Administration of a nonresident Decedent’s German Assets

As German lawyers specializing in international probate matters, we routinely provide legal analysis and represent executors and trustees with from common law (or mixed) jurisdictions (e.g. England, Australia, Canada, New Zealand, South Africa) regard to the administration of the decedent`s German assets. This article outlines the process of settling the estate of a foreign domiciled decedent who dies leaving assets in Germany and the problems foreign fiduciaries meet.

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 principal 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 foreign law is applicable, the reference to the foreign law includes the rules of private international law in so far 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 creditor’s 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 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 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 may 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 which prevents the heir or executor from proving his 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

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 on the basis of 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 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 im 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, §§ 7839 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 prior to 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 currently are reluctant to follow this argument. Further, as probate proceedings may take month 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 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 a 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 new owner in the land registry (Grundbuch).

Proceedure 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 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 fact 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 opening of the Will (Testamentseröffnung).

Issuance of the Certificate of Inheritance or Certificate of Executorship

If no interested parties 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 proceedure to obtain a German certificate of inheritance, in particular in contentious matters, please refer to our article German 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 am 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.

Compliance with Tax Reporting Obligations

Within 3 months after gaining knowledge of acquisition, the beneficiaries must inform the proper German inheritance tax office of certain facts (e.g. names of heirs and their residence, value of the estate). See § 30 ErbStG. Failure to comply can lead to prosecution.

Please note: While the German executor is not obliged to notify the tax office (unless he is for other reasons obliged to do so), in practice, the executor often notifies the tax office. 

The inheritance tax office (Erbschaftsteuerfinanzamt) will receive additional information (Account positions, balances) from German banks, insurance companies, German notaries and the probate court.

Filing of a German Inheritance Tax Return

The tax office will, on the basis of the information received, determine whether the executor or the heirs will be required to file an inheritance tax return (Erbschaftsteuererklärung). If the tax office does not require that an inheritance tax return be filed, there is no obligation to do so.

German Tax Clearance Certificate

Even if the beneficiary or personal representative has not been asked to file an inheritance tax return and if no tax is due, it may become necessary to obtain a tax clearance certificate (Unbedenklichkeitsbescheinigung). German banks generally refuse to make any payments to an heir or executor residing outside of Germany before obtaining confirmation that no German inheritance tax (Erbschaftsteuer) is outstanding. The Unbedenklichkeitsbescheinigung is directly sent to the bank and the executor and/or heirs are not typically informed directly.

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