The Community of Heirs in Germany

The community of heirs under German law refers to the legal relationship between the heirs of a deceased person, in which they are jointly responsible for administering the deceased’s estate and distributing the assets among themselves. This legal concept, known as “Erbengemeinschaft” in German, applies when the deceased has not left a will or when the will does not dispose of the entire estate. The community of heirs must reach a consensus on how the estate will be divided, and the courts will resolve any disputes. The community of heirs terminates once the estate is fully distributed.

The community of heirs is formed automatically by a succession involving several heirs and by law according to § 2038 German Civil Code – BGB. It is created without the heirs being able to influence it. It is also its peculiar difficulty as it becomes the joint property of the community of heirs according to § 2032 para. 1 BGB and must be administered jointly by all heirs. It is often the result of a statutory succession, i.e. when the testator has not settled the inheritance. Similarly, this is still possible if, in the will or inheritance contract – the voluntary succession – the estate is not already divided among the heirs individually but is allocated to all of them jointly.

The community of heirs only ends when the estate has been completely divided utilizing a settlement – in a settlement contract. Whether they wish to or not, the co-heirs must agree in principle within the community of heirs and deal with the inheritance jointly. It is not uncommon for the estate division to end in legal disputes lasting for years.

As a co-heir, it should be noted that the “community of heirs” is one of the joint owners. This status is important, for example, in cases where a particular asset is owed to the community of joint owners as a special fund. In general, this means that none of the co-heirs owns anything from the estate alone, but all of them share everything in the community of heirs. Each heir is part of a collective whole when dealing with the entire estate; thus, aspects of the assets cannot be dealt with individually. According to § 2033 (2) BGB, this can and may only be decided by all the heirs jointly in the community of heirs.

Co-heirs under the community of heirs should consider some of the following points:

• First of all, as a co-heir, one should get an overview of the other heirs and, if necessary, how they can be identified if they are unknown. No co-heirs are entitled to a compulsory portion of the inheritance.
• Secondly, it is necessary to determine what is available in the testator’s estate and whether the testator has left debts.
• Furthermore, the tax office must be informed of the inheritance within three months.
• Each co-heir should ask himself the question of whether they will participate in the dispute within the community of heirs and thus receive their share of the inheritance or whether it is the better solution for them to leave the community of heirs early and, under certain conditions, to be paid out by the other co-heirs.
• Protective measures for the personal liability of estate liabilities can be determined and, if necessary, already initiated.
• Furthermore, it is advantageous to consider which administrative measures might be necessary for the estate in the near future and, if necessary, to prepare a list of costs. For this purpose, it is a good idea to locate the required documents, e.g. rental agreements of a rented building in the estate.
• You can also find out whether you need a certificate of inheritance for the estate administration and what form you want to apply for it.

Ill-considered early-stage administrative measures can lead to a dispute between the co-heirs even before the actual dispute has arisen. Ultimately, it should be a priority for co-heirs to remain calm and exchange information with the other co-heirs. In this way, future inheritance disputes can be prepared for and settled as quickly as possible, and thus they can avoid lengthy conflicts.

In Germany, an heir can reject an inheritance (“Erbausschlagung” in German) by making a formal declaration of rejection within six weeks of being informed of their inheritance. If the inheritance is heavily indebted, it may be advisable to reject it and avoid liability for the estate’s liabilities. In addition to the testator’s assets, their debts are also transferred to the community of heirs. Even in the particular constellation of the community of heirs, the disclaimer is, in principle, possible under § 1942.1 BGB. Rejecting an inheritance due to the community of heirs means that the heir will not become a member of the community of heirs and will not be responsible for administering the estate or sharing in the distribution of the assets. However, rejecting the inheritance also means that the heir will not receive any benefits from the estate, including any cash or property that would have been allotted to them.

It should be noted that under § 1943 BGB, the heir can no longer disclaim the inheritance once they have received it – which can also be determined by their conduct, e.g. applying for a certificate of inheritance – or once the rejection period has expired. According to § 1944.1 BGB, the deadline for disclaiming/rejecting the inheritance is six weeks after the heir has become aware of the heritage and must be declared in writing to the probate court – the competent local court. The expiry of the disclaimer period automatically results in the inheritance being deemed accepted. After the rejection of the inheritance, it falls to the rejecting party’s respective heir per § 1953 (2) BGB. They must be informed of this by the probate court. Also, they automatically become part of the community of heirs as co-heir. Also, § 1950 BGB provides that the disclaimer cannot be limited to a part of the inheritance. An exception to this is the case where there are several grounds for appeal by the heir.

