Waiver of compulsory portion agreements
In some cases, claims to a compulsory share of the inheritance can lead to significant financial burdens for the heirs liable to pay. To reduce this burden and avoid disputes, agreements to waive compulsory shares between the testator and the entitled parties during the testator's lifetime are advisable. A waiver of inheritance or compulsory share is only valid if the agreement is notarized (§ 2348 German Civil Code).
What are compulsory portion and waiver of inheritance agreements?
A compulsory portion waiver agreement allows a person entitled to a compulsory portion to waive their compulsory portion in whole or in part. This means that the person actually entitled to a compulsory portion cannot claim their compulsory portion after the death of the deceased.
How is a waiver of inheritance or compulsory share effectively agreed upon?
The waiver of inheritance/compulsory portion requires a contractual agreement between the testator and the person entitled to the compulsory portion. The waiver agreement must be notarised. The waiver can only be agreed between living persons.
In practice, a waiver is often linked to a consideration. The person entitled to a compulsory share, who waives their share, Mandatory portion By waiving their inheritance rights, a person entitled to a compulsory share receives a form of compensation. However, there can be no "true value" in this case, as the date of death is usually not fixed and often unpredictable at the time the waiver agreement is concluded. Therefore, the value of the estate upon death is unclear. Finding an appropriate compensation is further complicated by the fact that the testator is often unwilling to provide comprehensive information about their assets. From the perspective of the person entitled to a compulsory share who waives their rights, it is important that liquid funds are received quickly and that they do not have to wait for the testator to die.
However, it is important to note that a waiver of a compulsory portion does not constitute disinheritance. If, for example, the testator does not make a last will and testament and the statutory order of succession therefore applies, the person entitled to a compulsory portion becomes the heir, regardless of whether or not they had agreed to waive their compulsory portion with the testator during their lifetime.
What are the reasons for agreeing to waive a compulsory portion?
1. Securing the surviving spouse
Married couples often prevail through a shared [context/solution]. Will The agreement stipulates that the spouses will be mutual sole heirs in the event of the first spouse's death. This means that the children are disinherited upon the first death and can claim their statutory share. To avoid such a financial burden for the surviving spouse, a waiver of their statutory share could be agreed upon with the children.
2. Securing business succession
If there is a company in the estate, payment claims can overburden the heir. As the assets of a company are generally not liquid, the assertion of compulsory portion claims can mean that the company may have to be sold.
3. Over-indebted heirs
In addition, a waiver of a compulsory portion can generally protect the family assets if the beneficiary of the compulsory portion is overindebted or receives social benefits.
4. Prevention of family inheritance disputes
If there is a disagreement with a child and the testator wishes to exclude this child from the succession, it could also be in the testator's interest to agree to waive the compulsory portion in return for payment of a settlement in order to prevent a dispute between the disinherited child, who is entitled to a compulsory portion, and the heirs.
5. Donations already made
If a child has already received generous gifts during the testator's lifetime, it may be helpful to agree a waiver of a compulsory portion with this child in order to achieve a free hand in the subsequent equalisation of the other children under inheritance law.
What are the advantages and disadvantages of waiving a compulsory portion?
| Advantages | Disadvantages |
| Discharge of the fading spouse | The waiving beneficiary of the compulsory portion may no longer have any claims in the event of inheritance |
| No effect on the legal succession | It is difficult to find an appropriate settlement in return for the waiver of the compulsory portion. |
| No increase in the inheritance quota and the compulsory portion of the others | If a consideration is agreed, assets already flow out during the testator's lifetime. |
| The testator has a further opportunity to organise his or her succession | |
| Future disputes can be avoided |
How is the waiver of inheritance or compulsory portion treated under tax law?
An assignment by a beneficiary of a compulsory portion does not in fact constitute a gift to the testator, so that the assignment itself does not lead to a tax liability.
However, the situation is different if a consideration (in particular a settlement) is agreed and paid out. This settlement is not subject to income tax, but to gift tax, as it is categorised as a „gift between living persons“. Benefits and tax rates depend on the relationship between the testator and the person entitled to the compulsory portion. If a child renounces his or her parent, an allowance of 400,000 euros applies.
Conclusion: Draft a legally sound inheritance waiver agreement and plan for succession
A waiver of inheritance is an effective tool for customizing the statutory order of succession and avoiding future conflicts among heirs. Particularly when children have already received substantial gifts during the testator's lifetime, a waiver can ensure a fair distribution of the estate. The person waiving their inheritance makes a legally binding declaration to relinquish all or part of their future inheritance. This step should be carefully considered and requires comprehensive legal advice to fully understand all the consequences of waiving an inheritance.
The legal basis for waiving an inheritance is found in the German Civil Code (BGB). An inheritance waiver agreement is a formal contract that requires notarization. This agreement establishes a binding arrangement between the testator and the person waiving their inheritance. Often, the waiver is agreed upon in exchange for a settlement payment, which provides the person waiving their inheritance with immediate financial compensation for the loss of their future inheritance claim. This allows the testator to clearly regulate their succession, and the future heir gains planning security.
A waiver of inheritance agreement offers a high degree of flexibility in estate planning. It allows the testator to distribute their assets according to their individual wishes, without being bound by the rigid rules of statutory succession. This is particularly relevant in business succession planning, to prevent the breakup of a company. We provide comprehensive advice on drafting a waiver of inheritance agreement and ensure that the agreement serves the interests of all parties involved and that future heirs, especially children, are treated fairly.