The Inheritance Contract in Germany (der Erbvertrag)

For expert advice and straightforward advice with the inheritance contract (Erbvertrag).

Our inheritance lawyers will provide the answers.

What is the Inheritance Contract?

The inheritance contract (Erbvertrag) is a binding agreement made between at least two parties including the testator. It is a means of disposition of property and assets following the passing of the testator. In comparison to a will, an inheritance contract is less flexible and subject to stronger legal requirements. Changing or cancelling an inheritance contract involves coming to an agreement with the other parties involved in the agreement and it must be notarized. An inheritance contract allows the testator to place certain demands on the part of the prospective heir. An inheritance contract may consist of the testator leaving their property to the heir, however, the heir may face obligations to take care of the testator in their old age.

An inheritance contract can be preferable to a will in certain cases. An example of a situation where an inheritance contract is preferable is where the testator is not married to their partner. Generally, spousal wills are primarily for married couples or registered partners but the inheritance contract does not face such limitations. It provides strong legal protection to the individuals party to the agreement, and can help prevent legal disputes arising such as those that may in the event of leaving a will.

Another case where an inheritance contract may be preferable is with business succession planning. Entrepreneurs who have built a successful business may face challenging questions concerning inheriting the business. Whether they want to keep the business in the family, hand their share over to their business partners or are looking at another option, an inheritance contract is advisable in such scenarios. Early planning and comprehensive documentation of the process is advisable. At Schlun & Elseven Rechtsanwälte, our full-service approach means that our lawyers provide advice on business succession planning requirements from the German inheritance law and the German corporate law perspectives.

Requirements for the Inheritance Contract

In comparison to a will, there are stricter legal requirements for the inheritance contract. Under § 2276 German Civil Code (BGB), an inheritance contract can only be deemed valid if it is notarized by a notary. Therefore, it is not possible for parties to draw up their own contracts without professionals involved. The parties to the inheritance contract must have the full legal capacity to make such agreements.

There will be variations within the inheritance contracts with the contents of the individual agreements. The contract should outline who is entitled to the testator’s estate. It is a prerequisite of the inheritance contract that there is at least one binding disposition made. Such dispositions will vary between different cases as they can consist of a condition, decision or appointment made by the testator. An example of a condition would be that the heir will receive the property and assets of the testator, but in return, they will look after the testator in their old age. To determine what conditions are possible within inheritance contracts, it is advisable to consult with an expert in inheritance law.

One contract element that can be agreed upon is a rescission clause whereby the testator can exit from the inheritance contract. Alternatively, there can be a clause allowing for the testator to render the inheritance contract ineffective by a future will. However, both sides need to be aware of what they are signing, and an agreement from both sides is needed.

Changing or Cancelling an Inheritance Contract

Compared to a will, an inheritance contract is more difficult to amend. Parties involved cannot make spontaneous or unilateral changes, and must instead agree to the changes with the other contracting party. After all, it is a legally binding contract. Furthermore, the inheritance contract itself is usually kept in the possession of the notary, and therefore they must also be contacted regarding making such changes. It is always advisable to consult with a specialist in the field of German inheritance law before agreeing to sign an inheritance contract.

Similarly, annulling or cancelling an inheritance contract is also possible; however, it too can only be achieved in limited circumstances. Testators can include a clause allowing them to withdraw from the agreement but they should consider legal advice in such matters before drawing up the contract. Similarly, the heir should also consult with an expert before determining whether having such a cancellation clause in the inheritance contract (der Erbvertrag) is to their advantage. The inheritance contract can also be cancelled by a mutual agreement whereby both parties involved agree to its cancellation. This mutual agreement to cancel can be achieved by a cancellation agreement that needs to be certified by a notary.

However, an exception can be seen where the  beneficiary of the inheritance contract is found guilty of serious misconduct, criminal activity or has not complied with the conditions of the contract. However, even in this case, the testator should consult with a legal expert before making any unilateral decisions.

Testators should also be aware that future wills cannot be used to change the inheritance contract unilaterally unless specific clauses within the Erbvertrag allow for it. Provisions within their will that contradict with the inheritance contract will be deemed invalid.

The Inheritance Contract and der Pflichtteil (the Compulsory Share of Inheritance)

The Erbvertrag provides degrees of security and certainty with a person’s inheritance plans; however, it does not prevent claims for the Pflichtteil (the compulsory share of inheritance). The “Plichtteil” is a certain amount that a testator is obliged (according to law) to leave to certain people. The certificate of inheritance allows certain people to be excluded from the will and for others to be prioritised; however, direct family members such as children (including adopted children), parents, spouses and grandchildren cannot be ignored in the will or inheritance contract. Whether a person is entitled to the Pflichtteil will depend on the situation at hand. The Pflichtteil is a minimum share of the estate that these family members are entitled to. It does not apply to more distant family members such as uncles, aunts, cousins and other relatives.

The Pflichtteil can be avoided in certain restricted cases as listed by § 2333 BGB (German Civil Code):

A testator may deprive a descendant of his compulsory share if the descendant

1. makes an attempt on the life of the testator, of the spouse of the testator, or of another descendant or of a person similarly close to the testator,
2. is guilty of a major offence or of a serious intentional minor offence against one of the persons designated in no. 1,
3. wilfully violates the statutory obligation to the testator incumbent upon him to maintain the testator, or
4. is finally sentenced to at least one year’s imprisonment without probation because of an intentional criminal offence, and participation of the descendant in the estate is hence unreasonable for the testator. The same applies if the accommodation of the descendant in a psychiatric hospital or in a withdrawal clinic is finally ordered because of a similarly serious intentional offence.

As can be seen, the requirements are quite strict. A difficult family relationship is not sufficient to exclude a close family member from their Pflichtteil entitlements.

Alternatively, family members can sign a contract of renunciation of inheritance to waive their right to the Pflichtteil. Parties should consider consulting with legal advice before taking this action. Gifts made by the testator during their lifetime is also a means by which they can get around the necessities outlined by the Pflichtteil.