Rights and obligations of the community of owners

A community of heirs arises when several persons become co-heirs to the estate of a deceased person. As members of the community of heirs, the co-heirs have various rights and obligations.

Rights: disclaim inheritance, sell inheritance & dissolution

The rights include, among others, the right to use the inheritance and the right to sell the inheritance share. Each co-heir has the right to sell his or her share of the inheritance, whereby the other co-heirs have a right of first refusal. There is also the right to dissolve the community of heirs if the community of heirs no longer functions or there is a dispute about the inher itance.

In addition, the co-heirs are permitted to disclaim the inheritance under certain circumstances if they do not wish to accept it or if this would mean that they would have to assume the decedent’s debts. The disclaimer must be made within a certain period.

The rights at a glance:

• Reject inheritance
• Right to use
• Right to sell the inheritance
• Right of first refusal
• Right to dissolve the co-ownership community

Duties: Rental agreements, management & Co.

The duties of the co-heirs include, among other things, the assumption of tenancy agreements if the decedent was a tenant of an apartment or house at the time of his or her death. The co-heirs also have an administrative duty towards the inheritance. They must manage the inheritance properly, maintain it and, if necessary, carry out maintenance measures.

Another important duty of the co-heirs is the payment of the estate’s liabilities. The co-heirs are jointly liable for the decedent’s liabilities and must ensure that these are paid. In doing so, they must also take into account the taxes of the inheritance.

Your duties summarized:

• Assumption of leases
• Management duty
• Payment of the estate liabilities

Prerequisite for apartment sale

In order to sell an apartment from a community of heirs, all heirs must therefore agree to the sale. A sale can only take place jointly and by mutual agreement. This requires close cooperation and agreement between the heirs to ensure smooth administration of the inheritance.

Heirs must agree on the sale of the apartment

However, in practice, it can often be difficult to agree on a joint sale. There are often emotions and memories associated with the property, which can make the issue sensitive for some heirs.

It is therefore not uncommon that individual heirs do not yet want to or cannot agree to a sale. In some cases, this can lead to disagreements and disputes regarding the inheritance. We will now take a closer look at the options available.

Dispute & conflict in the community of heirs

If the community of heirs disagrees on the sale of the apartment, it may be difficult to find an amicable solution. If all heirs refuse their consent to the sale, the property cannot be sold.

In this case, there are various ways in which the community of heirs can proceed.

Allow inheritance share to be paid out by co-heirs

One possibility is that a single co-heir pays off the other co-heirs and thus becomes the sole owner of the property. If a co-heir wishes to pay off the other co-heirs, the value of the property and the shares of the co-heirs must first be determined. An expert or surveyor can be consulted for this purpose. Then the share of each co-heir is calculated on the basis of the value of the property. The co-heir who wishes to pay out the other co-heirs must then pay out the corresponding share to the other co-heirs in order to acquire their shares in the property.

This is how the payment of an inheritance share works:

• Determination of the real estate value
• Calculation of the share of inheritance
• Payment to co-heirs is made

Sell inheritance share to third party

However, it may happen that the other heirs do not agree or are unable to acquire the selling heir’s share. In this case, the selling heir can sell the share to a third party. The prerequisite for this is that the co-heirs have been granted a two-month right of first refusal and that the sale of the inherited share is only possible as a whole. Therefore, if you decide to sell the part of your inheritance, this refers not only to the apartment, but also to the rest of the inheritance.

Partition auction by district court

The partition auction in the community of heirs by the district court is usually the last resort. If the heirs do not agree, an heir can apply for a partition auction. The district court will then auction off the property in order to subsequently divide the proceeds among the co-heirs. However, this route is often associated with high costs and usually results in significantly lower proceeds than a private sale.

The partition auction at a glance:

• Last resort in case of dispute
• Settlement by local court
• Division of the proceeds between the heirs
• Disadvantage: High cost & low purchase price

Procedure: Sell inherited apartment

When several heirs have inherited an apartment and decide to sell it, they must follow certain steps in order to carry out the sale in a legally correct manner. This requires good planning and coordination within the community of heirs, as well as the involvement of an experienced notary to ensure that the sales process runs smoothly.

