Multi-jurisdictional Will
A multi-jurisdictional will (also referred to as “global will”) addresses the administration and distribution of the testator’s worldwide assets.
Situs Will
A (separate) situs (also referred to as “supplemental will”) will specifically addresses assets with a “situs” in a particular legal jurisdiction and is generally used in conjunction with a principal will.
Benefits of a German Situs Will
Should a non-resident testator own assets in Germany and abroad (e.g. in England or Australia), there are strategic, pragmatic and legal reasons for using a separate situs will. The advantages of a German situs will may include:
- Ensuring validity of the will with respect to form;
- The use of German legal terminology may avoid complications in the proceedings for obtaining a German certificate of inheritance;
- Translation costs and incorrect translations may be avoided;
- The administration of the German estate may be more efficient.
Ensuring Validity of the Will as regards to Form
While Germany is a member of Hague Convention on the Form of Testamentary Dispositions and, consequently, most foreign wills are recognized as being valid with respect to form in Germany, making a Will which complies with the formalities of German law will ensure that there are no exceptional circumstances which will would prevent Germany from recognizing the foreign will. Pursuant to § 2231 BGB, the testator can choose between two forms of regular wills
Use of German legal Terminology and translation Costs
A German situs will that is drafted in German or is bilingual and utilizes German legal terminology (even if foreign law is applicable) provides the German probate court with clarity with respect to the testator’s wishes. Furthermore, a German language or bilingual will can result in significant savings and misunderstandings due to inaccurate translations as a translation is unnecessary.
More efficient Administration
In many situations, a German certificate of inheritance (Erbschein) or German letter of executorship (Testamentsvollstreckerzeugnis) is necessary to settle the estate in Germany. However, if the situs will is notarized in front of a German notary (notarial will) and the heirs can be identified from plain reading of the will, no certificate of inheritance is necessary in order to register the heirs as new owner of real estate in Germany in the German land registry (Grundbuch).
Even if the estate does not include real property, a German situs will can result in a more efficient administration. These efficiencies often result from the fact that German institutions (e.g. banks) must recognize a German will if it is sufficiently clear from the text of the will, who has the power to marshal the estate assets which are in their possession.
Please note: Unfortunately, some German institution are reluctant to recognize a (German) will if foreign law governs the will. As a matter of precaution, the testator should grant post-mortem power of attorney (Vollmacht auf den Tod) to the person called to settle the German estate.
Importance of proper Preparation
The use of a German situs will should be part of a greater estate plan that should be coordinated with the foreign will and will substitutes. The following should issues should be considered:
- Scope of the German situs will and the foreign Will;
- (Partial) Revocation (Widerruf) / non-revocation of the foreign will;
- Clear use of legal terms (e.g. does “issue” include adopted children);
- Deduction of testamentary disposition in the foreign Will from forced heirship claims arising out of the German estate;
- If the German executor (Testamentsvollstrecker) and the foreign personal representative are not the same persons: Responsibility for filing the German inheritance tax return (Erbschaftsteuererklärung) and payment of the German inheritance tax (Erbschaftsteuer);
- Clear responsibilities regarding the liability for estate debts and costs of administration;
- Power to take transfer funds from German to the foreign estate or vice-versa (if necessary);
- If the beneficiaries under the German will and the foreign Will are not the same persons: Who shall bear the estate debts, costs of administration; and
- Applicable law / choice of law clause (Rechtswahlklausel), e.g. in order to avoid the German forced share (Pflichtteil).
German Inheritance Tax Considerations
Germany levies an inheritance tax (Erbschaftsteuer). In contrast to an estate tax, an inheritance tax does not attach to the estate itself but instead is imposed on the acquisition (Erwerb) of the beneficiary.
In case that neither the decendent nor the beneficiary are Germany tax residents, Germany will only tax domestic property (Inlandsvermögen). As a bequest (Vermächtnis) of a domestic property is not subject to German inheritance tax (BFH, judgment dated November 23, 2022 - II R 37/19), in some constellations the German inheritance tax may be easily avoided by the use of the proper terminology.
German tax laws have special provisions for the taxation of certain trust, which may have significant impact on estate planning. Consequently, it is generally not advisable to transfer German asets to a trust. See U.S.-Trusts in German-American Estate Planning
