Please note, this article is written with a focus toward the German market, but very similar laws apply everywhere.

Testament – Inherit the assets correctly

Without a testament, the estate will be distributed according to the provisions of the legal succession. However, this is not always in the interest of the testator. If a will exists, the assets can be distributed differently than the law requires and non-blood relatives can also inherit. The making of a will is therefore not only important to regulate the last will and testament exactly, but also to avoid disputes in the family.

• Learn more about: Correctly inherit
• Exemptions and Inheritance Tax

The Content – What can be regulated in a will?

A will overrides the legal succession and can thus determine a new succession. The testator determines who is to take over the inheritance. If several persons are named, the assets are usually divided according to quotas. Writing a will also allows the testator to leave individual items to certain persons, such as a car, jewelry or real estate. However, these are legally not considered as inheritance but as bequest. To avoid disputes about the estate, the estate can be distributed in a will in such a way that no points of contention can arise.

Setting up – the notary helps

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

If, however, a will is drawn up with the help of a civil law notary, this means that the testator has verbally recorded his last will and testament with a civil law notary. This is particularly important when real estate is part of the estate, because 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.

Assigning Real Estate in a will – avoiding community of heirs and disputes

If there is no will and a property is part of the estate, it becomes the property of the heirs. In most cases, a community of heirs is then formed in which no one can dispose of the inheritance alone. When such a property is sold, all heirs must agree. This fact can often lead to disputes within the community of heirs. In addition, the costs incurred for a notarial will are usually only half as low as the costs for a certificate of inheritance that the heirs have to pay if no will exists. In a will, the last will and testament can regulate the last will and testament about the real estate in detail and save disputes and unnecessary costs for all parties involved.

Debts in your estate – Protect your private assets

The heir to an estate takes over not only the assets but also the liabilities of the deceased. In general, an heir must reject a debt inheritance within six weeks, otherwise the heir is liable for the debts with his private assets. If it is clear from the outset that it is a debt inheritance, the inheritance can be rejected within the six-week period. If it only becomes apparent later that the estate is burdened with debts, an application for bankruptcy can be filed. The private assets of the heir are thus protected and the debts must only be repaid from the estate.

The traps – What to pay attention to

Particularly when it comes to the question of how best to inherit the estate, mistakes often occur in the correct implementation that limit the last will and testament.

No will

Without a will, the legal succession automatically takes effect. This can lead not only to disputes within the family, but also to the fact that loved ones are left empty-handed

No replacement heir

If the designated heir is already deceased at the time of death, the legal succession takes effect, which is not always in favour of the testator. The nomination of a substitute heir is therefore very important to avoid legal succession.

Non-marital partners

Non-marital partners must be clearly named in the will, as they are left empty-handed according to the legal succession

No children

Childless married couples without a will do not inherit completely to the remaining spouse, but also to parents or siblings. If the spouse is to administer the estate, this must be named exactly.

No clarity

A testament should always clearly state what the last will and testament is. If it is not clear how the estate is to be treated, errors may occur.

Legal succession – this happens without a will

If the deceased leaves children and a spouse, the spouse receives half of the assets according to the legal succession. The other half is divided between the children. If the deceased has no children, the spouse receives 75 percent of the assets and second-order relatives, such as siblings or parents, receive the remaining part of the inheritance.

In general, the spouse always inherits. Apart from this only heirs of one order can inherit, for example the children. If there is a first-order heir, such as a child, no one inherits from the second or third order.

Please also inform yourself about the topic: compulsory part in the inheritance!

Statistics: Inheritance in Germany

Here you can see inheritances and donations in Germany. The survey ranges from 2008 to 2018 and shows that over 110,000 inheritances are distributed annually. Great potential for dispute if the community of heirs does not agree.

You can find more statistics at Statista

How much money is inherited?

Since 2014, Hamburg in particular has been the leader in Germany. Hamburg is currently at the top with 167.80 euros. In no other city is so much inherited. With a population share of 2.19% of total Germany (1.82 million of 82.79 million), a total volume of 305,731,600 Euro is inherited annually.

