Applicable Law from a German Perspective
A German probate court (Nachlassgericht) will determine the applicable law for deaths occurring on or after August 17, 2015, by applying the European Succession Regulation (hereinafter "Brussels IV").
The fundamental principle underlying the Regulation is that the law applicable to "succession as a whole" is governed by the law of the state in which the decedent had his habitual residence (gewöhnlicher Aufenthalt) at the time of death. See art. 21(1) Brussels IV.
If under Art. 21 Brussels IV refers to foreign law, such reference includes the rules of private international law insofar as those rules make a renvoi: (a) to the law of a Member State; or (b) to the law of another third State which would apply its own law. However, if the testator has effectively elected foreign law to govern the “succession as a whole”, "local law" applies and there is no back reference to German law.
The law determined pursuant to Article 21 or Article 22 results in application to the succession as a whole. This includes the powers of the heirs, the executors of a will, and other administrators/fiduciaries of the estate. Further, such laws shall apply to the administration of the estate, including the sale of property and creditors’ claims. See Art. 23 Brussels IV. However, even if foreign law governs succession as a whole, German procedural law (Verfahrensrecht) is applicable, e.g., on the question of how the powers of an executor are proven. Furthermore, German property law (Sachenrecht) will be applicable with respect to assets situated in Germany.
Basic Principles of German Law Pertaining to the Administration of the Estate
Under German law, the estate (Nachlass) passes in its entirety directly to one or more individuals who are referred to as "heirs" (Erbe) upon the decedent`s death. See § 1922 German Civil Code (BGB). The heir (Erbe) or the community of co-heirs (Erbengemeinschaft) administers the estate, and there is generally no other person (e.g., executor, administrator) involved in the administration of the estate. However, the testator may appoint an executor (Testamentsvollstrecker) or allow somebody else (e.g, the probate court) to appoint such an executor who shall execute the testamentary dispositions of the deceased. See § 2203 BGB. The executor generally has the exclusive right to administer the estate.
Requirement of a German Certificate of Executorship and/or Certificate of Inheritance
While in many estate matters, a German certificate of inheritance (Erbschein) or German certificate of executorship (Testamentsvollstreckerzeugnis) is obtained to administer an estate in Germany, there is no general law that requires that succession or the right of an executor to administer the estate can only be proven by such certificates. Instead, whether these documents are required will depend on the language used in the Will and the assets in the (German) estate.
Bank Accounts in Germany
In many situations, German banks, savings banks (Sparkasse), or cooperative banks (Genossenschaftsbanken) will not allow an heir or German executor to liquidate investments unless a German certificate of inheritance or a German certificate of executorship is provided. Nevertheless, such requirements are generally internal to the financial institutions, as there is no specific law that prevents the heir or executor from proving their rights in a manner that differs from the certificate of inheritance (Erbschein). For example, an heir may prove his right by presenting an original copy of the will or contract of inheritance (Erbvertrag) with an Opening Protocol (Eröffnungsprotokoll), if the will clearly shows that he/she is entitled to access the funds (either as an heir or as an executor). A foreign grant of probate is generally not recognized.
Furthermore, there may be other reasons why no German certificate of inheritance or executorship is required. Such reasons can include situations where there is
- a trans-mortem Power of Attorney (transmortale Vollmacht);
- a joint bank account (Gemeinschaftskonto) and each co-owner of the joint account had the right to dispose of the total balance of the account (ODER Konto); and
- a payable on death account (Vertrag zu Gunsten Dritter).
Real Estate in Germany
A German land registry (Grundbuch) will only register the new owner if his rights are either proven by way of a German certificate of inheritance or a notarized will which clearly confirms the heir or, if there is more than one heir, the co-heirs. See § 35 GBO. However, in some situations, the new owner may also be registered based on a notarized power of attorney, which remains effective after the decedent`s death. If the property was given to an individual by means of legacy (Vermächtnis), the heir or executor may have to transfer the property to such legatee by way of a notarized contractual agreement (Vermächtniserfüllungsvertrag).
Partnerships and Corporations in Germany
Any partner of a German General Commercial Partnership (Offene Handelsgesellschaft) or limited liability partnership (Kommanditgesellschaft) must be registered in the German Commercial Register (Handelsregister). Upon the death of a general partner, the partnership is continued with the remaining general partner unless it was agreed in the partnership agreement that the partnership ends. § 131 Abs. 3 Satz 1 Nr. 1 HGB. Upon the death of a limited partner, the partnership is, in the absence of any agreement to the contrary, continued with his heirs. see § 177 HGB. The death of a general or limited partner and the entry of his/her heirs into the company must be registered in the commercial register. See § 161 (2), § 143 (2), § 107 HGB.
If the shareholder of a German Limited Liability Company (Gesellschaft mit beschränkter Haftung) or Public Limited Company (Aktiengesellschaft) dies, the shares in the company pass to the heir (Erbe). Since the shareholders are not registered in the commercial register, the heir is not required to be entered in the commercial register. However, according to § 40 GmbHG, the list of shareholders to be submitted annually must be updated by the managing directors. The death of a managing director must be registered by all managing directors, §§ 78, 39 GmbHG.
Can a foreign Administrator, Executor, or Trustee obtain a German Certificate of Inheritance or Executorship?
If a German certificate of inheritance and/or a German certificate of executorship is requested, a foreign executor or administrator must first determine if he/she is entitled to a German certificate of executorship.
