Applicable Law with regard to the German Forced Share
A German probate court will determine the applicable law for deaths occurring on or after August 17, 2015 under the European Succession Regulation (‘the Regulation’). Generally, the law applicable to succession matters is governed by the law of the State in which the decedent had his habitual residence (gewöhnlicher Aufenthalt) at the time of death unless there is a valid election of law. See Art. 21 of the European Succession Regulation. This also includes the forced heirship and claw back rules.
However, in its judgment of June 29, 2022 (Case No. IV ZR 110/21), the Federal Court of Justice as upheld the decision of the Cologne Court of Appeal, which had held in its judgment of April 22, 2021, file no. 24 U 77/20, that English law regarding the compulsory portion is not applicable due to a violation of German public policy if a UK national (with the closest connection to England) with habitual residence in Germany elects British law to govern "succession as a whole" pursuant to Art. 22 of the European Succession Regulation.
Nature of the German Forced Share
While under German law the estate passes directly to the heir (Erbe) or if there is more than one heir, to the community of co-heirs (Erbengemeinschaft) upon the death of the deceased, the "forced heir" does not have ownership rights with regard to the estate or specific estate assets and has no administration right. Instead, the Forced Heir (Pflichtteilsberechtigter) is only entitled to the forced share (Pflichtteil), also referred to as "compulsory share", which is a claim in money against the heir or the community of co-heirs.
Individuals entitled to the Forced Share
Pursuant to § 2303 of the German Civil Code (BGB), the following individuals are entitled to receive the forced share:
- Issue of the deceased (e.g. children, grand-children);
- spouse; and/or
- parents of the deceased, if the deceased was not survived by issue.
Additionally, the registered same-sex partner (eingetragener Lebenspartner) is entitled to receive a forced share. See § 10 (4) German Act governing the same sex registered partnerships (LPartG).
The siblings of the deceased are not entitled to a forced share.
If the children survive the deceased, the issue of such children (i.e. grandchildren of the deceased) are excluded from receipt of a forced share. In other words, children who outlive their parent bar their issue from receiving the forced share from their grandparent`s estate.
Exclusion from Inheritance
The forced heirs are only entitled to a share of the estate, if they are excluded from an inheritance by will. Otherwise, they may only have the supplementary forced share claim (see below) or a claw back claim. If the testator named a forced heir to be his heir or co-heir, however, his share in the estate is:
- burdened by the designation of a subsequent heir (Nacherbe), the appointment of an executor (Testamentsvollstrecker), or a direction concerning the partitioning of the estate, or
- where he has been charged with a legacy (Vermächtnis) or a testamentary burden (Auflage),
he/she may claim the forced share if he/she disclaims the inheritance. See § 2306 BGB.
Liability for Forced Share
The heir (Erbe) is liable for payment of the forced share. See § 2303 (1) l BGB. If there is a community of co-heirs (Erbengemeinschaft), each co-heir is liable for the forced share. See § 2058 ff BGB.
Calculation of the Forced Share
The forced share amounts to half of the value of the share the disinherited individual would have received under the (German) intestacy rules (gesetzliche Erbfolge). See § 2303 (1) 2 BGB.
Example: A deceased widow leaves two children, A and B. Under German intestacy rules, the intestate share (Gesetzlicher Erbteil) of each child amounts to 50%. Thus, the forced share of each child amounts to 25 % (= one half of the intestate share).
In determining the forced share, the shares of disinherited individuals, individuals who have disclaimed the inheritance (after the death of the deceased) and/or those who are unworthy of inheriting are included. See § 2310 1 BGB.
Example: In the above example A is unworthy to inherit. Accordingly, he receives neither an intestate share nor a forced share. One may assume that the forced share of B would be 100% as he would be sole heir under intestacy rules. However, according to § 2310 1 BGB his share remains 50%.
However, the share of a person who has contractually waived his or her inheritance rights is not to be included (See § 2310 2 BGB).
