In an inheritance case with German-American connections, the question of German compulsory portion law inevitably arises. Whether the German law on compulsory portions is applicable is a question of generally applicable law. Our You can find an article on the applicable law in German-American inheritance cases here.
If German inheritance law applies, this also applies to the right to a compulsory portion. If American inheritance law applies, the German right to a compulsory portion is not taken into account.
Choice of law of the American law of succession
If there is a desire to favour the legal heirs to a minimum, the choice of American inheritance law can be considered. However, not everyone can do this.
ExampleThe future testator lives in Germany and is an American citizen. He has two children and a wife. He has real estate and bank accounts in Germany and the USA. He wishes to favour his children as much as possible and leave as little as possible to his wife.
Since, from a German perspective, the deceased is inherited under the law of his habitual residence (Germany) in accordance with Article 21 of the EU Succession Regulation, he can only make a choice of law in accordance with Article 22 of the EU Succession Regulation. A choice of law is only possible in favour of the home law - the law of the person's nationality at the time of death. American inheritance law can therefore only be chosen by someone who is also an American citizen.
Is the choice of law effective?
Firstly, it is questionable whether the choice of law is valid. In this case, the formal requirements for validity are not measured in accordance with Article 75(1) of the EU Succession Regulation in conjunction with the Hague Convention on the Form of Wills, as the USA has not signed this. Thus, from a German point of view, the only relevant requirements are those of Article 27 of the EU Succession Regulation. According to this, a choice of law would be valid if, for example, the German form of will was observed.
The substantive validity would be assessed according to American law, see Art. 22 EuErbVO. However, this does not mean that a choice of law to avoid claims to a compulsory portion will be deemed valid by German courts. The dispute as to whether such a choice of law is compatible with public policy (ordre public) has not yet been resolved (see MüKoBGB/Dutta, 8th ed. 2020, EuErbVO Art. 35 para. 6-12; Twine, JuS 2015, 981 (984)). The Federal Constitutional Court has given constitutional status to the right to a compulsory portion in Germany. Therefore, a complete erosion of the right to a compulsory portion without compensation could be null and void pursuant to Art. 35 of the EU Succession Regulation.
Should you make a choice of law to avoid claims to a compulsory portion?
In addition to effectiveness, there is also the question of whether a corresponding structure should be chosen. As outlined above, there is no guarantee that the German courts will recognise the arrangement in every case. Furthermore, in the event of a choice of law, comprehensive information should be obtained beforehand in order to avoid unwanted surprises. Although there is no compulsory portion law in America comparable to German law, there are nevertheless regulations to protect close relatives. Depending on the respective federal state, the surviving spouse can, for example, assert rights to the entire estate, the family home or household items.
It should therefore be noted that a choice of law should not be made solely for the purpose of avoiding claims to a compulsory portion. The organisation of the estate is an overall process and a choice of law can open up possibilities for organisation, but it can also exclude them. In any case, it is important to seek comprehensive advice before making a choice of law. And even then, there is no guarantee that the chosen arrangement will be recognised by the courts.
The choice of law is therefore not a panacea, but only one of many instruments available to the testator for organising the estate and it depends on the individual case how the testator's wishes can best be given effect.