estate.

Financial relief for heirs

This includes the allowances to be paid if the partner or the children were dependent on the financial support of the deceased. For spouses, the pension allowance amounts to 256,000 euros provided the surviving spouse does not have a widow’s pension or a company pension for which no inheritance tax is payable. If such a pension is available, the value of the pension is determined based on the expected duration of the benefits and the benefit allowance is reduced by this value. For children, benefit allowances apply that are graduated according to the child’s age at the time of death. Infants up to the age of 5 years are entitled to a pension allowance of 52,000 euros. Starting from this point, the allowance falls by approx. 10,000 euros every five years. Children aged 20 to 27 can therefore claim a pension allowance of 10,300 euros, but these allowances are only relevant if the children do not have their own pension, such as an orphan’s pension.

The other allowances, in addition to the pension allowances, are regulated according to the degree of kinship and are independent of the surviving dependant’s pension or one’s own assets. Accordingly, spouses and registered civil partners inherit an allowance of 500,000 euros. Children of the deceased or grandchildren of the deceased, if their parents die before the inheritance, can claim an allowance of 400,000 euros. Grandchildren whose parents are still alive can claim an allowance of 200,000 euros. Great-grandchildren or the deceased’s own parents are entitled to an allowance of 100,000 euros. All other heirs can claim an allowance of 20,000 euros. So that as little tax as possible has to be paid in the case of inheritance, the testator can make important decisions long before death and determine them in the will.  Only what remains after deduction of the tax-free amounts from the estate is taxable. Each taxable acquisition is rounded down to a full 100 €. The individual tax rates for inheritance tax depend on the different tax classes of the heirs and are also graduated progressively.

Gifts and inheritance tax – the allowances

Inheritance tax and gift tax are closely linked. Almost the same allowances apply, but as in the case of inheritance, the tax-free allowances may only be transferred once every ten years. Testators who wish to reduce inheritance tax for their heirs must therefore start giving away their assets ten years before their death. In the case of patchwork families, it follows from this regulation that it may be sensible to adopt the spouse’s children in order to equate the tax allowances with those of the natural children. The adoption does not influence the succession to the other biological parent.

A gift thus actually makes it possible to save on inheritance tax. The testator must be aware of these possibilities and use them in a targeted manner in order to have to pay less of an inheritance tax. Nonmarital partners must bear in mind that even long-term civil partnerships only allow the given tax-free amounts if they are officially recognised, either by marriage or by registration of the partnership.

Duty part despite disinheritance – you have these rights

Basically every person can decide freely who he/she will appoint as his/her heir and whom he/she will disinherit. The testator does not have to justify in his will why he excludes a relative from the succession. However, an exclusion does not mean that the heir receives nothing, because every heir has a right to a compulsory portion. This claim must be requested by the heir himself, because these compulsory portion claims are not noted in the certificate of inheritance. If a testator determines a person as sole heir, this means on the one hand that he alone inherits the entire estate, but also that no one else should inherit who would actually be entitled to inherit.

Married couples can disinherit close relatives together in an inheritance contract or a Berlin will. In a classic form of the Berlin will, the spouses stipulate that the longer living partner is the sole heir and the children only inherit when both spouses have died. The parents disinherit their children until both have died. If someone is disinherited, the part of the inheritance that would have been due to this heir falls to the person who would have become the heir if the disinherited person had already died at the time of the inheritance.

In spite of a disinheritance, close relatives are entitled to a part of the property. This fact is based in law on the duty of care which the deceased has for his close relatives even after his death. However, this only applies to the next of kin, who are determined as follows according to the law: Close relatives include both legitimate, non-marital and adopted children, the spouse as long as the marriage is still effective at the time of inheritance, partners in a registered same-sex partnership and parents of the testator as long as there are no children. Grandchildren are only entitled if they have been excluded from the inheritance and their parents are no longer alive. Siblings and grandparents of the deceased are not entitled to a compulsory participation and are therefore not to be understood by law as close relatives. Anyone who is disinherited must assert a right to the compulsory portion himself against the other heirs. Under special circumstances, it is possible for parents to disinherit their children completely and also to withdraw the compulsory portion from them. This wish must be expressly ordered and justified in the will.

