Inheritance & Inheritance of Real Estate

Never before has so much been inherited in Germany as this year, reports NDR. It continues, “According to the German Institute for Economic Research (DIW), up to 400 billion euros are inherited or given away every year.”

You can find the report in the NDR media center:

• Dispute over inheritance: How does a good will go?

Dispute in the community of heirs and partition auction

We have already reported on the topic of disputes in the community of heirs in the blog. If a deceased person leaves several heirs and the division of the estate among the heirs is not consensual, the division is determined by law. Since the estate is a joint asset, the co-heirs can only dispose of the inheritance jointly.

If this joint disposition does not work, each co-heir can demand the dissolution of the community of heirs at any time and pursue this independently. In this case, the individual co-heir can dispose of his share in the estate as a whole, but not of his share in individual assets.

• Dispute in the community of heirs

If the heirs are in dispute, a partition auction, a specific form of forced sale, is sometimes held. The aim of the partition auction is to convert the assets into a divisible sum of money and divide them among the co-owners.

An excerpt from Monday, April 25, 2022, 22:00 to 22:45 with our TV expert Jan Rickel.

Image source: 45 Min Reportage / NDR

Read even more on the topic here:

Will, house and compulsory share

The distribution of a deceased person’s assets can be recorded in a written declaration before death, which is the will. Every person is capable of making a will from the age of 16 and does not need a notary in the case of a handwritten will, as the testator draws it up himself by hand.

However, if one wants a notarized will, this must be notarized by a notary public, where the costs for this depend on the value of the estate. For clarification, the document should be labeled “Will” or “Last Will” and at the end it should be signed by the testator and dated. If there are several wills, the will with the most recent date is authoritative.

• Will
• Mandatory share

Inherit without a will?

The law of succession comes into force if there is no will. This regulates who receives the assets of the deceased after a death and how this is done. Communities of heirs may be formed if there are several heirs and the estate passes into their possession.

Communities of heirs are formed automatically after the death of the testator if there are several heirs. These must then divide the estate among themselves and make joint decisions about inherited property, such as real estate. If you want to decide for yourself which relatives inherit which property, you should draw up a will and regulate everything in detail.

• Heirs without a will

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.

Inherited house and debts

However, the heir is the legal successor and is therefore also liable for the debts of the deceased. With the acceptance of the inheritance, you may have to pay for existing real estate loans and tax debts with your own assets. In order to avert possible dangers, please approach us in good time. Only in very few cases can acceptance or disclaimer of an inheritance be reversed. We advise you on all questions and formalities concerning the inheritance. With the acceptance of the inheritance, an application for land register correction (§ 82 Land Register Code, GBO) must be made.

Split up

Inheritance to a community of heirs can be problematic. In this case, different parties (e.g. siblings) inherit the real estate assets. Different interests can make use and sale difficult. The sale of the property is generally not possible without a unanimous decision. In the course of the inheritance settlement, it is possible to divide the property and thus end the community of heirs. Agreements on division can be, for example, a cash payment to the first heir, a transfer of property shares to a second heir and the transfer of ownership of a property of the same value to a third heir. All solutions require an objective and realistic valuation of the property.

Own use or rental of the inheritance

Often there is a close personal connection to the parental home. But other objective criteria should be taken into account in the decision:

• What is the condition of the property (renovation backlog)?
• What conversion measures are necessary?
• Is there any possibility of paying off a possible community of heirs?

Debt trap real estate inheritance

If the inherited property is in excellent condition, it can also be rented out. In many cases, however, the sums to be spent on renovation and modernisation are too high to generate a return on renting out the property. The yield calculation can still be relatively positive for an apartment building even with a renovation backlog. Since the sale of the inherited property is in many cases the only way to settle the inheritance dispute, the heirs often sell far below value.

More information about inheritance:

Inheritance settlement

Properties inherited in community pose a particular difficulty when selling. Within the framework of a community of heirs, there are several owners in the land register. This circumstance has a detrimental effect on the interest of potential buyers and makes the sale process more difficult. There is a solution to simplify the settlement and at the same time provide for a clear guideline of all heirs with equal rights. The settlement of an estate refers to the dissolution of a community of heirs, which is carried out on the basis of clear contractual regulations and is not bound by any particular form. Everything you need to know about inheritance settlement.

Community of heirs

From practice it is known that a community of heirs rather rarely agree. But from the disagreement and open disputes in relation to a real estate inheritance arise losses that you can avoid with prudence. Avoid conflicts about the estate by consulting an estate agent and finding the best way with support. If the will does not provide otherwise, all co-heirs are equally entitled and obliged. This means that a sale is often the best solution and gives you the opportunity to divide the proceeds of the estate between all the co-heirs, thus avoiding the problem of an inheritance dispute. Learn more about the community of heirs.