• Population share Hamburg 2.19%
• Inheritance in Germany (comparison year) 109,635; statistically 2,401 inheritances in Hamburg
• Total inheritance (Hamburg / year) 305,731,600 Euro

Sell your inheritance? House prices in Germany

Here you can see the cities with the highest prices per square meter for condominiums in a comparison of 2010 and 2018* (in euros per square meter).

1. 1. Munich (Bavaria) with 8,342 euros per square meter; from 6,737 euros per square meter in 2014; increase of 1,695 euros per square meter in 4 years
   2. Stuttgart (Baden-Württemberg) with 5,925 euros per square meter; from 4744 euros per sqm in 2014; increase of 1,181 euros per sqm
   3. Frankfurt am Main (Hesse) with 6,060 euros per square meter; from 4,373 euros per square meter in 2014; increase of 1,687 euros per square meter
   4. Freiburg im Breisgau (Bavaria) with 4,943 euros per square meter; from 4,740 euros per square meter in 2014; increase 203 euros per square meter in 2014; increase 203 euros per square meter in 2014

1. Ingolstadt (Bavaria) with 4,969 euros per square meter; from 4,287 euros per sqm in 2014; increase 682 euros per sqm

You can find more facts and figures on this topic at: Statistics Heritage.

The most important questions: Will and correct inheritance

In order to avoid family disputes and ignorance about the estate, it is important to settle the inheritance during your lifetime. Our experts have answered all important questions on this subject for you.

When is a donation tax-free?

Parents can give their children something from their inheritance and this is tax free. This possibility facilitates the inheritance taxes that are due on the inheritance. Parents may give their children a tax-free gift of 500,000 euros, while the amount is limited to 20,000 euros. .

Can I sign over my child to my house?

If you would like your child, or one of your children to receive your property, you can sign over the property while you are still alive. However, this is considered a gift, which is why your descendant will own ten percent of the property with every year you live after the gift.

How is an inheritance divided without a will?

Without a will, the inheritance is distributed according to the legal succession. In the first place, this succession takes into account the spouses and children. Other relatives are usually not taken into account.

What does the transfer of a house cost?

The cost of transferring a house depends on the value of the property. As a rule, the value is determined by the comparative value method.

Is a donation taxable?

A gift is taxed in the same way as an inheritance, but the same tax allowances apply to gifts as to inheritance.

What is meant by a gift?

A gift is a donation by which someone enriches someone else from his or her assets without demanding a monetary contribution.

A community of heirs means a community of joint owners. This means that the inheritance is a joint property. Each individual member of the community of heirs becomes the owner, but always only together with the other heirs. Each individual is thus entitled to the property, but this right is limited by the rights of the other co-heirs. None of the heirs can give away or sell individual items of the estate without consent, not even his own share of it, since everything belongs to all of them.

Disputes Within the Community of Heirs are Common

Disputes within the community of heirs often arise when the interests of the co-heirs differ greatly. This is the case, for example, when one of the siblings needs money as quickly as possible and is therefore interested in selling the house, while the other siblings expect an increase in the property price and want to keep or rent the house.

The Testator can Prevent the Community of Heirs

From the very beginning, a community of heirs can only be prevented by the testator, by writing a will. Married couples often agree on a Berlin testament. After this, the spouse who lives longer becomes the sole heir.

Children are excluded from this inheritance. If there are several children, a community of heirs can be excluded by designating one child as the sole heir, while bequests are made to the other children. The legatee thus receives a payment or a specific object of the estate without becoming the legal successor.

General information on the Dissolution of the Community of Heirs

If the children wish to dissolve the community of heirs, it must first be examined how large the estate is. A certificate of inheritance is required for this. In the case of a community of heirs, this is a joint certificate of inheritance. It contains all the names of the heirs as well as an exact list of the shares of each heir. Only when the certificate of inheritance has been obtained, the banks where the accounts of the deceased exist, allow an insight into the finances.

If the estate also contains debts, these must first be paid off. This can lead to the fact that the estate itself must be sold.

