Pre- and post-inheritance
Testators often wish to have an influence on what should happen to their assets or individual items after the death of their heir or heirs. One means of long-term estate planning is the arrangement of a subsequent inheritance.
What is a prior and subsequent inheritance?
The subsequent heir is the person appointed by the testator who only becomes an heir after another person has become an heir (Section 2100 BGB). The prior heir is the person who became the testator's heir before the subsequent heir. If there is a subsequent heir, there is also always a prior heir. Prior and subsequent inheritance therefore necessarily belong together.
The prior heir and the subsequent heir are heirs of the same testator, they inherit one after the other and therefore do not form a community of heirs. More than one person can also become a prior and subsequent heir.
Pre- and post-inheritance must be strictly distinguished from the appointment of a final heir. There are often misunderstandings here in practice. If the spouses appoint each other as sole heirs in a spouse's will and stipulate that the joint children are to be heirs of the last spouse to die (known as a „Berlin will“), this is not an arrangement for a prior and subsequent inheritance. In the first case of inheritance, i.e. if one of the spouses dies, the surviving spouse initially becomes the sole heir. If the surviving spouse dies later, the joint children do not become heirs of the first deceased spouse in the Berlin will, but only heirs of the last deceased spouse. They are therefore referred to as final heirs.
What rights and obligations do the prior and subsequent heirs have?
Upon the occurrence of the inheritance, the previous heir receives a real inheritance status and the subsequent heir receives an expectant right.
According to Section 2112 BGB, the previous heir may dispose of the items belonging to the inheritance, unless the provisions of Sections 2113 to 2115 BGB stipulate otherwise. Sections 2113 to 2115 BGB impose restrictions on certain types of legal transactions. This means that disposals of the estate assets, such as gifts or the sale of the estate property, are invalid. In addition, the previous heir must administer the estate and bear the usual maintenance costs. The previous heir must also be liable for estate liabilities.
Pursuant to Section 2136, the previous heir can be released from most restrictions and thus be given more freedom of disposal.
In addition, the inheritance also belongs to the subsequent heir, „what the previous heir acquires on the basis of a right belonging to the inheritance or as compensation for the destruction, damage or deprivation of an object of the inheritance or by legal transaction with funds of the inheritance, unless the acquisition is due to him as utilisation“.
What are the reasons for setting up a prior and subsequent inheritance?
Pre- and post-inheritance is most frequently used in spouse's wills or inheritance contracts. On the one hand, the economic provision of the surviving spouse is to be secured. On the other hand, it is intended to ensure that the assets of the estate are passed on in their entirety to the subsequent heirs (often the children). Pre- and post-inheritance can therefore be an instrument of long-term asset protection.
What are the tax consequences of pre- and post-inheritance?
Under tax law, the subsequent heirs are regarded as heirs of the previous heir within the meaning of Section 6 ErbStG. This means that they are taxed twice, i.e. at the time of inheritance, i.e. when the prior inheritance occurs, and then when the subsequent inheritance occurs.