Inheritance tax

For many heirs, grief, joy and sorrow are closely linked. When you inherit a house, this process is always linked to a painful, emotional loss. After some time, a slight joy spreads and you realize that you are a homeowner. At the same time comes the worry that the tax office will claim inheritance tax from you and you will only be able to pay this amount if you sell the house. You have an exemption amount, below which there is generally no inheritance tax. The amount of this allowance is based on your degree of relationship to the deceased. Spouses can inherit real estate tax-free up to 500,000 euros, children up to 400,000 euros. To ensure that you do not pay speculation tax, you should consider whether you would like to live in the inherited house yourself if it was acquired less than 10 years ago. Everything about inheritance tax.

Certificate of inheritance

You are registered in the will as the sole heir of the parental home. If the will is notarised and legally valid, your inheritance will not be challenged. Nevertheless, without an additional certificate of inheritance, you will face a problem at the latest if you become the owner of the property as a result of the correction in the land register and wish to sell it on, for example. You should have a certificate of inheritance issued irrespective of the will and thus protect yourself when inheriting houses or apartments. Everything about the certificate of inheritance.

Partition auction in communities of heirs

The partial auction is a special variant of the forced sale and is used when several persons have ownership of a thing. This often involves a plot of land or a property that is auctioned off and the proceeds divided among the owners. This situation often occurs in communities of heirs whose estates include real property or land. In a community of heirs, the heirs share ownership of the estate property. Accordingly, each of them can dispose of his or her own share, but of the entire property only in agreement with the others. Everything about the partition auction.

Bequeath debts

An inheritance does not primarily mean wealth and new possessions. An inheritance is often burdened with debts and means a great deal 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 for them with their private assets. If an inheritance occurs, the inheritance should be carefully examined and checked for debts. Learn more about inheriting debts.

Heirloom

The estate can be disclaimed by any heir. This is particularly important if the inheritance is overindebted or if, for example, dilapidated real estate is part of the inheritance. However, a disclaimer requires certain forms and deadlines that must be observed. Precise information about the assets and debts of the testator is therefore extremely important. The right advice is the key to success in such a case. Everything about the inheritance.

Intestate succession

The law of succession comes into force if there is no will. This regulates who receives the assets of the deceased after a death and how this is done. Communities of heirs can be formed if there are several heirs and the estate passes into their possession. Communities of heirs are automatically formed after the death of the deceased if there are multiple heirs. These must then divide the estate among themselves and make joint decisions about inherited property, such as real estate. If you want to decide for yourself which relatives inherit which property, you should draw up a will and regulate everything in detail. Learn more about inheriting without a will.

Mandatory share of the inheritance

The compulsory portion is an important topic for disinherited relatives, because they still have certain claims to the inheritance. However, in order to claim this correctly and to comply with the formalities, a number of things must be observed. The share always depends on the other heirs and the amount of the estate. Read more about the compulsory portion of the inheritance now.

Allowances for inheritance

In order to protect the heirs from a large financial burden, different tax rates and allowances apply depending on the degree of relationship. These allowances include various things that do not have to be taxed, so that the heirs do not have to hand over the most as taxes, especially in the case of a large estate. Everything on the subject of tax allowances!

Statistics on inheritance, inheritance, house and apartment

Further studies and statistics can be found on the websites of the Federal Statistical Office and with us under:

• Real Estate Statistics
• Investment statistics
• Weather statistics

Inheritance and gifts

Here you can see inheritances and gifts in Germany. The survey ranges from 2008 to 2018 and shows that over 110,000 inheritances are distributed each year. 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 at the top in Germany. Hamburg is currently at the top with 167.80 euros. In no other city is so much inherited. With a population share 2.19% of total Germany (1.82 million out of 82.79 million), a total volume of 305,731,600 euros 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

Selling an inheritance? Apartment prices in Germany

Here you can see the cities with the highest prices per square metre for condominiums comparing 2010 and 2018* (in euros per square metre).

1. Munich (Bavaria) at 8,342 euros per sqm; up from 6,737 euros per sqm in 2014; up 1,695 euros per sqm in 4 years.
2. Stuttgart (Baden-Württemberg) at 5,925 euros per sqm; up from 4744 euros per sqm in 2014; up 1,181 euros per sqm.
3. Frankfurt am Main (Hesse) at €6,060 per sqm; up from €4,373 per sqm in 2014; up €1,687 per sqm
4. Freiburg im Breisgau (Bavaria) at 4,943 euros per sqm; up from 4,740 euros per sqm in 2014; increase of 203 euros per sqm
5. Ingolstadt (Bavaria) at €4,969 per sq m; up from €4,287 per sq m in 2014; increase of €682 per sq m.

