Monday, 28. November 2022

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The 10 biggest mistakes when making a will (or not)

The 10 biggest mistakes when making a will (or not) – This headline (or rather its equivalent in German) was the front page story today, Friday the 13th, of a Munich tabloid. So it must be a topic that catches people´s attention. More than the corona virus, the Bachelor or the current ranking of FC Bayern (Munich soccer club). Because otherwise it wouldn’t be the headline of the day.

Reason enough to take a closer look at the findings and recommendations of the “newspaper expert”. How good is it, the legal advice that you get here for €1.20?

So what are the 10 biggest traps or mistakes in planning your succession?

One more word before we start: My articles are always written in German and later translated into English. For reasons of convenience, to a large extent with the help of a translation app (AI, so to speak), at least as a starting point. This text here, however, gave me the most doubts whether the translation is really adequate. So many German legal terms where I am not sure if the English translation really fits or sounds rather awkward. But see for yourself.

1. Trap: When unmarried couples do not make a will

The newspaper expert considers it a cardinal mistake if unmarried couples do not regulate their succession by will.

a) To this end, one must know the following:

If a person does not make a will (and also does not conclude a testamentary contract/Erbvertrag), then his or her assets (and liabilities)  will pass according to the legal order of succession (gesetzliche Erbfolge), i.e. as stipulated by law. The law, in turn, holds regulations on its own as to how the estate of a deceased person is passed on and distributed. A will is therefore not mandatory.

German law links succession to two criteria, namely kinship and marriage. Therefore, if the testator (Erblasser) is satisfied with his assets passing to his spouse and relatives (children, parents, etc.) in the “distribution chain” provided for by the law, then the legal succession basically fits.

b) On the other hand, the law does not consider good friends or even the partner of a non-marital partnership. This is due to the fact that our BGB (German civil code) and thus also the law of succession (Erbrecht) are already quite old. Perhaps one idea also plays a role here: If two people live together but do not want to get married, then they apparently do not want to enter into a legal commitment, neither for life nor beyond death. That is why the partner of a non-marital cohabitation (relation) is not considered as an heir under German inheritance law.

c) If you do not want this, i.e. if you want the partner in the non-marital partnership to be considered under inheritance law in the same way as a spouse, for example, then you must indeed provide for this in your will (or in a testamentary contract, which we call Erbvertrag in German). Therefore, the expert’s advice at this point is absolutely correct. Unmarried couples should take care (at an early stage) as to whom the assets of the partner who dies first will go to. Because otherwise, in fact, instead of the beloved partner (m/f), it might well be that your „evil brother or sister“ will inherit your family home.

d) If, on the other hand, the partners in the non-marital partnership have children, the whole thing looks less dramatic. Because then the children are by law your legal heirs.

2. Trap: If a solitary person believes that they have no heirs anyway and therefore do not make a will

a) A will is also recommended for people who believe they have no heirs. Because this is not true. There is always some distant relative. And if this should not be the case, then the state inherits.

b) In such a constellation, however, the testator would have the opportunity during his lifetime to make a will, for example, for the benefit of a friend or a charitable institution. If this is important to you, then you should actually do this or at least consider it.

However, you cannot name your dog as your heir. And no, Mr. Mooshammer (a somewhat strange late Munich fashion tsar) was not followed (beerbt) by his dog Daisy either. But you can appoint your chauffeur as your heir, with the condition that he will take care of your dog with the inherited money if you are no longer able to feed and walk your beloved animal. That would be fine. …

c) If, on the other hand, you really don’t care what happens to your assets after your death, you can forget about making a will.

3. Trap: If married couples with no children do not make a will

a) According to the expert, married couples without children often believe that the surviving spouse would already inherit everything by operation of law.

b) But this is not correct. According to § 1931 of the German Civil Code, the surviving spouse is only entitled to a part of the inheritance as a legal heir, in addition to the relatives of the deceased. Alongside the parents and siblings of the deceased, he or she inherits only half, plus a further quarter as compensation (equalization) of accrued gains (Zugewinnausgleich) during marriage in accordance with § 1371 BGB.

This can then actually lead to the surviving spouse finding himself or herself in a group or community of heirs (Erbengemeinschaft) with a brother of the deceased, for example. The previous family home would then not pass in full to the surviving spouse, but only three quarters of it, while one quarter would belong to the brother of the deceased. This can certainly lead to conflicts.

c) If one does not want this, it is indeed appropriate to appoint the surviving spouse as sole heir in a will. Here too, therefore, the advice of the newspaper expert must be agreed with.

4. Trap: Not to think of a substitute heir (Ersatzerbe)

a) So, what is this, a substitute heir?

Let’s assume that mother M names her daughter T as sole heir, assuming that the daughter will naturally outlive the mother under normal circumstances. But what happens if the child predeceases the mother? In other words, the heir dies before the succession occurs?

b) Good point, one should indeed think about this when drafting a will.

Of course, you can also say: Then I’ll just make a new will, if this absurd case should ever occur. – But what if you are then already so old that you are no longer capable of making a will?  … See section 10 below.

5. Trap: Not to provide for an amendment rule in a Berlin will (Berliner Testament)

a) You know the Berlin will, don’t you? The whole thing is regulated in paragraph 2269 BGB. In a Berlin will, the spouses appoint each other as heirs and also stipulate that after the death of the survivor, i.e. the last to die, the mutual estate is to go to a third party, usually the children. This is stipulated in a so-called joint will (gemeinschaftliches Testament) by both spouses.

b) And here the expert now asks: What actually happens if, for example, 10 or 20 years pass between the death of the husband and the subsequent death of the wife? Can the wife then change the second part of the joint will, in which the children are appointed as final heirs, during this interim period? In other words, instead of leaving half to the son and half to the daughter, leave everything to the daughter who cares for the mother so tenderly, and nothing to the son at all, because he develops into a drunkard and regularly beats his mother?

