Estate planning is an essential yet often overlooked aspect of financial and personal security. Many people delay it due to the complexity involved or the discomfort of considering life after their passing. Estate planning in Germany can be even more challenging for non-German individuals who may be unfamiliar with the legal frameworks, inheritance tax implications, and potential cross-border legal conflicts. It may also impact international clients with assets or family members in Germany.
A well-structured estate plan ensures that your wishes are legally protected, prevents unnecessary loss of value, and minimises the risk of inheritance disputes. Estate planning in Germany often involves both inheritance law and aspects of tax and corporate law, making professional legal guidance crucial.
This article will explore key estate planning strategies tailored to international clients dealing with German law. If you need personalised advice, the Schlun & Elseven Rechtsanwälte legal team is here to assist you.
Disposition of Property Upon Death in Germany
One of the most important aspects of estate planning in Germany is deciding how your assets will be distributed after your passing. This is typically done through a will or an inheritance contract, allowing you to specify heirs, exclude individuals from inheritance, and set conditions—such as burial wishes or financial support for a dependent. You may also dictate how specific assets should be divided among heirs and appoint substitute heirs in case your primary heir predeceases you.
Joint Wills and Inheritance Contracts | Estate Planning in Germany
A joint will is a distinctive option under German law for estate planning for married couples and registered partners. There are several types of joint wills, including:
- Simultaneous Joint Will
- Mutual Will
- Alternating Will
- Berlin Will (a widely used special form of joint will)
A mutual will is particularly binding, as one spouse’s inheritance arrangements depend on the other’s. This means that once one partner passes away, the surviving spouse cannot easily change the terms of the will.
Alternatively, an inheritance contract may be preferable, especially when legally binding agreements about heirs, legacies, or conditions are required. Unlike a will, an inheritance contract cannot be unilaterally modified, providing greater certainty for all parties involved.
Legal Formalities for Wills and Inheritance Contracts
Clarity is crucial regardless of the method you choose for estate planning in Germany. Ambiguous wording in a will or inheritance contract can lead to legal disputes among heirs. Additionally, German law requires specific formalities for these documents to be valid. Reviewing and updating your estate plan regularly to reflect any changes in your family situation is advisable.
For personalised advice on drafting a will or inheritance contract, Dr. Thomas Bichat, our experienced inheritance lawyer, can guide you through the process and ensure your wishes are legally protected.
Consideration of Claims to a Compulsory Portion
Under German law, certain close relatives have a legal right to a compulsory portion (“Pflichtteil”) of an estate, even if they are excluded from inheritance in a will. This right applies to:
- Spouses or registered civil partners
- Children and grandchildren
- Parents of the deceased (if there are no direct descendants)
The compulsory portion is a monetary claim equal to half of the statutory share of the inheritance (§ 2303 BGB). If a beneficiary receives less than their entitled portion under a will, they can demand the difference from the heirs (§ 2305 BGB). Additionally, a supplementary compulsory portion may be claimed if the deceased made significant gifts within the last ten years of their life (§ 2325 BGB).
Strategies to Manage Compulsory Portion Claims
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Compulsory portion claims can create financial challenges, such as forcing heirs to sell property to meet payment obligations. To avoid this, estate planning strategies may include:
- Waiver of the compulsory portion: A contract between the testator and the beneficiary, often involving financial compensation, can prevent future claims. However, this requires the beneficiary’s consent.
- Lifetime gifts: Strategic gifting can reduce the estate’s taxable value, but legal restrictions apply.
- Compulsory portion deprivation: This is only possible in cases of serious misconduct by the beneficiary, as outlined in § 2333 BGB, and must be specified in the will.
Contending with the laws around estate planning in Germany—especially for international clients—can be complex. Our legal team can help you structure your estate to ensure your wishes are respected while minimising legal risks. Contact us today for expert advice on wills, inheritance contracts, and compulsory portion claims.
Anticipated Succession in Germany
Anticipated succession refers to transferring assets to heirs during the testator’s lifetime, often in the form of gifts. Under German inheritance law, such gifts are generally offset against the heir’s share of the estate when inheritance is distributed.
