How to ensure that the sole heir actually remains the sole heir
The Berlin will, whether drawn up by hand or by a notary, is a common way in Germany for married couples to make their last wishes known. The purpose of a Berlin will is for the longer-living spouse to become the sole heir and receive all the assets. The joint children should go away empty-handed on the death of the first spouse and only receive the remaining assets after the death of the second spouse. On the one hand, this ensures financial security and economic relief for the surviving spouse even after the death of the first deceased. On the other hand, the estate is kept together and protected from fragmentation for the time being. After the death of the second deceased, the assets then go to the children.
Berlin will disinherits the children
What many people do not realize about this arrangement is that it effectively excludes the children from the succession. The testator’s children are also his or her legal heirs. With a Berlin will, they are therefore disinherited with regard to the first inheritance. Disinheritance means that the children are entitled to a compulsory portion.
Children’s claim to a compulsory portion burdens the heir
The compulsory portion amounts to half of the statutory inheritance share and therefore often makes up a considerable part of the estate. For example, if the spouses live under the statutory matrimonial property regime of community of accrued gains and have two children, each child is entitled to a statutory inheritance share of ¼ of the assets, which means a compulsory portion of 1/8 per child. As the compulsory portion claim is a purely monetary claim against the heir, this can lead to liquidity problems for the surviving spouse who suddenly finds himself or herself exposed to claims from his or her children. Depending on which assets make up the estate, the heir may even be forced to sell parts of the estate in order to meet the children’s monetary claim.
Renouncing the compulsory portion as a possible way out
The children’s claim to a compulsory portion can only be excluded in exceptional cases. This would require, for example, the commission of a crime against the testator or a conviction for a criminal offense and a prison sentence of at least one year without parole.
If – as is usually the case – the requirements are not met, the only other option is to waive the compulsory portion by mutual agreement. This means that the children conclude a waiver of compulsory portion agreement with their parents, stating that they waive their compulsory portion upon the death of the first deceased. This waiver must be notarized in order to be effective and can be agreed at any time, ideally close in time to the execution of the will. This is usually successful in intact family relationships. It should be noted that this is a consensual agreement and the waiver of the compulsory portion therefore depends on the consent of the legal heir. It cannot be decreed unilaterally by the testator.
Compulsory portion penalty clause protects the estate of the surviving spouse
In order to avoid the assertion of compulsory portion claims and thus ensure that the surviving spouse is actually the only person to receive something from the estate, there is also the possibility of a so-called compulsory portion penalty clause. Such a clause can help to prevent the disinherited children from claiming their compulsory portion upon the death of the first spouse by “sanctioning” such an action.
The content of such a clause can be structured in various ways. However, the core of the penalty clause is always that the person who claims their compulsory portion on the death of the first spouse with knowledge of the penalty clause should also only receive their compulsory portion on the death of the second spouse. The child practically forfeits its rights under the will, namely its position as heir after the death of the last to die, if it claims its compulsory portion on the death of the first to die. As a result, the child only receives the compulsory portion twice and therefore, in case of doubt, less than the inheritance share provided for in the will.
The correct wording of the penalty clause is important
When formulating a penalty clause, as with all other dispositions in a will, it is crucial that it is drafted precisely and clearly so that the clause actually takes effect.
Above all, the clause should state the consequences of claiming the compulsory portion. The wording “Our children should only receive a benefit after the death of the last deceased spouse”, for example, is not sufficient to assume a compulsory portion penalty clause. In addition, the conduct that is to trigger the penalty clause must be specifically described. There are various connecting factors here: Should the clause already apply in the event of a request for information? Should the mere assertion of the claim also be sanctioned? Should the penalty clause only apply after the compulsory portion has actually been received?
If this content is not already specified in the clause, the interpretation of the clause may lead to a result that deviates from the testator’s intention.
Tax advantages through flexible structuring of the compulsory portion penalty clause
However, as such a compulsory portion penalty clause is not always advantageous, it can also be useful to exclude the applicability of the clause if the compulsory portion is claimed in agreement with the surviving spouse. This leaves room for flexibility to respond to changing situations.
With regard to the inheritance tax disadvantages of a Berlin will, for example, such an exception is often advisable. Each child has a tax-free allowance of EUR 400,000. This means that the first to die could transfer EUR 400,000 tax-free to each child, while the last to die could also bequeath this amount tax-free. However, as nothing passes to the children on the first death in a Berlin will, the first tax-free amount is given away. In total, only EUR 400,000 instead of EUR 800,000 can be transferred tax-free per child from the parents with this arrangement. To avoid this, the compulsory portion can be claimed so that the tax-free amount can already be used in the first inheritance.
Targeted control of succession through individual drafting of the compulsory portion penalty clause
The design of the compulsory portion penalty clause is versatile and must be individually tailored to the specific case. It is possible to make the assertion of a compulsory portion unattractive and thus avoid claims by the children excluded from the succession. It is crucial that the testators set out the requirements and any applicable exceptions in detail in their will. If skilfully drafted, the compulsory portion penalty clause can therefore be a thoroughly recommendable component of a Berlin will.
If you have any further questions about inheritance law and inheritance tax law in Germany, our specialist attorneys will be happy to help you.
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German Estate Planning and Inheritance Law
Private Handwritten Will in Germany