Here are the most important points in advance:

1. Consent to sale by entire community of heirs
2. Marketing of the property
3. Preparation of the purchase contract at the notary
4. Payment of the purchase price and settlement

Approval for sale

First, the community of heirs must agree that the apartment is to be sold. All heirs must agree to this. Once an agreement has been reached, a joint resolution must be passed that regulates all aspects of the sale, such as the sale price, the division of the proceeds among the heirs and who will carry out the sale.

Marketing of the property

After the community of heirs has decided to sell the apartment, the property must be offered on the market. For this purpose, a real estate agent can be hired to evaluate the apartment, prepare real estate exposés and take over the marketing. Alternatively, the heirs can sell the apartment themselves by placing advertisements or using online platforms.

Preparation of the purchase contract at the notary

Once a buyer has been found, a notary appointment must be arranged in which the purchase contract, conveyance and land register amendment are carried out. The purchase contract regulates all details of the sale, such as the purchase price, the time of transfer of ownership and all other conditions. The conveyance is the formal declaration by the seller that he is transferring ownership of the property to the buyer. The land register amendment is the registration of the buyer as the new owner of the apartment in the land register.

Payment of the purchase price and settlement

After all formalities have been completed, the buyer must pay the purchase price. As soon as the purchase price is received, the land register change is carried out and the buyer is registered as the new owner of the apartment.

Applying for a certificate of inheritance: This is what matters

In the course of the sales process, the heirs must provide proof that they own the inherited house. Often, a certificate of inheritance is required for this, as the deceased owner is still registered as the owner in the land register. The certificate of inheritance can be applied for at the probate court, but it is not necessary in every case. Alternatively, succession can also be proven by a European certificate of probate or a disposition of property upon death in accordance with Section 35 (1) GBO, provided this is contained in a public document (e.g. a notarial will) and the record of the opening of the disposition is submitted.

Land register registration in the event of a speedy sale

It is advisable for the heirs to have their ownership position entered in the land register before the sale, if necessary, as the land register becomes incorrect after the death of the testator. The heirs are generally obliged to correct the land register and enter them as the new owners. This can be particularly important if the sale takes place years later. In this case, the land register correction should be made as soon as possible and at the latest within two years of the inheritance. The process is usually free of charge within this period.

No transcription necessary in case of later sale

However, if the house sale takes place promptly after the death of the decedent, a land register adjustment is not normally required. In this case, ownership can be proven, for example, by presenting the certificate of inheritance and the buyer can be entered directly in the land register.

The most important things summarized:

• Certificate of inheritance proves new ownership of the apartment
• Alternative: Proof by European Certificate of Succession
• Community of heirs must register as new owners
• Exception: sale takes place shortly after the inheritance takes place

Conclusion: Sale of apartments of a community of heirs

In summary, a sale of an apartment by a community of heirs can be a complex process. For this reason, it is especially important that you and your co-heirs are familiar with your rights and obligations. After the community of heirs has agreed on the sale, the heirs must prove their ownership of the inherited apartment. A certificate of inheritance can be requested for this purpose, but there are also alternative means of proof such as the European certificate of inheritance or a disposition of property upon death. It may also make sense to correct the ownership position in the land register in order to avoid problems in the event of a subsequent sale.

Sell apartment against annuity

Many seniors face a financial dilemma. In some cases, neither savings nor pensions are sufficient to cover ongoing living expenses. In other cases, health problems can cause care costs to rise. The only way out: selling their own home.

But for many older people, their home is more than just a roof over their heads. It is their home, where they have lived for decades and which is familiar to them. Selling their apartment can mean being torn from their familiar surroundings and having to move into an unfamiliar environment.

In such cases, selling for an annuity can be an attractive option. By selling your home for an annuity, you can continue to live in your home and supplement your monthly pension payments.

How the real estate pension works

The life annuity is an agreement between the seller and the buyer in which the seller transfers ownership of his property to the buyer in return for a lifelong annuity. The amount of the annuity is determined when the contract is signed and depends on various factors, such as the value of the property, the age and life expectancy of the seller, and current interest rates.

In return for the annuity, the seller retains the right to live in the property for life. This means that he can continue to live in and use the property. This allows you to continue to stay in your familiar surroundings and still provide yourself with financial security.