The value of the inheritance at the time of death is crucial. See § 2311 BGB.
If the testator made a gift to the person entitled to the forced share during his lifetime or upon his death outside of the estate, e.g. by designation as beneficiary of a life insurance or a payable on death account (Vertrag zu Gunsten Dritter), the forced share will be decreased by the amount of the gifts. However, for the gift to be deducted it is crucial that the gift is declared to be deducted from the forced share. Failure to declare that the gift shall deducted will result in no deduction and the forced share will be calculated accordingly. See § 2315 BGB. Thus, if the testator does not declare that the gift shall be deducted from the forced share or does not do so at the time of the gift, the forced heir can still claim the full forced share.
Example: M gifts to her children A and B two valuable properties during her lifetime. As she trusts her beloved children, she assumes that they will receive the remainder later anyway and does not declare that the gift shall be deducted from the forced share. However, A and B turn out to be ungrateful and do not care for her mother when she gets ill. Thus, M decides to give everything to the church and states in her will that her children “have already received their forced share.” As M hasn’t expressed the intention that the gift shall be deducted from the forced share when she made the gift, A and B can claim the full forced share.
Supplementary Claim
If the forced heir (Pflichtteilsberechtigter) is not completely disinherited, but instead is bequeathed a share less than the forced share, he shall have a supplementary claim (Zusatzpflichtteil). See § 2305 BGB. The supplementary amount equals the difference between the amount provided in the will and what the forced share would have been.
Rights of the Legatee
If a legatee (Vermächtnisnehmer) would receive more under the forced share regime provided for in § 2303 BGB, he may disclaim the amount bequeathed and claim the full forced share. See § 2307 (1) 1 BGB). If he does not disclaim the gift, the amount bequeathed is deducted from his forced share (See § 2307 (1) 2 BGB).
Rights of the Spouse
if the spouse was excluded from inheritance and the spouses were married under the statutory matrimonial property regime of Community of accrued gains (Zugewinngemeinschaft), he/she is entitled to 1/8 of the estate and equalization of accrued gains (Zugewinnausgleich). If the spouse was not completely excluded, he/she is entitled to 1/4 of the value of the estate. See §§ 1931 (1), 1371 (1) BGB. Alternatively, the spouse may disclaim the inheritance and claim 1/8 and equalization of accrued gains (Zugewinnausgleich).
If the surplus of the surviving spouse is significant, it can be advisable for the spouse to disclaim the inheritance and claim equalization of accrued gains.
Clawback (Pflichtteilsergänzung)
In order to prevent the deceased from undermining the forced share, any lifetime gift (Schenkung) within the last 10 years prior to the death of the deceased and payments on death outside of the estate, e.g. by way of a and gift mortis causa (Schenkung auf den Todesfall), a payable on death account (Vertrag zu Gunsten Dritter) or life insurance (Lebensversicherung), are added (symbolically) to the estate as of the time of death and the forced heir has a claim to additional payments under § 2325 BGB (Clawback).
However, only gifts in the 10 years preceding death are relevant. Additionally, the value of the gift is reduced by 1/10 of the value of the gift for year between the gift and the death. § 2325(3) BGB.
Example: The deceased, D, makes a gift of € 100,000 in cash to his friend, F, on January 1, 2004. If D dies on January 2, 2012 and is survived by his disinherited son, S. The son can claim additional payments under § 2325 BGB. However, only 2/10 of the value of the gift is added to the estate of D.
If the donee is the spouse of the deceased, the 10-year period only starts after the marriage has ceased. See § 2325 (3) 3 BGB. Thus, the 10-year proportional deduction does not apply to the spouse unless they were divorced.