Reasons for appeal refer to the causes for the heir’s inheritance, which can arise from the heir’s voluntary and legal success. If, for example, the spouse’s heir status results from the will as an arbitrary succession on the one hand and the legal succession on the other, there are consequently several grounds for appeal. Depending on the case and distribution of the inheritance by the testator, it may, for example, be preferable for the heir from an economic point of view to reject the declared inheritance and accept the statutory inheritance.

The aim of the community of heirs is the settlement and division of the estate among the co-heirs. This purpose requires determining the total estate assets and establishing the estate liabilities that need to be paid, but, in particular, all co-heirs have been identified and known. If the estate has not been settled by the testator or has not been settled in full and the legal succession takes effect, it is not uncommon for individual heirs to be unknown, and, thus, they must first be determined.

It is possible to find the unknown co-heirs independently. To not prolong the search (and therefore the length of time until the inheritance is settled), it nevertheless often makes sense to appoint an investigator. It is advisable to discuss the matter with the known co-heirs in the community of heirs and appoint the investigator together to avoid disputes. It is thus determined from the outset that all co-heirs jointly bear the investigator’s costs.

In Germany, inheritance tax is imposed on the assets passed on to a deceased person’s heirs. The tax rate and the amount of the tax liability depend on the relationship between the deceased and the heirs, as well as the value of the assets. In principle, everyone who has benefited financially from the inheritance must pay inheritance tax. Regarding the community of heirs, the inheritance tax is imposed on the assets passed on to each heir individually. The tax is based on the value of each heir’s share of the estate, and each heir is responsible for paying their own tax liability. It’s important to note that the community of heirs, as a legal entity, doesn’t have the capacity to pay tax. Each heir individually is responsible for paying their share of the tax. Since different tax classes and allowances may apply to each co-heir, each heir is liable to pay tax individually, not the community of heirs. However, the community of heirs can submit a uniform declaration to the tax office regarding the content of the joint estate.

It’s also important to note that certain exemptions and reductions may apply for certain heirs, such as for direct descendants of the deceased or certain types of assets, such as a primary residence. Legal advice is recommended to evaluate the tax impact on each heir individually and the community of heirs. Inheritance tax is a complex area, and consulting with professionals is strongly advised if you are in any doubt.

A certificate of inheritance is an official document that identifies the heir as such and determines the size of the inheritance. It is therefore attributed to an evidential function. Consequently, it is often required or requested for inheritance administration purposes. With the application, the co-heir automatically accepts the inheritance so that a disclaimer according to § 1942 BGB is no longer possible, and they are generally liable for the estate’s liabilities. Different types of certificates of inheritance are to be differentiated for the community of heirs. The co-heirs can apply for a joint certificate of inheritance under § 352a FamFG.

The application can also be made individually by each of the heirs and does not require the consent of the remaining co-heirs. It must include the heirs and their inheritance shares and, if the application is not submitted by all heirs, the statement that the remaining heirs have accepted the inheritance. In addition, an affidavit under § 352a (4) FamFG must be submitted by all co-heirs stating that they are not aware of anything that could conflict with the information in the application for a certificate of inheritance. In addition, the individual co-heirs can apply for a partial certificate of inheritance, which only refers to their position as heirs. However, the application for a certificate of inheritance is also associated with costs. Therefore, if it is possible to prove the inheritance by other means for transactions of the estate administration, it may not be necessary to apply for a certificate of inheritance.

As part of a community of heirs, the law opens up a number of rights and obligations to the co-heirs. Here is a brief overview of what is entailed.

Before the estate can be divided, it must be definitively determined how much of the assets – (and in what form: objects, securities, etc.) – are contained in the estate. In the meantime, the estate must be administered jointly by the co-heirs of the community of heirs per § 2038 BGB. Each co-heir is obliged to cooperate with the others for proper administration.

A vote within the community of heirs must therefore decide measures of proper administration. They are intended to ensure the assets’ preservation and the estate’s maintenance. These measures include those to maintain the estate in its original condition and objects in their original state. In contrast, each co-heir can take the measures necessary to preserve the estate without the participation of the others. This necessity must be assumed if a short-term measure can remove an immediate threat to the estate’s value. For example, if a leaking house roof urgently needs to be repaired to prevent damage from flooding. Actions that significantly change the estate as a whole – e.g. the sale of estate objects – are part of the estate distribution and cannot be carried out within the framework of the estate administration. The costs of measures for the estate administration are to be borne jointly by the co-heirs. A quick consultation and agreement within the community of heirs are therefore also desirable for necessary acts. This way, unexpected compensation claims by co-heirs can be avoided, and disputes can be avoided early.

The estate’s administration also includes fulfilling the estate’s obligations. According to § 2058 BGB, the heirs are jointly liable for the responsibilities of the estate, meaning the testator’s creditors can turn to each heir with the entire claim. If the latter has paid off the debts, they claim compensation payment against the other co-heirs.