The life annuity in summary:

• Apartment is sold to annuity provider
• Monthly annuity payment instead of purchase price payment
• Registration of a lifelong right of residence

Requirements: Age & property value

In order to receive an annuity, certain requirements must be met. To ensure a calculable financial risk for providers, many set a minimum age for sellers. This is usually between 60 and 65 years. In addition, unencumbered real estate is usually preferred and the minimum value of the property is also usually fixed, as it guarantees a minimum real estate annuity. Here, one can be guided by the individually set value of the provider. As a rule, providers demand a minimum pension of 150 to 250 euros per month.

The requirements at a glance:

• Minimum age of the seller: 60 years and over
• Minimum payout: from 150 euros per month
• Property free from encumbrances

Taxes: Income tax on income share

In the case of the real estate life annuity, only the income share is taxed, as annuity payments are classified as “other income” under the Income Tax Act. The share of income is influenced by various factors, in particular by age at the time the contract is concluded, and can be deducted from tax as a special expense. The taxation share decreases continuously with increasing age at the time the contract is concluded. This means that older persons generally have to pay less tax than younger persons.

Life annuity or traditional apartment sale?

In addition to the annuity, you can also opt for a traditional sale of your home. The advantages of a complete sale: You receive the agreed purchase price paid out in one go. The sale price is usually higher than with a life annuity, but you lose all ownership rights to your home.

As mentioned above, the life annuity allows you to continue living at home while freeing up your real estate assets. In addition, you save the cost of moving and do not have to buy a new apartment or pay rent.

Here are the advantages at a glance:

• Life annuity: no need to move out & release of real estate capital.
• Traditional sale: payment of the full purchase price

Conclusion: Secured into old age

Overall, the sale of an apartment for a life annuity offers older people an attractive alternative to the traditional sale of an apartment. The life annuity makes it possible to convert the sale proceeds into a monthly pension that is paid out until the end of one’s life, thus guaranteeing a regular income in old age. At the same time, one must be aware that by selling the property, all ownership rights are transferred to the buyer. For this reason, it is important to take enough time in advance to weigh up the respective advantages and disadvantages and to make the best decision for yourself.

The right of residence declared

When it comes to real estate as a retirement plan, you may have heard of the concept of a right of abode. A right of residence entitles a beneficiary to use a property even if it belongs to someone else. Residential rights can be agreed either for a limited or unlimited period of time and can be either for a consideration or free of charge.

The right of residence defines:

• Use of a property allowed
• Lifetime vs. limited
• Paid vs. free of charge

Things get particularly interesting when it comes to a lifelong right of residence. A life-long right of residence allows the beneficiary to occupy the property for the rest of his or her life, even if the property is sold or inherited. This type of living right is often used as collateral for elderly people or family members to secure a permanent home for them.

For whom is the right of residence worthwhile?

In principle, a life-long right of residence can be granted to various people, depending on individual circumstances and needs. Typically, however, a life-long right of residence is granted to elderly people or family members who wish to live in the owner’s property but are unable to purchase their own property.

Elderly people can obtain a life-long right of residence to ensure that they can continue to live in their familiar surroundings in old age without having to worry about selling or buying a new property. This is often a good option for older people who are single or whose partner has already passed away.

The right of residence is ideal for close relatives, spouses, parents & grandparents

Benefits for the whole family

In principle, you can sell your apartment to any interested party. However, the right of residence deters some interested parties. For this reason, apartments encumbered with a right of residence are passed on within the family. This has several advantages.

Advantages for sellers

The right of residence ensures that you will continue to have a place to live while receiving a financial benefit from the sale or gift of the apartment. In addition, giving away or selling the apartment within the family can help keep the property within the family and avoid family disputes.

Advantages for heirs

At the same time, your heirs can enjoy a lower purchase price, as the right of residence reduces the value of the apartment. Since the apartment changes hands early, they can also save on inheritance tax.

All advantages at a glance:

• No move out necessary
• Financial benefit from sale
• Remain in the family
• Lower purchase price
• Saving the inheritance tax

This must be observed

If you decide to sell your apartment with a registered right of residence, a number of things must be taken into account. We will now take a closer look at the special features that come along with such a sale.

