If your Parent or Child passes away while having been resident in Germany…

… then German Succession Rules do apply to the Estate!

Since August 2015, all EU members (except for UK, Ireland and Denmark) apply the same basic rule: The national succession laws of that country shall apply in which the decedent had his or her last habitual residence (EU Succession Regulation, EU 650/2012).

Thus, if your parent or your child has been permanently living in – for instance – Germany, France or Spain and sadly dies while having been resident there, then the national succession rules of Germany, France or Spain will govern the administration of the entire estate as well as the formal probate proceedings.

This can create some surprising results for everyone involved. Intestacy rules, for example, vary from country to country. And, even more astonishing for English relatives and their lawyers, many European countries know a concept of “forced inheritance” or “statutory share rules”.

Under French law, a fixed proportion of the estate (of at least one half) is inherited by the child or children of the deceased, irrespective of the testator’s wishes as expressed in his or her will (“forced inheritance”). In Germany, the situation is similar: the surviving spouse, children and even the parents of the deceased are entitled to make a significant financial claim against the heir(s), the so called Pflichtteilsanspruch (details here).

Not every British or Irish national who lives in Germany (or France etc) is aware of this. And even if they are aware, then some of these national succession laws are mandatory and indispensable. Thus the term “forced inheritance”. For the surviving spouses, children or parents of a British or Irish national who passed away in Europe, this means that they may be entitled to an interest in the estate even if they were disinherited. In other words: German or French succession laws grant the close relatives certain rights they would not expect to have under English laws.

There are, however, also unpleasant surprises and risks: Under German as well as French laws, for instance, the heirs inherit their share of the property of the deceased directly on death and also assume personal responsibility for the debts of the deceased (even if they are at first unaware of such debts) and the tax on inheritance.

In all international inheritance cases, the relatives of the deceased should thus obtain information on the local succession laws and probate rules to avoid risks of personal liability and to find out whether they are entitled to a forced inheritance.

For more information on probate as well as gift & inheritance tax in Germany, Austria and Switzerland see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners was established in 2003 and has many years of experience with British-German and US-German probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

“I want to make a Gift to my Child in Germany…”

… but my son-in-law / daughter-in-law shall not benefit from such a gift or inheritance! Is that possible under German law?

Yes, it certainly is possible. Spouses are sometimes under the impression that they have an automatic entitlement to any gift the other spouse receives, whether as a lifetime gift or as an inheritance. Simply by virtue of the fact they are married. Under German law, this is certainly not the case.

Unless the spouses in Germany have entered into a specific marital property regime by way of an Ehevertrag, i.e. a marriage agreement (which is only possible in notarial form under German law), they find themselves under the statutory property regime (gesetzlicher Güterstand) of Zugewinngemeinschaft (community of acccrued gains). In spite of the somewhat misleading word “community” (Gemeinschaft), this does NOT mean, however, that everything that is gained by one spouse during marriage automatically also belongs to the other spouse. Instead, quite to the contrary, each spouse owns their own assets. Marriage per se, under German family law rules, changes nothing with regards to who owns what.

Therefore, unless the spouses decide to handle this differently (for example by paying everything into a joint bank account) the respective estates of the spouses remain separate. The meaning of “accrued gains” means that upon divorce (and only upon divorce), there is a (rather complicated) split of the accrued gains. However, even then, gifts are usually NOT relevant for such a split.

In short: Gifts (lifetime or testamentary) made by a British parent to their child being resident in Germany belong to the child and to the child only, unless the child voluntarily transfers the gift onto his or her spouse. If the British donor whishes to prevent such – from the donor’s perspective stupid – behaviour, the gift must be made in a more formal manner, i.e. the gift would have to come with legal strings attached. German law provides for such “protected gifts”.

Beware of German Gift Tax and Inheritance Tax

When you consider making a gift to your son ordaughter while they are resident in Germany, you must also consider that such a gift will trigger German gift tax, because the donee lives in Germany and is thus subject to the german Gift Tax and Inheritance Tax Code. We have expplained the implications of all that in these posts:

The Perils of German Inheritance Tax and Gift Tax

Everything about German Inheritance & Gift Tax at one Glance

Most Germans die without a Will

For more information on German-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

How to deposit a Will in Germany

If you live in Germany or have significant assets there you should consider making a separate last will with regard to those German assets. If you do so, the question arises where to store the will. In case you opted for a so called public will (i.e. a will recorded before a German notary), an official copy of your German will is automatically sent to the central registry. So there is no risk of the will being misplaced or destroyed.

