2022-06-29 | Community of Heirs Under German Inheritance Law
Community of Heirs Under German Inheritance Law
Most people experience a death in the family at some point in their lives. On top of dealing with the grief of mourning a loved one, you have to cope with numerous organizational tasks, such as informing relatives, writing the obituary, managing the funeral, terminating contracts or closing bank accounts. When it comes to the inheritance of real estate, there are a few things to keep in mind. Especially if you are not the only heir but part of a community of heirs, things can get complicated.
What to pay attention to?
In case of the deceased having appointed several relatives or other individuals as benificiaries of the estate, they form a so-called community of heirs. First of all, you have to decide if you even want to accept the inheritance at all? Accepting it also entails various obligations, such as paying bills, property tax and possible repairs. It is therefore advisable to get informed about the value and state of the property early on. Knowing the value is also essential when it comes to paying inheritance tax, which depends on the degree of relationship and your tax class.
Officially, the inheritance is accepted with a special certificate, which is issued by the probate or district court. Various documents are required for this: birth certificates of the deceased and the heirs, death certificate, identity card, will and, if available, a contract of inheritance. A certificate of inheritance is considered official proof and facilitates future proceedings, for example when dealing with banks or the land registry. We do recommend getting this certificate, even though some fees will apply which are based on the business value of the inheritance and range between 75 € and 3,335 €.
If the inheritance consists of moveable objects, such as jewellery, furniture or electronics, an agreement can often be reached in the division. The situation is completely different when dealing with real estate, because a house or an apartment cannot easily be divided. Challenges and problems can arise even in the best of families if a member of the community of heirs wants to use the property themselves or rent it out, and another member prefers selling it and splitting the profits.
How can a community of heirs be dissolved?
A community of heirs can be dissolved in several ways. One possibility would be to pay off one or more co-heirs thus becoming the sole heir. It is also feasable to sell the property to a third party, provided an agreement can be reached. Another option is a so-called stratification, i.e., a severance payment, whereby the co-heirs waive their share of the inheritance.
If no agreement can be reached, the last resort is a division auction. This is equivalent to a foreclosure sale and can be summoned by any member of the community of heirs without the consent of the other parties. A court then puts the property up for auction and it can be bought by a third party or any member of the community of heirs. However, the amount obtained does not go directly to the heirs but is administered by the court. If there is still no agreement on the distribution of profits, further legal disputes may arise.
The ‘Erbengemeinschaft’ (community of heirs) is handled different in every country. In Germany, disputing heirs can block the administrator from allowing any inheritance to be distributed. The only way around this complex law is ensuring that a proper will is drawn up during the lifetime of the testator that allows the executor of the will to manage and dissolve any disputes. Which country’s inheritance law is applicable to your specific case may be a difficult question, depending on your last place of residence and your citizenship. Make sure you get informed about the proper way of setting up your will to avoid unnecessary expensive legal disputes for your heirs, which unfortunately can and do happen.