International inheritance law using the example of a German-Hungarian inheritance case:
Legal aspects of inheritance matters in Germany
An international succession is spoken of when a person is
- with assets in several countries dies,
- dies in one country and leaves heirs or dependents in another country,
- died as a national of one state in another state.
In this article we consider the case of the death of a Hungarian in Germany, where he had lived and worked for many years. He did not leave a will.
Example of a German-Hungarian inheritance case
Germany and Hungary are both members of the European Union, which is generally advantageous when dealing with inheritance cases.
Germany and Hungary, however, have different legal systems and – of course – different legal languages.
It is important for the successful settlement of an inheritance case to recognize which law is applicable.
Applicable law of succession: German or Hungarian law?
In a German-Hungarian succession case, the decisive factor for the question of the applicable law is whether the testator has made a choice of law. If he has not made a choice of law, the place of habitual residence shall be decisive.
A Hungarian living in Germany can stipulate in his will which law is to apply to the settlement of his estate (choice of law). He is not completely free to do so, but he can choose the law of the country of which he is a citizen or the law of the country in which he usually resides.
If the testator has not made a choice of law , the law of the habitual residence shall apply.
The habitual residence is sometimes not easy to determine, e.g. if the decedent has several places of residence. In our example, however, habitual residence in Germany is to be assumed. The situation becomes more complicated if the decedent had several residences and his or her main residence cannot be determined so easily.
Consequences of the applicable law:
The question of which law applies influences, among other things, the legal succession, the validity of wills, the rules on the distribution of the estate and the right to a compulsory portion, to name just a few important points.
It is important to note that the choice of law in the will or inheritance contract must be clearly and unambiguously formulated in order to avoid possible misunderstandings or disputes.
In addition, tax aspects may vary depending on the law chosen. Clearly, these issues should be considered when drafting wills.
Competent court in the case of a German-Hungarian inheritance case
A different issue from the applicable law is the question of which court has jurisdiction over the probate proceedings.
In the case of a German-Hungarian inheritance, as in other inheritance cases, the probate court at the place of residence of the deceased is in principle responsible for the probate matters.
It may therefore be that a German court is competent to issue a certificate of inheritance (see below), but Hungarian law is decisive for the settlement of the estate.
Acceptance of the inheritance or disclaimer
If the inheritance is governed by German law, as in our example, the inheritance does not have to be actively accepted. This is because the inheritance is accepted on its own, unless it is disclaimed.
The deadline for the disclaimer is six weeks for heirs in Germany. It is six months if the testator had his last residence only abroad or if the heir is abroad at the beginning of the period. The period begins at the time when the heir becomes aware of the accrual and the reason for the appeal (§ 1944 BGB).
The disclaimer shall be made by declaration to the probate court; the declaration shall be made for the record of the probate court or in publicly certified form. Publicly certified form means that the signature of the disclaiming party must be certified by a German notary public. Heirs living abroad who find it difficult to travel to the probate court or a German notary public to declare their inheritance can have their declaration certified by a consular officer at a German diplomatic mission abroad. However, this can regularly be replaced by a certification by a foreign notary, for example. if the travel distances to a German consulate or embassy are too long, especially considering the personal circumstances of the declarant, or if the waiting times in the consular section of the mission abroad are several months, as is sometimes the case.
The most important facts about succession
Under German law, upon the death of the testator, all his or her rights and obligations pass to the heirs (Section 1922 (1) of the German Civil Code). This means that existing contracts do not simply end, but must be terminated by the heirs if this is desired. Not only the assets are inherited, but also any existing debts.
Estate liabilities are both the decedent’s debts and the costs of settling the estate and inheritance tax, as well as funeral expenses, etc. In principle, these costs can be met from the estate.
Whether a rented apartment can or should be taken over by the heirs must be specifically examined on the basis of the rental agreement. In the case of tenancies, the heirs regularly have a special right of termination, which they can exercise within one month of becoming aware of the death. Of course, heirs living abroad are usually not interested in a rental property in Germany.
But who inherits at all when a person dies? Under German law, this is decided either in accordance with the will (testament or contract of inheritance) or in accordance with the intestate succession if the deceased has not made any last will and testamentary dispositions. Since the contract of inheritance is less common, only the will will be discussed here. However, the same usually applies to the contract of inheritance.