If, however, you opt for a holographic (i.e. handwritten) will or if you wish to include your German assets in your English will, you can — and probably should — deposit said will with the German Probate Registry (Nachlassgericht) at the German town where you live. This not only protects your will against any fould play but also speeds up German probate proceedings later on. Of course, you can at any time withdraw your will from safekeeping in case you change your mind about the content of the will.

How much does it cost to deposit a will or codicil?

There is a one-off charge to deposit a will or codicil which depends on the value of your estate. Usually between EUR 80 and EUR 200. So be prepared for the court official to ask you about the value of your German estate (a rough estimate is sufficient).

In order to avoid unpleasant surprises or probate problems, British expats living in Germany should definitely have their last will checked by an international succession law expert. English solicitors are rarely willing to consider foreign law implications (for some examples how English wills can lead to catastrophic results outside the UK see here).

If you wish to instruct Graf & Partners LLP to draft a Will or to team up with a foreign lawyer to advise in specific areas of German or Austrian law, please feel free to complete the questionnaire and contact our German succession and probate law experts. Lawyers can create a tailor-made Last Will only if they are fully informed about the testator’s personal situation and his/her objectives. In order to draw up a Last Will that fully meets the clients individual requirements, Graf Partner LLP uses a comprehensive questionnaire and Will preparation checklist (available for download here).  This checklist also helps to facilitate an effective and individual preparation for the personal meeting at the firm.

German solicitor Bernhard Schmeilzl also conducts inhouse seminars for British and American lawyers and accountants who advise clients with foreign assets or who have family abroad. More on these seminars here: Advising Clients with Assets Abroad

For more information on German-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

 

This is what a German Gift Tax & Inheritance Tax Bill really looks like

Understanding a German Inheritance Tax Statement

Inheritance tax in Germany is calculated very differently from the IHT in the United Kingdom. First of all, under German law, not the estate as such is being taxed but each individual beneficiary. Secondly, each beneficiary has an individual tax rate and an individual tax allowance, based on the amount received and the degree of kinship. And, last not least, German law applies the concept of gift tax which means that pre-death lifetime gifts are relevant for the caluclation of German IHT.

Sample German IHT Assessment Notice

Here is a practical real life example of a German Inheritance Tax Statement in a case where the decedent has made lifetime gifts to the beneficiary and – in addition to the pre-death gifts – has gifted half of the estate to the same donee.

 

 

 

 

 

 

 

 

In order to understand a German tax calculation one must know the terminology of the German Gift Tax and Inheritance Tax Code (Schenkungs- und Erbschaftsteuergesetz). The most important terms in the tax bill are:

  • Erbschaftssteuer = Inheritance Tax
  • Schenkungsteuer = Gift Tax
  • Sonstige Erwerbe = Other Gifts (meaning any kind of gift except for the inheritance itself, mostly pre-death gifts or life insurance payments outside of the estate)
  • Vorerwerbe = pre-death gifts and pre-death payments outside of the estate
  • Steuerklasse = German IHT category (based on degree of kinship)
  • Steuersatz = tax rate
  • Freibetrag = personal allowance of the donee (this allowance also depends on the degree of kinship and ranges from only EUR 20,000 between unrelated persons to EUR 500,000 between spouses)

As mentioned above, a major difference between German and UK inheritance tax is that under German law all lifetime gifts do in principle trigger gift tax. Immediately when the gift is made, i.e. not only if the gift was made during the periof of 7 years prior to the date of death of the donor.

All such lifetime gifts (lebzeitige Schenkungen) and any inheritance are added together (if they happen within a period of ten years) and are then the basis on which the combined gift and inheritance tax is being calculated (see the above sample German IHT Tax Bill).

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For more information on German gift & inheritance taxation, on German-British probate matters and on international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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seminar_lyndalesIn case you need specific advice in a concrete case or assistance in German probate procedures, feel free to contact the lawyers of the German firm Graf & Partners which are specialized in British-German succession issues. Attorney Bernhard Schmeilzl has years of experience acting as executor and administrator of estates, both in the UK and in Germany. He is an expert in international succesion law and gives lectures and seminars for UK probate solicitors and UK accountants who advise clients with foreign assets.

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The law firm Graf & Partners was established in 2003 and has many years of experience with British-German and US-German probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

British Expats Beware of Foreign Succession Laws and Foreign IHT

Children of British Expats in Europe often are entitled to the Estate without even knowing it. EU Succession Laws are full of surprises.

British expats who are resident in Europe, let’s say in Germany, Austria, France or Spain, rarely are aware that ever since the introduction of the EU Succession Regulation (August 2015), if they pass away while being resident in that country, the Inheritance and Succession Laws of that country of residence will most likely apply to their estate. This is due to the fact that the entire European Union (except for the UK, Denmark and the Republic of Ireland) have adopted the EU Succession Regulation which states that the laws of the country in which the deceased had his or her last habitual residence must apply. Habitual residence is easier to achieve than domicile.