Preliminary inheritance and subsequent inheritance – determined in the will

The testator is free to determine the heirs and can therefore transfer his assets to several persons in a time transfer. The heir receives his inheritance only after another person, in this case the previous heir, has inherited it. The testator can, for example, choose an occasion or a time for the occurrence of the subsequent succession, for example the age of majority or the passing of the master craftsman’s examination. The previous heir and the subsequent heir are both legal successors of the testator, but do not form a community of heirs in which they would inherit at the same time, but inherit at a different time due to the cause of the testator. The heir has an expectant right to the subsequent inheritance and thus the heir of the previous heir lapses in the event of subsequent succession, the latter ceases to be the heir and the inheritance accrues to the subsequent heir. In the event that the subsequent heir has already died at the time of the subsequent inheritance, the testator should make provisions and name further subsequent heirs.

Pre-heirship and post-heirship are often used by spouses to ensure that all joint assets remain in the family. The spouses nominate the other as the previous heir and the common children as the subsequent heirs. Even in the event of a remarriage after the death of a spouse, the assets cannot be bequeathed to the new spouse.

The communities of heirs – open communication and agreement

A community of heirs describes all the heirs of a testator. This comes into force when there is more than one heir and a community of heirs is automatically formed. The community of heirs, however, loses its effect at the beginning of an inheritance dispute. However, a dispute does not necessarily have to occur in a community of heirs. Since there are often disputes about the objects of inheritance in communities of heirs, many communities of heirs still exist many years after the death.

Discussing a community of heirs

In the ideal case, the heirs of a community of heirs pay any debts quickly from the estate and then dissolve the community of heirs by distributing the surplus according to shares. However, this is often not the reality. Disputes within the community of heirs often ensure that these remain unresolved for years after the inheritance. Every member of such a community of heirs has the right to demand dissolution at any time, even without good reason.

pay debts and distribute inheritance

In order for a community of heirs to be dissolved without disputes, it is advisable to follow certain steps. From the correct valuation of the estate to inheritance taxes, there are important formalities to be observed.

Pay the debts of the estate

The debts of the estate can be paid from the estate by the heirs of the community of heirs. It is not uncommon for objects belonging to the estate to be sold, such as real estate or land.

The indivisible objects sell

If a real division is not possible for certain objects, such as a property in the community of heirs, the heirs may have to sell or force the object to be auctioned. In order to do this, a realistic selling price must first be determined. If there is no agreement here, a division auction can be initiated by one of the heirs. Distribute the divisible objectsThe heir is primarily to be divided in nature by the heirs. Each heir can therefore take objects from the estate for himself in agreement with the other heirs. Money and securities can be divided by the community of heirs according to the respective shares.

The donations and endowments take into account

If an heir has received benefits or gifts from the testator during his lifetime, these may be subject to compensation. Gifts that are subject to extinguishment increase the estate mathematically and are deducted from the recipient’s inheritance quota. Each heir may ask the others for information on such benefits so that they can be taken into account correctly.

Consider the tax office

An inheritance is always subject to inheritance tax. However, some things from the inheritance can be deducted from the tax, such as the cost of the burial or fees for opening the will.

Calculate the discount

A community of heirs cannot be divided until the estate has been determined. The heirs receive most of the information from the bank where the deceased had the accounts or deposits. In order to obtain access to these, a certificate of inheritance or a will with a court opening record is required. However, the debts are also part of the estate. In order to determine the complete estate, the debts and the assets should be compared and balanced.

The notary helps

If an agreement cannot be reached, a notary can be called in by the community of heirs. The notary mediates between the heirs in order to reach an agreement as quickly as possible. However, it should be borne in mind that such assistance is associated with some costs.

Consider the nursing services

If a child has cared for the deceased parent during his or her lifetime for no consideration, compensation can be claimed for this. This must be commensurate with the duration, scope and value of the estate.

The partial auction – the last resort for communities of heirs

Objects, such as real estate or land, often give rise to disputes in communities of heirs. The ideas of how to deal with the joint property are too different and the parties cannot agree. Every heir has the right at any time to demand a dispute of the community of heirs and thus to force its dissolution. In such a case, a partition auction may be the last possibility to settle the disputes and resolve the community of heirs.

The partition auction involves some risks which should be well thought out in advance. The real estate could be sold below value and lead to low profits for the heirs. There are some alternatives that exclude these risks. The property can be sold privately, saving on application, legal and attorney fees. In addition, the heirs can choose the buyer themselves and thus ensure that the property is not sold below value.  Another alternative is voluntary auctioning. The community of heirs can turn to a public auctioneer who organises and conducts an auction. The advantage for the heirs is that the minimum bid can be determined by the heirs themselves and there is therefore no risk of an auction below value. In both cases, however, the community of heirs must agree unanimously to the sale of the property.