Duration of the right of residence

A right of residence can either be limited in time or be lifelong, which means that it expires either at the end of the agreed period or upon the death of the beneficiary. Revocation of the right of residence is only possible in exceptional cases. However, the beneficiary can voluntarily relinquish his or her right of residence at any time, for example if he or she moves into a nursing home. Mere non-use of the right of residence does not automatically mean its cancellation. Only after 30 years of non-use can the right of residence be deleted from the land register without the beneficiary’s consent.

In summary:

• Duration is determined in advance
• Revocation only in exceptional cases
• Waiver is possible at any time
• Cancellation after 30 years of non-use

Inheritance to third parties not possible

As a rule, the right of residence cannot be inherited and ends with the death of the person entitled to the residence. The heirs or successors can therefore not inherit or continue the right of residence unless this was expressly stipulated in the original agreement.

This means that after the death of the owner of the right of residence, the owner of the property again has full power of disposal over the property and can sell, rent or otherwise use it.

Notarial registration in the land register

In addition, the right of residence must be notarized and entered in the land register in order to be legally valid. The entry in the land register is necessary to establish the right of residence as a real right to the property. The notary appointment plays an important role here, as the notary ensures that all the necessary steps and formalities are complied with.

The registration of the right of residence in the land register ensures that it is clear to everyone that a right of residence exists and who the holder of this right of residence is. It also provides legal protection for the owner of the right of abode, as it enables him to assert his interests against third parties, including the owner of the property.

The following is necessary to secure the right of residence:

• Notarial certification
• Registration in the land register

Sell apartment with right of abode

Assume that the apartment is already encumbered with a right of residence and is now to be sold again. This is also possible, although the sale is more complicated with an existing right of residence than without. So what needs to be taken into account here?

Right of residence still exists

When a property with residential rights is sold, certain regulations must be observed. The seller must not only inform the buyer about the existing right of residence, but also protect the rights of the person entitled to the residence. For example, the sale must not impair or otherwise jeopardize the right of residence.

Right of residence continues to exist even in the event of a change of ownership

Thus, the right of residence continues to exist even if the property is sold, and the buyer must recognize and accept the right of residence.

Reduction in value & lower purchase price

When one wishes to acquire a property, the goal is usually to have unrestricted power of disposal over it. However, an existing right of residence can restrict this freedom and thus reduce the demand for such a property. The value of the property is also reduced by the existing right of residence, which is why in most cases a lower purchase price is achieved.

Conclusion: Preparation is half the battle

A life estate can be a good option if you want to sell your home but still stay in the area. It gives you the freedom to use the capital from the sale of your home while continuing to live in your familiar surroundings. However, it is important to note that the right of residence cannot be inherited and that it must be notarized and registered in the land register. The right of residence also has an influence on a later sale, as it reduces both demand and value.

So overall, a life estate can be a great option for people who want to make sure they have a home for the rest of their lives. However, one should be aware of the legal aspects and possible effects on the sales price in advance.

Is the sale of an apartment tax-free?

Similar to the purchase of a house, apartment and land, taxes may also be due on the sale. The taxes you have to pay and the amount of tax you have to pay depend on the value of the property as well as on the use of the apartment. Under certain circumstances you can save taxes. The so-called speculation tax plays a major role.

Speculation tax for rental & owner occupancy

As a rule, speculation tax is incurred if a property is resold within a certain period after purchase and was not used as a primary residence. In Germany, this speculation period is generally 10 years. If the sale takes place within this period, the profit generated by the sale is subject to income tax and is referred to as speculation tax.

Tax-free if there are more than 10 years between purchase and sale

If you or your children have lived in the apartment yourself, no speculation tax is due, even if less than 10 years have passed between the purchase and sale. However, if the apartment is a rental property, you should observe the speculation period.

Commercial trade from three-object limit

The three-property limit usually affects real estate dealers and speculators who buy and sell a large number of properties in a short period of time. If a seller sells more than three properties within a five-year period, this may result in the seller being classified as a commercial real estate dealer and thus becoming liable for tax. In this case, the capital gains may be taxed as income, resulting in a higher tax burden.

