In the first part, we already explained which preliminary considerations a testator should make when he wants to bequeath real estate: he should first create a concept. In this article we explain how to best implement this concept.
Making a will
First of all, a will must be drawn up. German inheritance law allows for a range of options. Caution is advised if the testator has lived abroad (Italy, Spain, etc.) for some time and has his centre of life there. Italian or Spanish inheritance law could then be applicable. The testator is free to draw up his or her own will. All the testator needs is a blank sheet of paper and a pen. He can write down his will by hand. In the case of spouses, it is sufficient for one spouse to have written the text and for the other spouse to sign it.
Wills written on a computer (and printed out) or formulated by typewriter are invalid. In the case of complicated financial circumstances, it is strongly recommended to seek legal advice (and possibly have the will notarised). Claims to a compulsory portion could not be waived.
Anticipated succession
In some cases, anticipated succession can make sense. For example, if the estate has a wide variety of special features (company shareholdings, assets abroad, etc.) and/or the family circumstances give cause for this (patchwork, protection of partners). In this case, parts of the testator's assets are already transferred during his or her lifetime. The testator should then allow himself the possibility of being able to reclaim what has been transferred or given in the worst case. The same applies if, despite the utmost care, the tax authorities unexpectedly demand inheritance tax. In this case, clauses should be provided that control the transfer process and allow it to be reversed neutrally.
Usufruct (Nießbrauch)
The granting of usufructuary rights is very popular. In this way, the real estate can be donated and transferred to the beneficiary(ies). This gift is encumbered with the usufruct of the grantor(s). As long as she/he lives, she/he can draw the uses and fruits from this property. The increase in value of the property from the transfer until the death of the testator(s) is irrelevant.
Tax advice
In addition to the use of allowances that make it possible for tax purposes to transfer significant assets (including real estate) to children or spouses (allowances for children per child EUR 400,000.00, for spouses EUR 500,000.00), the entire transaction must be examined for tax purposes. Those concerned are well advised to formulate a clear mandate to a tax expert. Many details may need to be considered here. Competent tax advice usually saves from unpleasant tax payments.
In the third part of our series, we explain what to do if "something goes wrong" after the implementation of the agreed concept.
Düsseldorf, 29 April 2021
Author: Dr. Dieter Jasper