The will (intestate succession) A central legal aspect of an inheritance case is the question of whether there is a will. A will may be kept at the probate court or it may be kept at home or some other place. Notaries do not keep wills, but give them into official custody at the probate court. It is obligatory for everyone to deliver a found will or something in which even a will could be seen to the competent probate court without delay after knowledge of the succession (§ 2259 BGB). The will is opened there and the heirs and other parties named in the will (e.g. those entitled to a compulsory portion) are informed of its contents.
The legal succession
Without a will, succession is governed by the German Civil Code (BGB). In this case, the next of kin, i.e. regularly the children of the deceased in addition to the spouse, are appointed as heirs. If the latter had no children, the parents or siblings come into consideration (§ 1924 ff. BGB). If, on the other hand, there is a will, this determines the heirs.
If close relatives are disinherited by the testator’s will, they often have a claim to the so-called compulsory portion. In principle, the descendants, the spouse and the parents can be considered as beneficiaries of the compulsory portion if they would have become legal heirs without a will. In Germany, the compulsory portion amounts to half of the legal share of the inheritance and is always directed to money and not to objects in the estate (BGB §2303). The calculation of the compulsory portion is a matter for lawyers in order to avoid mistakes.
In a Berlin will, spouses appoint each other as sole heirs and usually stipulate that after the death of the last spouse to die, the estate goes to the children. The children are therefore disinherited after the first inheritance, as they are not to inherit until later, and can therefore claim their compulsory portion. However, there are often penalty clauses in the Berlin will that make it unattractive to claim the compulsory portion.
Proof of inheritance
The European Certificate of Succession (ECC) serves to enable heirs or other beneficiaries in cross-border cases to prove their legal status in another member state.
The European Certificate of Succession is issued upon request by the competent court of the member state in which the deceased had his habitual residence.
These regulations are particularly important for inheritance cases involving Hungary. If, as in our example, a Hungarian citizen resident in Germany leaves assets in Hungary, the European Certificate of Succession can be used to prove the status of the heir in Hungary and the heirs can dispose of the assets there.
The European Certificate of Succession is available as a form in the official languages of the member states. However, the probate court will only issue this in its official or court language. The certificate of probate must therefore usually still be translated for use abroad. However, the legalization or the Hague Apostille can be waived (Art. 74 EuErbVO).
If the decedent only leaves assets in Germany, an application for a certificate of inheritance can be filed.
Applying for a certificate of inheritance or a European certificate of inheritance involves costs that increase with the value of the estate. But the application is not always necessary. If a notarial will exists that has been opened, this usually completely replaces a certificate of inheritance. Even real estate can be transferred under presentation of the same. If the testator has assets in another EU country, it may be necessary to apply for a European Certificate of Succession despite the existence of a notarial will.
However, legitimation as an heir does not have to take place in all cases by means of a notarized will or a certificate of inheritance. Heirs can often also prove their status as heirs to banks and others by presenting an extract from the family register. To apply for a certificate of inheritance or an ENZ, the heirs must file an application with the competent probate court. In this case, fees are incurred that are based on the value of the estate. The correctness of the information in the application must be certified in a publicly certified form. For this form, what has been said about the inheritance notice (see above) applies.
Community of heirs and dispute
If there are several heirs, a community of heirs is created which jointly administers the estate (§ 2032 BGB). The objective of the community of heirs is basically to end the community by dissolution. In this process, the estate is divided or sold and the proceeds distributed (§ 2042 BGB).
A will may stipulate that the estate may not be divided for a certain period of time, which is usually accompanied by an order for execution of the will.
Taxes in case of inheritance
Depending on the inheritance tax class and the amount of the inheritance, inheritance tax is due. The exemption amount varies depending on the degree of relationship to the decedent. For spouses, the tax-free amount is 500,000 euros, for children and stepchildren 400,000 euros and for grandchildren 200,000 euros. In the case of other persons, the tax-free amount is only 20,000 euros (§ 16 Inheritance Tax Act). Depending on the degree of relationship and the amount of the inheritance, the remainder above the tax-free amount is then taxable at 7 to 50%.
Help with inheritance disputes
Lawyers, mediators and notaries can help with disputes. These offer advice and assistance in settling the estate.