The co-heirs are obliged to provide information about donations during the testator’s lifetime. If one of the siblings has already received a plot of land or real estate at an earlier point in time, it is a donation that is subject to equalization. Compensatory gifts increase the value of the estate. This in turn is deducted from the inheritance quota of the co-heir.

It often happens that if there are several siblings, one of them takes care of the parent free of charge. This sibling can claim compensation through the care provided. This increases the inheritance share of this person. The amount of the compensation depends on the duration and extent of the care provided as well as on the amount of the estate itself.

Dissolution of the community of Heirs: Ways and Means

Different ways to dissolve the community of heirs

Division Agreement

If the community of heirs agrees on what is to be done with the estate, i.e. the real estate, a division agreement can be concluded. This agreement must be notarized if real estate is to be transferred.

Transfer of Inheritance

Another possibility to dissolve the community of heirs is the transfer of inheritance. In exchange for a settlement, the co-heirs can transfer their inheritance share to a co-heir. This step also requires a notary. This is a particularly simple solution to dissolve the community of heirs.

Division

In the case of stratification, the individual also leaves the community of heirs in exchange for a settlement. However, his share of the inheritance is not transferred to a single heir, but becomes part of the joint heirs’ total inheritance. By paying the compensation, the individual thus relinquishes his or her rights as co-heir. As a result, the share of the inheritance of the other co-heirs increases. The amount of the compensation can be determined by the heirs themselves.

Selling an Inheritance Share

Each co-heir can sell his or her own inheritance, also to third parties. However, no individual items of the estate may be sold. Instead, the buyer becomes part of the community of heirs. Each co-heir has a right of first refusal and can purchase the share of the inheritance on the conditions agreed with the third party. It must be noted that this step is also notarized.

Court of Probate

If a dispute arises and no agreement is in sight, a probate court can be involved. This court assumes the role of mediator in the matter. However, any co-heirs can prevent the involvement of a probate court by lodging an objection.

Arbitration

In the event of a dispute, an arbitral tribunal may also make a decision.

Action for Partition

In the event of an action for partition, the objects of the estate will be sold at public auction. In the case of real estate, a compulsory auction takes place. The action for partition is usually associated with high costs and should therefore be avoided in the interest of all co-heirs.

Division Auction

If the estate includes a property, any of the co-heirs can apply for a divisional auction. The only requirement for this step is that the applicant is registered in the land register. The purpose of a division auction is to make money out of the property and then to divide it among the heirs.

Due to the usually high loss of value, a division auction is not advisable. In division auctions it is common practice to set the market value of the property as low as possible in order to increase the interest of potential buyers and thus to sell the property quickly and promptly. The price that is collected for the property at the end of the auction rarely corresponds to the real sales value of the property.

There is no claim to dissolve the community of heirs

The individual is not entitled to have his heir share paid out to him or to be released from the community of heirs. If you do not want to be part of a community of heirs, your only choice is not to accept the inheritance.

In a community of heirs it is financially advantageous and in the interest of all if an agreement is reached.

We would be happy to advise you personally with regard to your inherited property. Get in touch with us.

Selling an Inherited House – the First Steps

Whatever type of property you have to sell now after the inheritance: It depends on the location. When selling an apartment, selling a house, selling a plot and even more so when you are looking to sell multi-family houses. The location of your real estate is a decisive valuation factor. So is the substance and the equipment. Selling privately means accepting risks and making mistakes. From property valuation, contracts, taxes and costs.

In most cases the heirs decide on the inheritance: collect, administer or sell ?

Even if the property is located far from the heir’s place of residence. But in exactly this situation, the question arises what to do with the property. If neither inhabiting nor renting the house is possible, the most common consideration is to sell the inherited house.

• Reading tip: Sell or rent (external, FIV Magazine)

The first step: Local court, compulsory share and certificate of inheritance

After a house is inherited, the first step for the heir is to go to the local court. There the certificate of inheritance can be applied for. This measure should also be taken if the heir only claims the compulsory portion. The certificate of inheritance identifies the heir as the rightful owner of the property.

The certificate of inheritance is issued by the probate court. The competent probate court is always the district court of the last residence under which the deceased was registered.