Furthermore, the 10-year period fails to commence, if the donor retained an interest in the gift. The determination as to whether the donor retained an interest is based on whether, from an “economic” perspective, the donor remains the owner of the gift. The German Federal High Court has decided, that this is the case if a donor retains a usufruct (Nießbrauch) in a gift /German Civil High Court, 94, 1791). But this may may also be the case if the decedent had transferred assets to the trustee of a living trust and had retained the right to revoke, amend or defund the trust.
Generally, the heir is liable for an additional claim under § 2325 BGB. If the heir himself is entitled to the forced share, he can refuse an additional payment, insofar as this payment would affect his own forced share. See § 2328 BGB. In this case, the recipient of the gift is liable in so far as the heir is not obliged to an additional payment. See § 2329 BGB. The sole heir can also claim an additional payment to his inheritance. See § 2329 (1) 2 BGB. All lifetime payments are deducted from the clawback claim. See § 2327 (1) BGB).
Waiver of Rights over Future Inheritance (Erbverzicht)
Those who have waived their future right to inherit (Erbverzicht) or future right to claim the forced share (Pflichtteilsverzicht) have no right to the forced share. See §§ 2345 (2), 2346 (1) 2 BGB.
Individuals, who have waived their rights over the future inheritance, will not to be included when calculating the forced share. See § 2310 2 BGB. This results in the remaining forced heirs receiving additional assets.
If there is more than one forced heir, the future decedent should not ask for a waiver of right over future inheritance (Erbverzicht), but instead only ask for a waiver of rights over the forced share (Pflichtteilsverzicht).
Unworthiness to Inherit (Erbunwürdigkeit)
Those who are unworthy of inheriting (erbunwürdig) have no right to the forced share. See §§ 2345 (2), 2346 (1) 2 BGB. Such individuals will not to be included when calculating the forced share resulting in the remaining forced heirs receiving additional assets. See § 2310 2 BGB.
Deprivation of the Forced Share (Entzug des Pflichtteils)
Pursuant to § 2333 BGB, the testator may deprive a descendent from the forced share if the descendant:
- Makes an attempt on the life of the testator, of the spouse of the testator, or of another descendant or of a person similarly close to the testator,
- Is guilty of a major offence or of a serious intentional minor offence against one of the persons designated in no. 1;
- Willfully violates statutory maintenance obligations to the testator; or
- Is finally sentenced to at least one year’s imprisonment without probation because of an intentional criminal offence and participation of the descendant in the estate is hence unreasonable for the testator. The same applies if the accommodation of the descendant in a psychiatric hospital or in a withdrawal clinic is finally ordered because of a similarly serious intentional offence.
Under the same conditions, the testator may deprive his parents or his/her spouse from the forced share.
Limitation of the Forced Share
If issue of the testator is wasteful or heavily indebted, the testator may limit the forced share by appointing his issue preliminary heir (Vorerbe) for his offspring or by directing a durable executor (Dauertestamentsvollstrecker) or administrative executor (Verwaltungsvollstrecker). In this case, the forced heir does not have full control over his part of the estate.
Statute of Limitations
The time limitation period is 3 years. See § 195 BGB. The time limitation period commences at the end of the year in which the person entitled to the foced share receives knowledge of
- the death of the testator and
- the disinheritance.
Enforcement of the Forced Share
A forced heir can demand from the heir or heirs an inventory and appraisal of the estate so that he/she can accurately determine his/her share. See § 2314(1)1 BGB. If it is objectively reasonable to deem that the information provided is flawed, the forced heir can request that such an heir affirms that the inventory is accurate.
Generally, the forced heir cannot claim information from third parties (e.g. banks). However, information can often be obtained from German land registries or company registers.
Based on the available information, the forced heir should calculate his forced share (which is a monetary amount, see "Nature of Forced Share") and claim payment from the testamentary heirs. Generally, the forced share is payable upon the death of the testator. See § 2317(1) BGB. However, if the immediate payment of the forced share would unfairly affect the heirs (e.g. because they must sell the family home), the heir can ask the court to order that payment is made in installments or is postponed.