Thus, a British national who may consider him- or herself to be domiciled in England, can easily be considered by the German, Austrian, French or Spanish probate court to have established habitual residence outside the UK. Then, from a EU law perspective, these national succession rules (i.e. German, Austrian, French inheritance laws etc.) do apply to the entire estate, including the assets situate within the UK. English law takes a different view on this issue which may lead to horrendous legal disputes and contentious international probate cases which drag on for years and block the administration of the estate both in the UK and in Europe.

Who inherits if a British expat dies abroad?

German Intestacy Rules Overview Chart

The application of foreign succession laws can lead to surprising results. Pleasant or unpleasant, depending on the degree of kinship with the deceased. Under German succession laws, for example, the surviving spouse has a much weaker position compared to the intestacy rules in England and Wales as well as Scotland. Details are explained here and here.

The stunning results are not only caused by different national rules of intestacy. These could easily be avoided by simply creating a will. But even if the British expat has set up a valid will, the inheritance and succession laws of continental EU countries (including Germany, Austria and France) often apply statutory elective share rules, also known as forced heirship or compulsory inheritance share rules. For practical implications of such forced heirship rules see here and here.

By the way: National inheritance tax laws of the respective country of residence do also apply. This cas always been the case and has nothing to do with the EU Succession Regulation and will also not be affected by Brexit. National tax laws are what they are. Still, British expats should inform themselves about the respective IHT laws of their country of residence. Unless they live in Austria because Austria does not levy any inheritance tax (as of now).

In order to avoid unpleasant surprises or probate problems, expats should definitely have their last will checked by an international succession law expert within the country of residence. English solicitors are rarely capable or even willing to consider foreign law implications (for some examples how English wills can lead to catastrophic results outside the UK see here).

If you wish to instruct Graf & Partners LLP to draft a Will or to team up with a foreign lawyer to advise in specific areas of German or Austrian law, please feel free to complete the questionnaire and contact our German succession and probate law experts. Lawyers can create a tailor-made Last Will only if they are fully informed about the testator’s personal situation and his/her objectives. In order to draw up a Last Will that fully meets the clients individual requirements, Graf Partner LLP uses a comprehensive questionnaire and Will preparation checklist (available for download here).  This checklist also helps to facilitate an effective and individual preparation for the personal meeting at the firm.

German solicitor Bernhard Schmeilzl also conducts inhouse seminars for British and American lawyers and accountants who advise clients with foreign assets or who have family abroad. More on these seminars here: Advising Clients with Assets Abroad

For more information on German-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

If a British Testator relocates to Europe…

… the surviving spouse may be in for an unpleasant surprise

Since 2015, according to the rules of the EU Succession Regulation, the criterion “last habitual residence” of the deceased determines which succession laws apply to the estate. If, for instance, a British national moves to Spain, Germany or France and later on dies there, then the respective national succession laws, i.e. Spanish, German or French succession laws, do apply (except with regard to UK immoveables).

This can cause surprising results, especially if the British expat or retiree did not have a will, because German, French, Spanisch or Austrian intestacy rules vary significantly from those in England & Wales, Scotland or Ireland.

Under German intestacy rules, for example, the surviving spouse only inherits 1/2 of the estate if the deceased had children. And it’s even worse if the deceased did not have any children but his parents or siblings are still alive. In this instance, the surviving (British) spouse is not the sole beneficiary, but instead only inherits 3/4 of the estate. The remaining 1/4 share goes to the parents or (if they are no longer alive) to the siblings of the deceased spouse. This usually comes as quite a shock to the surviving spouse. For details on German intestacy rules see here.

Beware of the “Elective Share” Risk

These foreign rules of intestacy can, of course, be avoided by simply making a last will and testament (an English will is accepted as valid throughout Europe, see here). However, even then there can still be serious implications resulting from the foreign succession rules, which often neither the testator nor his/her spouse nor their English solicitor who drafted the English will are aware of.

The often overlooked problem is that the inheritance laws of Germany, France and many other European countries apply the concept of a statutory compulsory share (mandatory elective share), which means that certain close relatives (usually spouses, offspring and parents) are entitled to a certain share of the estate no matter what, i.e. even if they have been expressly disowned in a will. The concept goes back to the Napoleonic Code (French Civil Code) which contains compulsory inheritance provisions for certain relatives. In particular, children are “protected heirs” and cannot be disinherited. German civil law and the succession laws of many other countries have adopted this concept.