So, if you have already sold several properties recently, it is recommended that you sell your home only after 5 years to avoid additional taxes.

Taxes on inheritance and donation

But what taxes apply if the apartment is an inherited property? If you decide to sell an inherited apartment, it may well be subject to a speculation period. Here, too, the decisive question is: owner-occupation or rental?

However, a special feature must be taken into account: The start of the speculation period is not the date of inheritance or gift, but the date on which the apartment was acquired by its original owner.

With the inheritance, the speculation period attached to it therefore also passes to the heir

If, for example, you inherit an apartment as a rental property that was purchased 15 years ago, the speculation period is over and you can sell the apartment without having to pay speculation tax.

Conclusion: How to save taxes

In summary, various taxes can be incurred when selling an apartment. The speculation period and the three-object limit play a particularly important role. Special regulations also apply to the sale of an apartment after an inheritance or gift, which require consideration. It is therefore advisable to find out about the relevant tax rules and regulations before selling an apartment and to factor the tax payments involved into your costs.

1. find out about investment options that suit you (goals, risk)

Tip 1 is to thoroughly research the different investment options and choose the ones that best fit your goals and risk tolerance.

This means that you should inform yourself about the various options in which you can invest your inherited money. These include, for example, stocks, bonds, funds, ETFs, real estate as an investment or alternative forms of investment. You should consider which investment options best fit your financial goals and risk tolerance. A financial advisor or expert can help you choose the investment options that are right for you.

Here is a bullet point list with a short summary of the content of tip 1:

• Find out about the different investment options
• Choose the ones that best fit your goals and risk tolerance
• Consider your financial goals and your risk tolerance
• Seek advice from a financial advisor or expert if you are unsure

2. talk to a financial advisor or an expert

Tip 2 is to talk to a financial advisor or an expert who can help you decide.

This means that it can be helpful to seek advice from a financial advisor or an expert if you are unsure how to invest your inherited money wisely. A financial advisor is knowledgeable about different investment options and can help you develop an investment strategy that fits your goals and risk tolerance. An expert in a particular investment area, such as real estate or art, can also give you valuable advice.

Here is a bullet point list with a short summary of the content of tip 2:

• Talk to a financial advisor or expert
• Get advice if you are unsure how to invest your inherited money wisely
• A financial advisor is knowledgeable about the different investment options and can help you develop an investment strategy
• An expert in a particular investment area can give you valuable tips

3. realistic goals and financial plan

Tip 3 is to set realistic goals and create a financial plan to ensure you are investing your money wisely.

This means that it is important to set clear goals and create a financial plan to ensure that you invest your inherited money wisely. For example, your goals may be to save a certain amount of money to buy a property in the future (Tip 8), or to create financial security for your retirement. A financial plan helps you keep track of your goals, expenses and income.

Here is a bullet point list with a short summary of the content of tip 3:

• Set realistic goals
• Create a financial plan
• Helps you track your goals and keep track of your expenses and income

4. diversify your portfolio

Tip 4 is to diversify your portfolio to minimize risk.

This means it’s important to diversify your portfolio to minimize risk. Diversification means that you invest your money in different investment options and industries, rather than putting everything into a single option. By doing this, you can reduce the risk of suffering big losses if one investment performs poorly. It is important to have a balanced portfolio that consists of different investment options.

Here is a bullet point list with a short summary of the content of tip 4:

• Diversify your portfolio
• Invest in different investment options and industries
• Reduce the risk of losses
• Hold a balanced portfolio of different investment options

5. shares with long-term appreciation / less risk

Tip 5 is: Consider investing in stocks to benefit from long-term appreciation.

This means that it may be an option to invest in shares in order to benefit from long-term increases in value. Stocks are shares in companies that are traded on the stock exchange. They can give you an attractive return if the company is successful and increases its value. However, it is also important to note that stocks are speculative and there is a risk of loss. You should therefore carefully consider whether stocks fit your goals and risk tolerance.

Here is a bullet point list with a short summary of the content of tip 5:

• Consider investing in stocks
• Profit from long-term value increases
• Shares are interests in companies that are traded on the stock exchange
• Take into account that shares are speculative and there is a risk of losses

6. think about ETFs (funds and bonds)

Tip 6 is: Also consider investment options such as bonds, funds, ETFs and other securities.

