The testator is free to decide how much he wants to bequeath to whom

The testator is completely free to decide what should happen to his assets after his death. However, in order for a will to be truly valid, it is important that the testator is familiar with the specifics of drafting a will. Small mistakes in the wording can already lead to parts of the will not being interpreted correctly or not being valid in the first place. For this reason, it is of absolute necessity that the will is legally unambiguous.

Facts about the compulsory part

Close relatives cannot be completely excluded from the testator’s inheritance. Even in the event of disinheritance, which was agreed in the will, the relative can sue for the statutory compulsory portion. Incidentally, disinheritance can be effected without giving reasons.

Therefore, it does not make sense for the testator to disinherit a person who is entitled to the compulsory portion. This only leads to disputes. Inherited is nevertheless.

The compulsory portion is half of the statutory share of the inheritance. The compulsory portion is not automatically awarded to the heir by the probate court. The compulsory portion is also not noted in the certificate of inheritance. This means that the compulsory portion must first be claimed by the beneficiary of the compulsory portion from the other heirs.

However, there are special circumstances in which the testator is entitled to disinherit the child in such a way that the child cannot inherit the compulsory portion. This is the case if the child has been sentenced to a prison term of at least one year without probation for a criminal offence.

If a child is also to be deprived of the compulsory portion, the testator must record the motives in the will. Another legally valid reason is when the beneficiary of the compulsory portion seeks the life of the testator or another close person. If the beneficiary of the compulsory portion is guilty of a crime such as theft or bodily harm against the testator, he or she may also be deprived of the right to the compulsory portion.

Entitled to a compulsory share?

But which persons count as next of kin and are therefore entitled to a compulsory portion? This includes children. It does not matter whether they are biological or adopted children. If the testator was married at the time of death, spouses also count as close relatives. The same applies to a registered civil partnership. If the deceased has no children, the parents count as close relatives. Siblings of the deceased, on the other hand, are not entitled to a compulsory share.

The heir’s compulsory portion may be increased if the testator made gifts to other relatives up to ten years before his or her death. This is a claim to a supplement to the compulsory portion. This is the case, for example, if the testator gave away a property five years before his death. The beneficiary of the compulsory portion can demand that the compulsory portion is now calculated as it would have been if the gift had not been made. His or her compulsory portion increases as a result.

It should be noted that the beneficiary of the compulsory portion is not the owner of the estate. He therefore has no say whatsoever in what is to be done with the estate.

The legal succession must also be observed in the will if it is not to lose its validity. If the succession was not observed by the testator, the person concerned can enforce his or her claims in court.

If the claim to the compulsory portion is not asserted within 3 years after the death of the testator, the claim loses its validity. In addition, the claim to the compulsory portion only becomes valid when the testator has died. The compulsory portion cannot be claimed during the lifetime of the testator.

Inheritance and bequests: Compulsory portion

Calculate compulsory part – instructions

Legal succession in the case of inheritance

Legal succession always applies if the testator has not made a will. If there are no relatives, the inheritance passes to the state. However, this is hardly ever the case in Germany.

In the law of succession, kinship is divided into different degrees of order.

If heirs of order I exist, heirs of order II are completely excluded.

The children of the deceased as well as the grandchildren belong to the degree of order I. The children inherit in equal shares. If one of the children is already deceased, his or her children inherit.

Second cousin

If a deceased dies leaving neither children nor grandchildren, the second-degree relatives inherit. These include the parents of the deceased and the siblings. If a sibling has already died, the inheritance passes to their children, the nieces and nephews. If there are no second-degree relatives, the third-degree relatives are the grandparents and their children. These are then the aunts and uncles and the cousins.

Spouse

If no marriage contract has been agreed and the principle of community of accrued gains applies, the spouse of the deceased receives half of the inheritance alongside the children. In addition to the parents and siblings, the spouse even receives three quarters of the inheritance.

This can become dangerous if, for example, a property is inherited. In this case, the spouse has no sole claim to the property. In order to avoid this problem, many spouses opt for the Berlin will.

Berlin will

In a Berlin will, the longer-living spouse inherits everything. The children are excluded as heirs. Only after the death of the second spouse does the inheritance pass to the children. In this way, the property passes to the spouse without an inheritance dispute. However, even in this case, children can override the testator’s last will and claim the compulsory portion.

To prevent this from happening, the will can be amended to include a penalty clause in the event that the compulsory portion is claimed. However, this usually does not have the desired effect of the testator. Children can nevertheless claim their compulsory portion after the death of one parent. However, this becomes economically less attractive, as the inheritance is higher after the death of the second parent.

Parents are not obliged to treat their children equally in their wills

Parents are not obliged to treat their children equally in the will, even if this could avoid disputes after death. However, it is not possible to bequeath certain items of the estate only to certain children. For example, that the first child should inherit only the real estate, while the second child should become heir to the securities. Instead, it is only possible to determine with which quota the individual child receives how much of the total inheritance.

Will and custody

For the testator’s will to be valid, it must be handwritten and, of course, signed. It is absolutely fatal to type the will on the computer for the sake of better legibility. Even if it is signed, it is not valid.

Most testators choose to keep their wills at home. However, this carries the risk that it will be lost, cannot be found after death or that one of the heirs will make it disappear if it falls into their hands and disadvantages them.

It is therefore more advisable to place the will in the care of the probate court. This ensures that the will will be used in any case after the death of the testator. Anyone who decides against this form of safekeeping would do well to inform a trustworthy person about the existence and location of the will.