Germany in comparison: Inheritance in other countries

Inheritance tax critics: What do Germans think?

What is the opinion of Germans on the subject of inheritance and taxes? The question: “Do you find the argument of the inheritance tax critics that the inherited assets were already taxed during your lifetime justified?”

Uniform inheritance tax – Survey

Should a uniform but low tax rate be introduced for inheritance tax?

You can find more statistics at Statista

Spare the family business – Survey

Should heirs to family businesses continue to be largely spared from taxation in the future?

Reform of inheritance tax and valuation law

Vote of the members of the Bundestag on the draft law for the reform of the inheritance tax and valuation law

Abolish taxation of inheritances

Should the taxation of inheritances be abolished in general?

Against abolition same for increase of inheritance tax?

If you are against the abolition of inheritance tax, are you also in favour of an increase in inheritance tax?

Further studies and statistics can be found on the websites of the Federal Statistical Office and with us under:

• Real Estate Statistics
• Investing money / Capital investment
• Weather in Germany

Estate settlement or house sale as a community of heirs?

For a profitable sale, it is important that you have already reached an agreement as a community of heirs before the sale of the property. The agreement can, which is of course the best case, be reached by mutual consent among all co-heirs. If an amicable agreement and joint decision is impossible, each heir has the right to demand an inheritance settlement and to have his or her share of the inheritance paid out. In the case of hardened fronts, this decision is usually accompanied by a partial auction and the corresponding financial loss for all co-heirs.

Community of heirs – Communicate openly and find agreement

We recommend that you decide together and, at best, sell. By selling the house, the community of heirs dissolves at the moment when the proceeds of the sale are divided between all the co-heirs and paid out. A community of heirs can sell without several owners in the land register and thus sell more quickly. For interested parties, the community of heirs is often an obstacle to decision-making, which can delay the sale of the house or lead to conditions below the market value.

Open communication in community of heirs excludes losses and risks!

As a civil law partnership, you face a number of tasks in a community of heirs. Once you have decided to sell, estate agents will act on your behalf and rule out the possibility of selling the inherited property for less than its value or only with great difficulty.

More information about inheritance:

Contested

Ideally, the heirs of a community of heirs would pay any debts swiftly 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 they remain unresolved for years after the inheritance. Each member of such a community of heirs has the right to demand dissolution at any time, even without good cause. Learn more about the dissolution of a community of heirs.

Partition auction

The partial auction is a special variant of the forced sale and is used when several persons have ownership of a thing. This often involves a plot of land or a property that is auctioned off and the proceeds divided among the owners. This situation often occurs in communities of heirs whose estates include real property or land. In a community of heirs, the heirs share ownership of the estate property. Learn more about the partition auction.

The most important questions on the subject of community of heirs:

Many issues often arise with joint heirs. From the correct tax return to the dissolution of the community of heirs, there are many points of contention that raise questions.

What is an undivided community of heirs?

An undivided community of heirs describes all heirs of a deceased. This comes into effect if there is more than one heir and thus a community of heirs is automatically formed. However, the undivided community of heirs loses its effect with the commencement of a community of heirs dispute. However, a community of heirs does not necessarily have to be divided.

What is the intestate succession?

If the deceased did not leave a will and the testamentary disposition is invalid, the law determines which persons are the heirs. The legal succession is based on certain specifications, such as the degree of relationship and the marital property status of the deceased.

What is meant by inheritance settlement?

If problems arise with the division of the inheritance in a community of heirs, each heir has the right to demand a division of the inheritance. The inheritance is then divided in equal parts. First the inherited money or similar securities and then the inherited objects, such as real estate and the like.

What is a fractional community?

A fractional ownership is understood to be several persons who jointly own a thing. The legal regulations find the fractional ownership in the paragraphs § 1008 to 1011 of the BGB.

How much does it cost to apply for a certificate of inheritance?

A certificate of inheritance can be applied for at the probate court. The costs for this depend on the value of the estate. For example, if the estate was worth €200,000, the certificate of inheritance costs €207.

When does the spouse inherit?

The spouse inherits only if there are no siblings, grandparents, parents or their siblings of the deceased. In all other cases, the legal right of inheritance of the surviving spouse is limited to a certain quota of the estate.

Can grandchildren inherit?

If the children of the deceased are alive, this excludes the grandchild from the legal succession (§ 1924 para. 2 BGB). Grandchildren can therefore only inherit from their grandparents if their own parents are deceased and have therefore disappeared from the succession.

What is a stratification contract?

A partition, partition agreement or partition contract is when the co-heirs of a community of heirs agree among themselves to exclude an heir from the community of heirs. This is usually compensated with a payment.