However, as co-heir, you are only liable if you have accepted the inheritance and not rejected it.

If the estate is unclear or over-indebted, you can apply to the probate court to administer the estate or insolvency of the estate. As a result, the co-heirs are no longer liable for their private assets, but their liability for estate liabilities is limited to the estate. Any co-heir can make this application. However, the right of the heirs to access the estate and to administer it independently is also lost.

There is also the option of the so-called three-month plea to § 2014 BGB to protect against personal liability. This plea allows the heir to refuse payment for liabilities of the estate for the first three months after acceptance of the inheritance. Therefore, heirs can get informed about the estate’s extent and take further preparatory steps.

If you need more time to determine the estate, you can apply to the probate court for a bankruptcy petition. Thus, the heirs’ liability is also limited to the estate after the deadline for the creditors to file claims has expired.

If the heirs have not yet divided up the estate, the individual co-heirs also have the possibility of a “plea of the undivided estate” – regulated in § 2059 I BGB. The creditor can still take action against the community of heirs as a whole.

If they wish to claim against a co-heir individually, which is permissible due to the structuring of the liability of the co-heirs as joint and several debtors under § 2058 BGB, the creditor can, however, refuse performance with the “plea of the undivided estate”. Consequently, the co-heir no longer has to settle the debt individually and can protect their private assets.

The community of heirs is designed for an eventual dissolution, as can be determined by its composition as a community of joint owners and the resulting complicated, joint administration of the estate. The community of heirs under German law is dissolved when the estate assets have been distributed among the heirs and the estate has been entirely administered. Once it happens, the heirs are no longer jointly responsible for the estate and no longer have any claims against each other regarding the distribution of assets. With the successful completion of the estate settlement, the goal of the community of heirs has been achieved. The estate must be divided among the co-heirs in the settlement according to the respective inheritance quotas. The community of heirs then dissolves automatically.

The dissolution of the community of heirs can be done differently, depending on the situation. One way is for the heirs to reach a consensus on the distribution of the assets and divide the estate among themselves. They can also reach an agreement with the help of a notary or a court-appointed administrator.The contract of settlement contains the agreement of the co-heirs on the estate division and conclusively regulates the estate distribution within the community of heirs. Within the contract, all assets must be divided according to the inheritance quotas of the individual co-heirs.

Another way to dissolve the community of heirs is through a court decision. In this case, the court will rule on the distribution of assets and order the estate to be divided among the heirs. This step can happen if the heirs cannot reach an agreement on their own or if there are disputes that need to be resolved by the court. In the estate distribution, particular difficulties arise in dividing assets and property of the estate among the co-heirs. When comparing individual estate assets and property, the value can fluctuate considerably so that the division does not correspond to the inheritance quotas. These values can be converted into money and divided accordingly, utilising division auctions. However, this procedure often does not do justice to the heirs’ interests or the testator. It is, therefore, preferable if the co-heirs in the settlement contract assign estate assets and property for each heir by agreement and compensate for the lack of correspondence with the inheritance quotas through compensation claims.

All compensation claims and obligations, which, for example, also arose due to the testator’s gifts during their lifetime, are finally calculated and set off against each other. It should be clear for each co-heir which objects and properties are allocated to them, their compensation contributions from the respective co-heirs and which they must pay. Also, the settlement agreement can conclusively regulate the “stratification and accumulation” of inheritances. Furthermore, in the course of the distribution of the estate, the claims to the compulsory portion and bequests must also be fulfilled. There are no special formal requirements for such a settlement agreement. This means that the co-heirs are theoretically only permitted to agree orally. It is recommended that conflict results are recorded in writing and secured by the signatures of all co-heirs to prevent later misunderstandings and disputes. An exception to the freedom of form of the settlement agreement exists if a particular formal requirement intervenes in the transfer of assets in regular legal transactions. This is then also to be applied to the contract of dispute, which must be observed, particularly for transfers by notarial recordings, such as in the case of real estate or shares in a company.

All in all, the settlement must be kept in mind in the distribution of the estate. Suppose a co-heir refuses to participate in the settlement or blocks it. In that case, no settlement agreement can be concluded so that, consequently, no dissolution of the community of heirs can occur. An inheritance settlement action is not a quick and inexpensive solution to this problem. To be successful, the estate distribution among the co-heirs must already be determined, which may require a declaratory action. Therefore, it is strategic to focus on consideration and compromise during the negotiations for the settlement. With the execution of the settlement agreement, i.e. the actual transfer of the assets to the co-heirs, the so-called “division of the estate”, according to §§ 2059f BGB, can occur. Once this happens, the community of heirs is terminated. It’s important to note that the dissolution of the community of heirs must be done according to the laws and regulations of German inheritance law, and all necessary legal formalities must be observed.