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.

The allowances of inheritance – what is taxed and what is not?

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 pay the most as taxes, especially in the case of a large estate. You can now find out what the tax-free amounts are and how high they are for the respective family members.

• Life estate: bequeathing correctly
• Learn more about: Inherit properly

Pension allowances – precisely regulated for children and spouses

Pension allowances are payable if the partner or children were dependent on the financial support of the deceased. For spouses, the pension allowance is €256,000 provided that the surviving spouse does not have a widow’s pension or occupational pension for which no inheritance tax is payable. If such a pension exists, the value of the pension is determined on the basis of the expected duration of the benefits and the pension allowance is reduced by this value.

Children are entitled to pension allowances that are graduated according to the age of the child at the time of death. Infants up to the age of 5 are entitled to a pension allowance of 52,000 euros. Starting from this point, the pension allowance decreases by approximately 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 payments, such as an orphan’s pension.

• Pension allowances apply if the partner or children were dependent on the deceased’s financial support
• Spouses and registered partners receive 256,000 euros
• Children receive 52,000 euros, but the amount is reduced under certain conditions

Inheritance tax: clever use of allowances – tips from a specialist lawyer

Further allowances – different according to degree of relationship

The other allowances, in addition to the pension allowances, are regulated according to the degree of relationship and are independent of existing survivors’ pensions or own assets. Accordingly, spouses and registered 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 tax allowances of 20,000 euros. To ensure that as little tax as possible has to be paid on inheritance, the testator can make important decisions long before death and specify them in the will.

Only what remains of the estate after deducting the allowances is taxable. Each taxable acquisition is rounded down to a full €100. The individual tax rates of inheritance tax depend on the different tax classes of the heirs and are also progressively graduated.

• There are other allowances that apply to both inheritance and gifting
• The free allowances are based on the degree of relationship

Gifts – allowances and gift tax

Inheritance tax and gift tax are closely linked. Almost the same allowances apply as in the case of inheritance, however, the gift allowances may only be left tax-free once in ten years. Testators who wish to reduce the inheritance tax for their heirs must therefore start gifting their assets ten years before their death. In the case of patchwork families, this rule means that it can make sense to adopt the spouse’s children in order to bring the tax-free amounts into line with those of the biological children. The adoption does not affect the succession to the other biological parent.

A gift thus actually allows for savings opportunities in inheritance tax. The testators must be aware of these possibilities and use them in a targeted manner in order to have to hand over less of an estate in taxes. Non-marital partners must note that even long-term civil partnerships only allow the given tax allowances if they are officially recognised, either through marriage or through registration of the partnership.

• The same allowances apply to gift tax as to inheritance tax.
• The two are closely linked and follow the same premises

Tax-exempt goods – works of art, libraries or household effects

In addition to tax-free allowances, there are also goods that are tax-free. For close relatives in tax class I, movable assets such as household effects or similar objects of daily use are tax-exempt if they do not exceed a value of 42,000 euros. For all other heirs, a value of 12,000 euros applies here. If works of art, archives or libraries are part of the estate, they are generally exempt from tax at a rate of 60 percent. If the estate includes a building in which one of the heirs lives, this can also be exempt from tax.

• Some goods are tax free or tax exempt up to a certain amount
• Archives, works of art and libraries are 60 percent tax-exempt

You can also find out more about the topic: Bequeathing correctly during your lifetime!

The most important questions on the subject of tax allowances and inheritance tax

Since the allowances vary depending on the degree of relationship and also depend on the succession, questions often arise on this topic. So that you know which allowance you are entitled to and how much inheritance tax is due, the experts at Lukinski answer all the important questions on the subject of allowances and inheritance tax.

What is the allowance for inheritance tax?

The tax-free amounts vary depending on the degree of relationship. For spouses and civil partners, an amount of 500,000 euros applies, for children and grandchildren, if their parents are already deceased, an amount of 400,000 euros applies. For grandchildren whose parents are still alive, an amount of 200,000 euros applies and for parents and grandparents an amount of 100,000 euros applies.

What is the allowance for inheritance between siblings?

In the case of inheritance among siblings, an allowance of 20,000 euros applies. The heirs are subject to tax class 2.

How can I avoid the inheritance tax?

The inheritance tax can be reduced by the testator already starting to give away his inheritance during his lifetime. Here, some guidelines must be followed so that no gift tax is incurred. If everything is observed, the inheritance tax can be reduced by the gift and, depending on the case, can even be completely omitted.

When do I pay inheritance tax?

Inheritance tax is paid by every heir. However, tax is only levied on the amount that exceeds the exempt amount. The possible tax-free amount varies depending on the degree of relationship.

Is a gift taxable?

Gift tax is very close to inheritance tax. In general, a gift must be taxed in the same way as an inheritance, but the same allowances apply here. Testators can therefore minimise inheritance tax by making a gift during their lifetime.

Until when is an inheritance tax-free?

This depends on the degree of kinship. Close relatives such as spouses and children have a higher allowance than grandchildren, parents or grandparents of the deceased.

How much is the inheritance tax?

The amount of inheritance tax depends on the degree of relationship, the amount of the estate but also on the respective allowances. How high the inheritance tax is in each individual case must be calculated individually.