Under the laws applicable before the implementation of Brussels IV, a German certificate of executorship was never issued to a foreign administrator or administrator with the Will annexed. Application of Brussels IV can result in foreign law governing the administration of the estate. Accordingly, a foreign administrator, in specific situations, may be entitled to a German certificate of executorship. However, this law is in flux and still subject to interpretation, and German courts are currently reluctant to follow this argument. Further, as probate proceedings may take months or years in Germany, it is generally not advisable to rely on such an argument, as it may result in additional delays and/or complications.
A foreign executor is entitled to receive a German certificate of executorship if it can be established that it was the testator`s intention that he should settle the German estate, and he was not simply named as executor because an executor or administrator is required under foreign law. If a foreign executor or administrator does not qualify for a German certificate of executorship, he cannot effectively administer the estate unless the heirs, who will, in the absence of a German executor, administer the estate themselves, provide him with power of attorney.
A foreign trustee generally is entitled to receive a German certificate of executorship with regard to the trust assets in Germany, as German courts generally characterize a trustee as a durable executor (Dauertestamentsvollstrecker). In some situations, e.g., because he was also a beneficiary of the trust, he may also qualify for a German certificate of inheritance.
Please note: If the trust document does not comply with the formalities of a will, it may be ineffective from a German perspective with regard to the testamentary aspects.
In addition to the German certificate of executorship, a German certificate of inheritance may be required, e.g., if the estate comprises real estate in Germany and the heir shall be registered as the new owner in the land registry (Grundbuch).
Procedure to obtain a German Certificate of Inheritance and/or Executorship
Application for a German Certificate of Inheritance and/or Executorship
An application for a German certificate of executorship or German certificate of inheritance can be made via a German notary (Notar) in Germany or a German Consulate. In simple matters, the German notary or German Consulate drafts the application document. However, in more complex matters (e.g., because there is a trust with regard to German assets or because it is unclear if the foreign executor qualifies as a German executor), a German lawyer specializing in international probate law should prepare the document.
The application can be signed by an attorney-in-fact (e.g., German lawyer) or other representative, e.g,. a (German) guardian (Vormund) or custodian (Betreuer). However, unless the German probate court has waived this requirement, at least one heir or the (designated) German executor (Testamentsvollstrecker) must personally affirm in lieu of an oath that he/she is not aware of anything that contradicts his statements and certain facts are true. See 352 FamFG. Such affirmation in lieu of an oath (eidesstattliche Versicherung) must be made in front of a German probate court (Nachlassgericht), a German notary (Notar), or a German Consul.
If the applicant does not have sufficient command of German, the the German Notary (Notar) or German Consul will verbally translate the full contents of the application document to English or, if the Notary or the Consul is not willing to do so, a sworn translator must be present when the Notary or Consul reads out loud the application document and translate it into English.
After the signing of the application, the German notary or the German Consulate generally hands over the notarized application document to the applicant or his representative, who then has to file it with the competent German probate court (Nachlassgericht). The probate court then sends a copy of the application document and all supporting documents to all interested persons (e.g., intestate heirs). If there is a will, the probate court sends a court-certified copy of the will to each interested person. This proceeding is referred to as the opening of the Will (Testamentseröffnung).
Issuance of the Certificate of Inheritance or Certificate of Executorship
If no interested party objects within the prescribed period and the court is convinced that the applicant has the right to receive the requested certificate, the court issues the certificate after payment of the court fees.
For additional information on the procedure to obtain a German certificate of inheritance, in particular in contentious matters, please refer to our article German Certificate of Inheritance.
Settling the Estate in Germany
The German certificate of executorship will enable the personal representative to marshal the assets and settle the German estate. He can
- revoke a trans-mortem Power of Attorney (transmortale Vollmacht),
- seize estate assets,
- (after obtaining tax clearance) transfer funds to a foreign fiduciary or beneficiary,
- pay rightful debts and costs,
- file the German inheritance tax return and pay the tax out of the estate,
- distribute the balance to the residuary beneficiaries.
For additional information on the basic tasks, powers, and duties of an executor in Germany, please refer to our article Executor of the estate under German law.
Involvement of German Courts
There is no further supervision by the German probate court (Nachlassgericht) or other German court. However, interested parties can seek the Court’s involvement by filing a formal application for:
- dismissal of the executor,
- determination of the share of an heir or legatee in the estate, or
- interpretation of the Will.
German Inheritance Tax Return and Duty of Disclosure
There is no obligation to file a German inheritance tax return (Erbschaftsteuererklärung) unless an inheritance tax office demands it. However, according to § 30 ErbStG, the beneficiaries are obliged to report the transfer to the local inheritance tax office within 3 months after gaining knowledge of the taxable acquisition (Erwerb). For further information on the reporting obligation, please see our article German Inheritance Tax: Duty to report an Inheritance from Abroad.
Based on the information received from the beneficiaries, the financial institutions and other sources (e.g. German notaries, German probate courts or German Consuls), the German tax authorities determine if German inheritance tax may be due and, if this is the case, ask to file an inheritance tax return from any person involved in the transfer. The filing period is generally one month. Upon application, an extension of the filing period is granted in most cases. For further information on the German inheritance tax return and the tax assessment, please check our article German inheritance tax return: preparation, filing, and tax assessment.
Tax Clearance / Transfer Certificate
If all or one of the beneficiaries reside outside of Germany, German banks and other financial institutions are liable for the payment of inheritance tax by such beneficiaries. Thus, they make no payments to beneficiaries or executors residing outside of Germany, unless a transfer certificate (Unbedenklichkeitsbescheinigung), also referred to as a tax clearance certificate (Unbedenklichkeitsbescheinigung), is provided. Such a tax clearance certificate will be issued by the tax authority once it has determined that no tax is due or the assessed tax has been fully paid.