One key advantage of transferring assets early is tax optimisation. Inheritance and gift tax in Germany only applies to assets exceeding the tax-free allowance. By gifting assets over time, testators can make use of recurring tax-free allowances, significantly reducing the taxable estate. This strategy is particularly relevant for high-value estates that exceed tax thresholds.
Testators can also retain certain rights over gifted assets. For example, when transferring real estate, they may secure a lifelong right of residence or usufruct (Nießbrauch), allowing them to continue renting out the property while retaining income. However, usufruct agreements must be notarised and registered in the German land register.
It is important to distinguish between gifts made unconditionally and those that take effect only if the recipient outlives the testator. The latter are treated as dispositions upon death and must comply with stricter legal requirements. Due to the complexities of anticipated succession and estate planning in Germany, it is advisable to seek professional legal advice to avoid unintended tax consequences or inheritance disputes.
Legacies and Estate Planning in Germany
A legacy (Vermächtnis) is another tool in estate planning in Germany. It allows a testator to leave specific assets, money, or rights to an individual without naming them as an heir (§ 1939 BGB). Legacies must be explicitly stated in the will or inheritance contract to avoid legal uncertainty.
Unlike an inheritance, a legacy does not transfer ownership automatically. Instead, the legatee acquires a claim against the heirs for the designated asset or sum. This distinction is particularly important when planning for non-family beneficiaries or allocating specific assets separately from the general estate.
A special form of legacy is the advance bequest (Vorausvermächtnis, § 2150 BGB). This allows an heir to receive a specific asset before the inheritance is formally divided, ensuring they benefit from it independently of their overall inheritance share. However, this must be carefully worded to avoid conflicts with the division of the remaining estate.
All instructions in wills and inheritance contracts should be legally precise to ensure clear and enforceable estate planning. Our experienced inheritance lawyers can help you structure your estate plan effectively, minimizing risks and ensuring your wishes are fully carried out.
The Execution of a Will
Ensuring that a will is executed correctly is a crucial part of estate planning. Appointing an executor guarantees that the testator’s wishes are respected and carried out. Under § 2203 BGB, the executor is responsible for administering the estate, handling financial matters, and distributing assets to the heirs.
Appointing an executor for estates with multiple heirs can help prevent inheritance disputes, ensuring a smooth settlement. Additionally, it can provide protection in cases where heirs may be overwhelmed by legal and financial complexities. This is particularly relevant when minor heirs are involved, as they cannot manage the estate independently.
When establishing an executor in Germany, the following should be carefully considered:
- The instructions in the will should be clear and legally sound to avoid ambiguity.
- The choice of executor should be made with care, ensuring they are capable of handling the estate responsibly.
- Executor remuneration should be determined in advance to prevent potential disputes with heirs.
If you need guidance on will execution in Germany, our experienced inheritance lawyers can help you structure your estate plan effectively.
Business Succession and Digital Estate Planning in Germany
Estate planning is not only about personal wealth—it also extends to businesses and digital assets.
Business Succession Planning
For business owners, planning company succession is essential to secure long-term stability. Partnership agreements should include succession arrangements to define what happens in the event of death. Without clear provisions, conflicts may arise, potentially endangering the company’s future.
Our corporate and inheritance lawyers specialise in business succession planning in Germany, including:
- Structuring succession agreements within corporate bylaws.
- Incorporating business interests into a will or inheritance contract.
- Guiding legal execution of the company’s transition to heirs or partners.
If you own a business in Germany, we can help you create a legally secure succession plan tailored to your needs.
Managing Your Digital Estate
In today’s digital world, estate planning should also cover online assets. A digital estate includes:
- Online accounts (email, social media, banking, investment platforms).
- Digital intellectual property (websites, domains, online businesses).
- Cryptocurrency holdings (e.g., Bitcoin, Ethereum).
Without proper arrangements, digital assets can be lost or inaccessible to heirs. Our lawyers assist with digital estate planning to ensure seamless inheritance and compliance with German law. For personalised advice on estate planning in Germany, including business and digital assets, contact our legal team today.
German Inheritance Law Practice Group
German Inheritance Law Practice Group
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