The partial auction 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 proceed with the common property are too different and the participants cannot agree. Every heir has the right to demand a partition of the community of heirs at any time and thus to force its dissolution. In such a case, a partition auction may be the last resort to settle the disputes and dissolve the community of heirs. You can find out here what needs to be taken into account in the event of a dispute and a partition auction.

Learn more about communities of heirs!

Application for partition auction – the correct form must be observed

An application procedure always precedes a partition auction. This application can be made by any heir of a community of heirs. Formally, a written application, which must be submitted to the competent district court, is sufficient. However, it must be accompanied by certain documents. In the first application, it must be proven beyond doubt that the applicant has co-ownership of the property to be auctioned. The appropriate document is a corresponding extract from the land register, which must not be older than six months. Once the application has been received, it is examined by the local court and the next steps are initiated.

Partition auction & community of heirs – Video

The procedure – step by step to the partition auction

The process of a partition auction already begins with the application that one of the heirs from a community of heirs must file with the district court. This is followed by further steps in order to carry out the partition auction in accordance with the law.

The expert opinion – assess the value of the property

A partition auction requires an appraisal of the value of the property or land. The court needs this in order to determine the lowest bid for the partition auction. Such an appraisal can be obtained in three different approaches. The petitioner can obtain a private appraisal, but the entire community of heirs must agree to this step. An alternative is to obtain the appraisal through the court. Often a valuation report is already available. As long as this is not older than a few weeks or months, it can also be used.

The minimum bid – determined by the court

The court sets a so-called lowest bid before the partition auction to ensure that the proceeds of the partition auction can cover the costs of the proceedings and all claims of the heirs. Once this is determined, neither the market value nor the purchase price of the property or land is relevant and the lowest bid is considered the notional value. It is made up of the rights, encumbrances and minimum cash amounts. The person who acquires the property or land at the partition auction assumes all rights and encumbrances in addition to the subject matter and thus becomes the purchaser and debtor.

The auction – the highest bid gets the surcharge

Once the lowest bid has been determined by the court, a date for the partition auction can be set. Subsequently, the partition auction of the property or the land should be advertised in newspapers and on the Internet in order to attract interest in the property. Viewing appointments are also possible in consultation with the community of heirs. On the auction date, all interested parties can submit bids within a predetermined time frame. The highest bid is accepted for the property and the community of heirs may be divided.

The duration – varies from case to case

The duration of a partition auction is different depending on the case. It depends in particular on how long it takes to prepare the expert opinion and how long it takes to process the application. The applicant can only shorten the duration by already having a valuation report available when filing the application and the court agrees to its use.

The disbursement – dispute of the community of heirs

The community of heirs does not successfuly dissolve until the proceeds have been successfuly distributed. Disputes can also arise here. If the testator has not determined the distribution in his will, the statutory inheritance quotas usually apply. If the heirs do not agree, a civil action may be brought. The proceeds from the partition auction are deposited with the district court and are not paid out until the heirs have reached a written agreement on the distribution.

The costs – how much are they and who bears them?

Certain costs are incurred for a partition auction. These include the application costs, the procedural costs, the expert’s fees, the lawyer’s fees and the costs for newspaper and internet advertisements. All these costs are incurred when the court orders a partition auction. The costs for the notification of the co-heirs are part of the application costs. Usually, the costs of the proceedings have to be paid as an advance. Who bears the costs of a partition auction depends on the outcome of the auction. If the auction is successful, all costs will be deducted from the proceeds and thus each heir will share equally in the costs. However, if the auction is not successful, the applicant bears the costs alone and the community of heirs continues to exist.

The alternatives – private sale or voluntary auction

The partition auction involves some risks that should be well thought out in advance. The property could be sold below value and lead to low profits for the heirs. There are some alternatives that eliminate these risks. The property can be sold privately, saving the application, procedural and legal fees. In addition, the heirs can choose the buyer themselves and thus ensure that the property is not sold below value.

Another alternative is the voluntary auction. The community of heirs can turn to a public auctioneer who organises and conducts an auction. The advantage here for the heirs is that the minimum bid can be determined themselves and thus there is no risk of an auction below value. However, in both cases the community of heirs must unanimously agree to the sale of the property.

The most important questions on the subject of partition auctions in communities of heirs

A partition auction can resolve disputes within a community of heirs, but it can also reignite disputes. To avoid mistakes and save time, it is important to take the right steps. Lukinski’s experts answer the most important questions on the subject of partition auctions in detail for you.

Why a partition auction?

A partition auction can put an end to long disputes, especially in communities of heirs, and lead to a result with which all heirs agree. The partition auction also offers the last resort if no agreement can be reached.

What does for the purpose of abolishing the community mean?

The partition auction success for the purpose of the abolition of the community around from an indivisible article, like a property or a real estate a divisible money equivalent to generate.

What is a partial auction of a house? More terms in our property glossary.

A partial auction is held when several people are co-owners of a property. The partial auction turns an indivisible object into a divisible amount of money that can be divided among the owners.

What does § 1010 BGB mean?

Pursuant to § 1010 of the Civil Code, the co-owners of a plot of land may make arrangements for the administration or use of a plot of land or exclude the right to demand the dissolution of the community.

What did ZVG mean?

The abbreviation ZVG stands for Zwangsversteigerungsgesetz. This regulates both the forced sale and the forced administration.