At the appointment at the probate court, the heir must prove his claim to the inheritance. This can be done through the public will, the inheritance contract or by proving the relationship with the accompanying legal succession.

The following documents must be brought by the heir to the probate court:

• The identity card
• The death certificate
• An affidavit regarding the correctness of the personal data

The probate court then issues the certificate of inheritance. This is either a sole certificate of inheritance, a community certificate of inheritance or a partial certificate of inheritance.

The sole certificate of inheritance is issued if there is only one heir. A joint certificate of inheritance is issued if there are several heirs. The certificate of partial inheritance shows that there are several heirs and that each of them receives a single inheritance.

The certificate of inheritance allows the heir to view the land register. Through this it can be found out whether the property is encumbered with land charges.

It should be noted that the issuing of the certificate of inheritance can be very expensive. These are based on the value of the inherited property at the time of the inheritance, less the debts of the deceased. In addition, the amount of the fees is based on the effort of the inheritance certificate procedure. For example, a fee of 300.00 Euros is due for an estate of up to 125,000 Euros. For an estate value of up to 500,000 Euro, a fee of 935.00 Euro is already due.

The extract from the land register is then corrected, as the heir is now the new owner of the property. In contrast to the conventional entry in the land register when buying a house, the entry in the land register for an heir is free of charge, provided that this is requested within two years after the death of the testator. Afterwards, the sale of the house can begin.

Selling an inherited house with several heirs

It is not unusual for a property to pass into the possession of several heirs. This is the case when several children inherit the house. This does not prevent the sale of the inherited property. The prerequisite for this is, of course, that the heirs are in agreement and all agree to the sale of the house. Verbal promises are not reliable here; instead, a clear legal situation is necessary.

Which costs are incurred when selling a house?

If the inherited house does not have to be renovated or a speculation tax is due, the costs are kept within a manageable range. Small cosmetic repairs will be due. Also proportional costs of the broker must be included. If the house is still burdened, a prepayment penalty for the mortgage is due.

Sell inherited house: Historical property

The sale of an old building or a listed property can prove to be more complicated. Often the speculation period causes heirs to suffer. If the property is sold within the period, the tax benefits that were originally granted by the status of the house are reclaimed.

In addition, the heir is obliged to preserve the property. If this does not happen, an order for maintenance can be issued by the monument protection authority. The resulting invoice will be forwarded to the heir. This results in very high costs, which the heir could have avoided.

What taxes are due on the sale of an inherited house ?

A land transfer tax is to be paid with every house sale. This is taken over by the buyer.

The inheritance tax itself is due with every inheritance, regardless of whether the house is sold or not.

It is therefore of primary importance for the heir whether an income tax is due. This is levied if the house is sold within the speculation period. The duration of the speculation period is ten years. The speculation period is not calculated from the time of inheritance, but from the time when the house was bought by the testator.

If this purchase is more than ten years ago, no taxes are due for the heir.

If the house is sold within the speculation period, the profit of the sale is taxable. This means that not the entire purchase price of the property is taxed, but only the increase in value of the house since the purchase. Thus the amount by which the proceeds of the sale are higher than the purchase price paid by the testator at that time is taxed.

You can find out the amount of this profit by deducting from the price that was sold for the property the acquisition costs, brokerage costs, notary’s fees and land transfer tax.

Whoever wants to sell an inherited house often exposes himself to a great deal of stress. It is therefore helpful to engage a competent estate agent who will take care of the sale of the house and take over all related tasks.

You are going to inherit a house? 8 tips for correct heirs of a property

You will inherit a house and are wondering what the next steps are for you? We present 8 aspects that you will have to deal with when inheriting a property.

How do I get my inheritance?

Ideally, the deceased has written a will and deposited it with a civil law notary. A will regulates (for example in the case of several children) who should inherit what. If there is no will, the legal succession applies. Spouse and children are first order heirs.

Check the estate

If an heir is accepted, this means accepting all rights, but also duties. If the inheritance is a pure monetary amount, this value is immediately determined. The situation is different with real estate. Not only does the house pass into the hands of the heir, but also any debts such as a mortgage are then accepted by the heir. This means in practice that the heir is liable for these debts with his own assets.

