Waiver of compulsory portion and inheritance

Waiver of compulsory portion agreements

In some cases, claims to a compulsory portion can lead to high financial burdens for the heirs liable to pay. In order to minimise the burden on the heirs and avoid disputes, compulsory portion waiver agreements between the testator and the beneficiaries can be concluded during their lifetime. 

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 do I agree a waiver contract?

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 portion who waives their share of the estate therefore receives a kind of compensation. There can be no „true value“, because at the time the waiver agreement is concluded, the time of the inheritance is usually not known and often cannot be predicted. The value of the estate in the event of inheritance is therefore unclear. Difficulties in finding an appropriate settlement also arise because the testator is often unwilling to provide extensive information about his or her assets. From the perspective of the waiving beneficiary of the compulsory portion, it is important that liquid funds flow in the short term and that there is no need to wait for the inheritance. 

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. Protection of the surviving spouse

Spouses often make a joint will designating each other as sole heirs in the event of the first death of a spouse. This means that the children are disinherited in the event of the first death and can claim their compulsory portion. In order to avoid such a financial burden for the surviving spouse, a waiver of the compulsory portion could be agreed with the children.

1. Securing company 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.

1. 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.

1. Preventing a family falling out

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. 

1. Contributions 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?

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.