Almost no Income Tax: New York Times

I myself have been dealing with finances for a long time. Why? Finances are a matter for the boss. Your tax advisor is often only “consultant”, not “designer”, I know that from my own experience. Then the New York Times had a headline yesterday:

Story: 750$ Income Tax

“Donald J. Trump paid $750 in income taxes (or federal income taxes in the United States) in the year he won the presidency. He paid another $750 in his first year in the White House. In 10 of the previous 15 years, he had paid no income taxes at all-mainly because he reported losing much more money than he earned.”

While the president is leading a re-election campaign, which according to polls is in danger of losing, his finances are under stress, he has suffered losses and hundreds of millions of dollars in debt, which he has personally guaranteed, are coming due. He is also under pressure from a decade-long dispute with the Internal Revenue Service over the legality of a $72.9 million tax refund that he demanded and received after declaring large losses. A negative ruling could cost him more than $100 million. – Extract New York Times.

At a briefing at the White House on Sunday, Trump denied the New York Times story and claimed that he pays “a lot” in federal income taxes.

“I pay a lot, and I pay a lot of federal income taxes” – Donald Trump

Trump added that he is willing to release his tax returns as soon as he is no longer audited by the Internal Revenue Service, which, he said, “treats me badly.”

Must a US president disclose his tax return?

Importantly, the President is not required to keep his tax returns during the audit, despite his repeated assertions to the contrary. Trump also refused to answer in the briefing how much he paid in federal taxes.

Tax Avoidance: How does he do that? 4 examples

The Times article describes a number of corporate and transactional tax claims that could raise significant audit issues for the president and his business organizations. It also points out ways in which the tax laws provide for entrepreneurs to reduce their taxes.

Note, for further details see the full article on Investopedia. Here are 4 examples from the article:

Casino ‘Waiver’ Loss

The Times’ research puts certain tax reduction strategies on Trump’s tax returns in the spotlight.

The $70.1 million refund received for 2005-2007 appears to be due to the recovery of approximately $700 million in business losses claimed for 2009. These losses were probably based on the allegation that Trump Atlantic City’s casino business was completely “abandoned” (Source: IRS. “Publication 544 (2019), Sales and Other Dispositions of Assets. Accessed Oct. 1, 2020).

They would be permissible provided Trump received nothing in return for giving up its interest in the business. However, records of the bankruptcy proceedings show that Trump received 5% of the shares of the successor company, which would have disqualified any loss from the abandonment and limited its deduction to a loss of $3,000 for the year (source: IRS. “Part I, Section 165. Losses.” Accessed Oct. 1, 2020)

Consulting Fees vs. Employee Compensation vs. Gift

Unspecified “consultancy fees”, which can be seen in tax returns, may indicate a common strategy for reducing corporate income and taxes. The $747,622 in consulting fees paid to Ivanka Trump raises several questions. As an employee of the Trump organization, Ivanka should not be paid as a consultant, that is, as an independent contractor.

Unlike employee compensation, consultant fees avoid withholding taxes that are payable by the payer. But in order to be deductible, they must be reasonable, marketable amounts. Although a consultant is subject to reporting and taxation, Ivanka may be able to avoid any tax liability. As a real estate professional, Ivanka may have enough real estate losses to offset the payment. This fee deduction may cause the IRS to raise another issue. Officials may question that the fee – which far exceeds the annual gift tax exemption of $15,000 for 2020 – is in fact a transfer of assets to a family member on which the transferor owes gift tax (source: IRS. “Publication 950.” Accessed Oct. 1, 2020).

Business vs. Personal Expenses

Although not all Trump’s business expenses are explained, the article lists items that may be non-deductible personal expenses (source: IRS. “Publication 529.” Accessed Oct. 1, 2020)

It is noted that on this basis, the IRS may not allow deductions for aircraft used for personal travel and television entertainment expenses. Since the deductions for attorneys’ fees are stated as a lump sum, The Times wonders if the total amount includes fees paid to attorneys representing Donald Trump, Jr. in investigations and the President’s personal legal agreements to obtain confidentiality agreements from the plaintiffs.

Residence or Investment?

The Trump Seven Springs housing estate in Bedford, N.Y., asks additional questions. Although Forbes reported that Eric Trump described the property as a personal residence, Donald Trump called it an investment and deducted the $2.2 million property tax as a business expense. Wealth tax deductions for personal residences are subject to a $10,000 cap on state and local tax deductions (IRS. “Topic No. 503 Deductible Taxes.” Accessed Oct. 1, 2020).

Reading tips: Asset Accumulation & Co.

Here I have some reading tips for you:

1. “Billion-dollar gift: shares largely tax-free”
2. Taxes & Assets: learning from investor experiences

“Billion-euro Gift: Ahares Largely Tax-Free”

“Billion dollar gift for Döpfner – largely tax-free?” – this headline is not from me, but from the morning mail. In fact, Matthias Döpfner has turned the publishing house upside down as boss. While owner Friede Springer stands confidently behind his decisions. Print shares were sold, new online media such as Business Insider, Idealo, Immowelt and StepStone were acquired. Already in 2012 Döpfner has received a big share package for more than 70 million Euro, now a “billion-dollar gift” for the Axel Springer boss is going to go, according to Manager Magazin. The 57-year-old media manager is increasing his previous stake in Axel Springer SE from just under three percent to a total of around 22 percent.

Tip! How does it work that you can get a block of shares almost tax-free? A little further down in the article I explain the methodology, or rather the law behind it.

• • Give away shares: largely tax-free?

Understand and Convert Taxes & Build up Assets

Tax optimization, tax-free, the most popular buzzwords when it comes to wealth accumulation. But how do you actually convert private wealth into taxes? My tip, as before, is to learn from professionals who have all been through it.

Always remember: taxes are a matter for the boss.

• Convert taxes into private assets