Thus, the (British) children or grandchildren of a British citizen who has permanently moved to Germany or France may be entitled to a huge portion of the estate (up to 50 percent of the entire estate!), even if the last will does not mention them as beneficiaries or only gives them a smaller portion of the estate.

In many cases, these (disinherited) relatives are not aware of their right to make such a claim. However, if they speak to a probate lawyer in that country or if they stumble across this post, they may approach the surviving spouse of the expat / retiree and demand their share.

Thus, if a British national plans to work or retire in another European country, he or she should (i) make a will in order to avoid foreign intestacy succession rules applying and (ii) have that will checked by a succession and probate lawyer who is well versed in international inheritance laws to avoid unpleasant surprises for the beneficiaries later on.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

Bernhard Schmeilzl is an expert in international will preparation, estate planning and cross border probate. He also conducts inhouse seminars for British and American lawyers and accountants who advise clients with foreign assets or who have family abroad. More on these seminars here: Advising Clients with Assets Abroad

For more information on German-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

Living Wills and Advance Directives for Medical Decisions in Germany

Our law firm specialises in international wills and succession planning for German-British and German-American clients. In this context, our international clients often also ask us to assist with the related matters of creating a Living Will, a Healthcare Proxy, a Lasting Power of Attorney or Advance Directives for Care or End of Life Medical Treatment. All these things are permitted under German law and are becoming increasingly popular.

The terminology most commonly used for these end-of-life legal instruments in Germany is:

  • “Generalvollmacht” (General POA, Lasting POA)
  • “Vorsorgevollmacht” and “Betreuungsverfügung” (Healthcare Proxy)
  • “Patientenverfügung” (End of Life Care Instructions / Advance Directives for Medical Decisions)

Many Germans use the templates and forms developed by a group of medical and legal experts under government supervision. These forms are contained in the brochure “Vorsorge” which is available for download here.

If a client requests that we come up with a more individual set of end-of-life documents which are specifically tailored to the needs of an international family, we are happy to prepare such documents, either in German or in English language.

For more information on German-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

Preparing International Wills: A Checklist for Clients and their Lawyers

Complete Questionnaire for International Families and Expats who are resident or own Assets in Germany or Austria

If you or your client owns assets in more than one country, or if a beneficiary is resident in another country than the testator, chances are that the executor and/or the beneficiary need to obtain probate in more than one country. Since the EU Succession Regulation neither applies to the United Kingdom nor to Ireland, the option to take out a European Grant does not exist in those cases. Furthermore, the estate may be subject to various inheritance tax regimes.

Therefore, international families and expats should draft their Wills in a way which ensures a smooth transfer of the assets. British or U.S. Wills often create uncertainty in Civil Law Jurisdictions like Germany, Austria, Spain or France. Vice versa, German or French style Wills are often difficult to interpret in regards to the issue of who has become “heir” (Erbe). Thus, in order to avoid legal uncertainties or even disputes between the beneficiaries and executors, the Will should address the probate requirement of all jurisdictions involved. Inter alia, this means to use the specific succession law and probate terminology in the international Will in order to avoid misinterpretation by the probate registrar. There are many “false friends” in international succession law: an executor under English law, for example, is not at all the same as an Austrian “Exekutor”.

There are always more taxes than you think

Also, every testator who finds himself in an international situation should keep in mind the very different inheritance tax regimes of various countries. English solicitors or U.S. lawyers sometimes forget that there may be additional inheritance tax due in the country where the foreign assets are situated or – and this aspect is sometimes overlooked – where an individual beneficiary is resident at the time of the bereavement. While Austria, for example, does not levy inheritance tax at all, countries like Germany and France do tax the individual beneficiary. This is dangerous territory for international succession lawyers. Professional tax and estate planning can often mitigate the overall inheritance tax quite considerably.

Lawyers can create a tailor-made Last Will only if they are fully informed about the testator’s personal situation and his/her objectives. In order to draw up a Last Will that fully meets the clients individual requirements, Graf Partner LLP uses a comprehensive questionnaire and Will preparation checklist (available for download here).  This checklist also helps to facilitate an effective and individual preparation for the personal meeting at the firm.

If you wish to instruct Graf & Partners LLP to draft a Will or to team up with a foreign lawyer to advise in specific areas of German or Austrian law, please feel free to complete the questionnaire and contact our German succession and probate law experts.

German solicitor Bernhard Schmeilzl also conducts inhouse seminars for British and American lawyers and accountants who advise clients with foreign assets or who have family abroad. More on these seminars here: Advising Clients with Assets Abroad

For more information on German-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.