The heir therefore has a period of 6 weeks within which to decide whether to accept or reject the inheritance. This period begins on the day you learn of the inheritance. A glance at the land register reveals the financial situation of the estate. An estate agent is also able to determine the market value of the property.

The disclaimer of the inheritance takes place at the local court. Alternatively, the disclaimer can also be certified by a notary of your choice.

Do I need a certificate of inheritance?

The certificate of inheritance confirms the legality of the inheritance. Often the certificate of inheritance is necessary in order to receive the inheritance in the first place or to access the accounts of the deceased. The certificate of inheritance also entitles the heir to inspect the land register.

Are you the sole heir or co-heir of a community of heirs ?

In the case of a community of heirs, the inheritance does not go to a single person, but to several persons. This is the case, for example, if the testator leaves several children. The inherited house therefore belongs to all heirs. None of the co-heirs has a right to individual items of the inheritance. This means that all decisions concerning the inherited property must be made jointly by all heirs.

In a community of heirs, very different ideas about the property often clash, which can often lead to major conflicts. Many communities of heirs therefore decide together to sell the house and to divide the subsequent proceeds among themselves. This sale, in contrast to a partial auction, does not involve economic losses.

What should happen to the house?

Who will inherit or has already inherited a house, must deal in the second step with the question, what is to happen with the real estate. If the property is located in the heir’s place of residence and is also in a favorable location, it makes sense to live in the property yourself.

However, this option is not always possible. For example, if the heir already lives in his own house or the inherited house does not meet his own wishes and ideas.

The options then available to the heir are either renting the property or selling the house. Who considers letting must consider here that often numerous renovation work becomes due with the inherited house.

Which costs will come to me when I inherit a house?

The costs of inheriting a house are manageable. These are the application for the certificate of inheritance, the change in the land register and running costs.

The amount of the costs for the certificate of inheritance depends on the assets that are inherited. If the value of the inherited house is approximately 500,000 Euros, the costs due for the certificate of inheritance amount to approximately 935 Euros.

Running costs include, for example, incidental expenses and taxes. These can vary greatly from property to property and must be calculated individually.

Change of the entry in the land register

In the case of a normal house purchase, costs for the change of the land register entry become due. Not so if you inherit a house. In this case, you have a period of two years within which you can be registered free of charge as the owner of the property in the land register.

A certificate of inheritance is required to have the entry in the land register amended. You can obtain this from the probate court of the district court of the last place of residence under which the testator was registered.

Alternatively, a notarized will can be presented at the land registry. However, a simple will is not sufficient.

Calculate the inheritance tax

Who will inherit a house should calculate the amount of the inheritance tax as soon as possible. The law grants the heir a high tax allowance. For spouses in inheritance tax class I this is 500,000 euros. Children and grandchildren benefit from a tax allowance of 400,000 Euro.

Tax allowance:

Spouses in inheritance tax class I = 500,000 Euro

Children and grandchildren = 400.000 Euro

An inheritance tax is due if the remaining estate, after all liabilities have been calculated and deducted, is above the tax-free amount.

In inheritance tax class I, 7% inheritance tax is due after deduction of the tax-free amounts for a discount of up to 75,000 euros.

For a discount of up to 300,0000 euros, 11% inheritance tax is due.
You will inherit a house and would like to sell it? We are happy to assist you and advise you. Please contact us by telephone so that we can take care of your case.

Increase in value through conversion ?

An old property can be put to new use by a house conversion. Small rooms can be merged. Alternatively new rooms can be created. By extending the attic or the basement even new square meters can be gained. This opens up many possibilities for the current residents of the house, but can sometimes also be useful if you want to sell your house. Especially for old buildings with small rooms, a conversion can work wonders and attract more buyers. However, conversions involve a lot of effort and a high financial outlay. You should therefore only use it to increase the value of your property if your chances on the real estate market improve noticeably as a result.

• Selling a house and increasing its value: house renovation