Or is she even allowed to delete the common children as final heirs altogether if she has found comfort with another widower, or perhaps with a much younger new partner?…  – These are all points that one should really think about when drafting a Berlin will.

c) So here again: Good point by our newspaper expert. And also quite knowledgeable, I would say. This goes well beyond the tabloid level.

6. Trap: Leaving the community of heirs to their own devices

a) Now this is probably a classic. If a person dies and is inherited by several people, then these heirs together form a community of heirs (Erbengemeinschaft).

b) Let us assume that our deceased owned 2 houses and had 3 children. Then these 3 children become a community of heirs, and this community of heirs owns (jointly) the 2 houses. It is up to the heirs to decide how to deal with each other.

This may well lead to a dispute. Even if the heirs usually got along well. But the interests of siblings can of course develop in completely different directions. While one or the other may live in one of the inherited houses and want to continue to do so, the others may have long since moved away and have no real interest in maintaining the building. Or they are afraid of the high costs involved in maintaining an old house. …

These problems would not exist if the testator had already determined during his lifetime, for example by way of a partition order (Teilungsanordnung), who should get which house and what form the compensation for the other heirs should take.

c) Is such a partition order to be recommended to the testator in any case? I think no. I think there may be good reasons why a testator does not want to interfere in the later division of the estate, but leaves this to the heirs. After all, the testator knows much less during his lifetime than the later heirs what their needs and interests will be. Or perhaps the testator simply wants to spend his last days in peace and quiet without having to deal with the dispute and the burdens associated with an inheritance dispute.

d) From this point of view: It is good to keep in mind the problems that an undivided community of heirs brings with it. However, it is just as legitimate for the testator to say to himself: “My heirs should settle this among themselves at a later date, I will not interfere any more”.

7. Trap: Overlooking the fact that someone can also be disinherited

a) At this point, the expert points out that people who would actually be called to succession by law can also be excluded from succession, i.e. disinherited. In this case, the person thus disinherited does not receive the legal share of the inheritance (gesetzlicher Erbteil) but, if applicable, only the minimum or compulsory share (Pflichtteil).

b) Yes, this is definitely a point to think about if you would like to leave as little as possible of your assets to one or the other legal heir.

8. Trap: To not sign the will or to hide it so well that no one will find it

a) At this point, one may have to elaborate a bit more; especially if you think of the WhatsApp generation.

Under German law, a will can either be made in front of a notary or in the form that you write and sign the will yourself with your hand. This means that a will typed on a PC and signed by the testator by hand is not valid because it is not handwritten. And a will sent by e-mail, WhatsApp or video message on Instagram would of course be even less effective. So watch out at this point.

b) And for the dreamboat generation („Traumschiff“, a German tv series mainly for older people), perhaps one additional note: According to Section 2251 of the German Civil Code, there is also the so-called emergency will at sea. According to this, in certain cases a will can also be made by oral declaration in front of three witnesses. For example, at the Captain’s Dinner off Tahiti. …

c) And another important point: For a will to be factually effective, it must of course be found by the survivors. The most beautiful will is of no use if it is hidden in the back of an old desk and ends up unnoticed in the bulky waste.

9. Trap: To not consider inheritance tax

a) Unfortunately, I know very little about tax law. That’s what tax consultants are for. But of course I know that there are certain allowances (Freibeträge) for inheritance tax, which depend on the closeness of the relationship between the testator and the heir.

If I understand correctly, the spouse has an allowance of €500,000, the children €400,000 per inheritance. So it can sometimes make sense to transfer assets to the next generation during one’s lifetime by way of an anticipated succession (vorweggenommene Erbfolge).

b) But of course you have to weigh the possible tax advantages against the possible legal disadvantages. After all, assets that you have given away no longer belong to you.

10. Trap: Wait until you are no longer capable of making a will

a) A will is invalid if the testator was demented to such an extent that he or she is no longer capable by law of making a will. It is therefore advisable to make a will at an early stage if necessary.

b) Of course, there is no problem with testamentary capacity (Testierfähigkeit) in the case of intestate succession. Which brings us back to the beginning: Does one have to or should one make a will in every case?

As we have seen, there are quite a number of situations in which a deviation from the legal (order of) succession (gesetzliche Erbfolge) by way of a will is appropriate. But then again, intestate succession is not that far off the mark. And in any case, it involves less effort and expense. But as a lawyer, I should perhaps not say that, because we also live from making wills, at least if you are a specialist in inheritance law.

c) What can be recommended in any case, however, is that clients should be aware of their inheritance situation. Once you have passed the age of 65, let’s say, you should start thinking about what will happen to your assets once you can no longer look after them yourself. And that’s where I find the newspaper article about the 10 traps (mistakes) when making or not making a will quite helpful. So the € 1.20 is well worth the investment in any case.

Dr. Wolfgang Gottwald
Rechtsanwalt/Attorney at Law

DR. GOTTWALD
Rechtsanwalt
Attorney at Law

Leopoldstraße 51
80802 München

Tel.: 089/383 293-10
Fax: 089/383 293-13

w.gottwald@kanzlei-dr-gottwald.de