This means it’s important to consider other investment options such as bonds, mutual funds, ETFs and other securities if you want to invest your inherited money wisely. Bonds are debt instruments issued by companies or governments to raise money.

They can be a good way to earn a fixed return. Funds are investment vehicles that pool the money of many investors and invest in a variety of securities. ETFs are exchange-traded funds that track a specific index. There are many different investment options you can consider, and you should think carefully about which ones best fit your goals and risk tolerance.

Here is a bullet point list with a short summary of the content of tip 6:

• Consider investment options such as bonds, funds, ETFs and other securities
• Bonds are debt instruments that are issued by companies or governments
• Funds pool the money of many investors and invest in a variety of securities
• ETFs are exchange-traded funds that track a specific index
• Choose the investment options that best fit your goals and risk tolerance

7. robo advisor instead of asset manager

Tip 7: Consider using a robo advisor as an automated financial tool.

A Robo Advisor is a digital tool that serves as an automated wealth management tool. It uses algorithmic models to develop investment strategies and invest your money automatically. All you have to do is specify your investment goals and risk tolerance, and the robo advisor will create a customized portfolio for you.

You can use the Robo Advisor online at any time and thus have access to your portfolio around the clock. Robo advisors are usually cheaper than traditional asset managers and are therefore particularly suitable for investors who opt for a long-term investment strategy. However, you should keep in mind that robo advisors also have risks and you should therefore carefully consider whether they fit your goals and risk tolerance.

Here is a bullet point list with a short summary of the content of tip 7:

• Consider using a robo advisor as an automated financial tool
• Use algorithmic models to develop investment strategies and invest your money automatically
• Specify your investment goals and risk tolerance and get a customized portfolio
• Use the Robo Advisor online around the clock
• Robo advisors are usually cheaper than traditional asset managers
• Consider that robo advisors also have risks

More about automated trading:

• Robo Advisor: Provider
• Robo Advisor: 20 tips

8. invest in real estate as a capital investment

Tip 8 is: Consider investing in real estate to benefit from appreciation and rental income.

This means that investing in real estate to benefit from appreciation and rental income can be an option. Real estate can be a good way to achieve a stable return.

For example, you can invest in a property and rent it out to tenants to generate regular income. However, it is also important to note that real estate investments require a lot of capital and there is a risk of losses. You should therefore carefully consider whether real estate investments fit your goals and risk tolerance.

Depending on the inherited assets, you could also think about a family foundation with tax benefits.

Here is a bullet point list with a short summary of the content of tip 8:

• Consider investing in real estate
• Profit from appreciation and rental income
• Real estate investments can provide a stable return
• Take into account that real estate investments require a lot of capital and there is a risk of losses
• Choose the investment options that best fit your goals and risk tolerance

More on the topic:

• Real estate as an investment
• Buy first property

9. sustainable, green investments with a future – idea

Tip 9 is to consider investing your inherited money in sustainable investments to have a positive impact and benefit financially.

This means that investing your inherited money in sustainable investment vehicles can be an option to have a positive impact and benefit financially. Sustainable investment vehicles are investments that are guided by social, environmental and governance (ESG) criteria and help create a more sustainable future. For example, you can invest in companies that are committed to climate protection or in funds that invest in sustainable projects.

It is important to note that sustainable investments are not without risk and you should consider whether they fit your goals and risk tolerance. You should also make sure that the sustainable investments you invest in are actually sustainable and not just so-called “green washing” products that only pretend to be sustainable.

Here is a bullet point list with a short summary of the content of tip 9:

• Consider investing your inherited money in sustainable investments
• Invest in a more sustainable future and benefit financially
• Sustainable forms of investment are based on ESG criteria (social, environmental and governance criteria)
• Consider that sustainable forms of investment have risks
• Make sure the sustainable investment vehicles you invest in are actually sustainable

Read more about here:

• Green investments

Conclusion: Investing inheritance wisely

There are many ways in which you can invest your inherited money. It is important that you weigh up the different options and choose the most suitable form of investment for you. You should also consider your goals and how much risk you are willing to take. If you are unsure, you can also hire a financial advisor or a financial planner to help you decide.