Compulsory portion and waiver of inheritance
In some cases, compulsory portion claims can lead to significant financial burdens for the obligated heirs. To reduce the burden on heirs and avoid disputes, compulsory portion waiver agreements between the testator and entitled parties can be established during the testator's lifetime.
What are compulsory portion and inheritance waiver agreements?
Through a compulsory portion waiver agreement, a compulsory portion beneficiary can fully or partially waive their compulsory portion. This means that the beneficiary who would typically be entitled to a compulsory portion cannot claim it upon the occurrence of the inheritance.
How do I arrange a waiver agreement?
The inheritance/compulsory portion waiver requires a contractual agreement between the testator and the compulsory portion beneficiary. The waiver agreement must be notarized. The waiver can only be agreed upon while both parties are alive.
In practice, a waiver is often linked to compensation. The compulsory portion beneficiary who waives their compulsory portion receives a form of settlement. A "true value" cannot be determined since, at the time of signing the waiver agreement, the exact time of inheritance is generally unknown and often unpredictable. The value of the estate at the time of inheritance is unclear. Difficulties in determining appropriate compensation also arise because the testator is often unwilling to provide comprehensive information about their assets. From the perspective of the waiving compulsory portion beneficiary, the crucial point is the inflow of liquid funds in the short term without having to wait for the inheritance.
However, it's important to mention that a compulsory portion waiver does not equate to disinheritance. If the testator does not make a valid will and the statutory inheritance rules apply, the compulsory portion beneficiary becomes an heir regardless of whether a compulsory portion waiver was agreed upon during the testator's lifetime.
What are the reasons for agreeing to a compulsory portion waiver?
Protection of the surviving spouse
Spouses often establish mutual sole heirship through a joint will in the event of the first spouse's death. This leads to the situation where children are disinherited for the first death and can claim their compulsory portion. To avoid this financial burden for the surviving spouse, a compulsory portion waiver could be arranged with the children.
Safeguarding business succession
If a business is part of the estate, claims for payment can overwhelm the heirs. Since business assets are typically not liquid, enforcing compulsory portion claims might result in the forced sale of the business.
Heirs burdened with debt
Furthermore, a compulsory portion waiver can generally protect family assets if the compulsory portion beneficiary is burdened with debt or receiving social benefits.
Preventing family inheritance disputes
In cases of estrangement from a child, if the testator wishes to exclude this child from the inheritance, an agreement for a compulsory portion waiver might be in the testator's interest, avoiding conflicts between the disinherited child, who is still entitled to a compulsory portion, and the other heirs.
If a child has already received generous gifts during the testator's lifetime, agreeing to a compulsory portion waiver with this child can help ensure equal treatment of the other children in future inheritance matters.
What are the pros and cons of a compulsory portion waiver?
- Relief for the surviving spouse
- The waiving compulsory portion beneficiary might have no claims in the event of inheritance
- No impact on statutory inheritance rules
- It's challenging to determine appropriate compensation as a counterpart for the compulsory portion waiver.
- If compensation is agreed upon, assets are transferred during the testator's lifetime.
- The testator gains further flexibility in structuring their inheritance.
Future disputes can be avoided.
How is the inheritance or compulsory portion waiver treated in terms of tax?
An assignment by a compulsory portion beneficiary does not essentially constitute a gift to the testator, thus the assignment itself does not trigger tax liability.
However, it's different if a compensation (especially a settlement) is agreed upon and paid out. This compensation is subject to gift tax rather than income tax, as it is categorized as a "gift between living persons." Payments and tax rates depend on the relationship between the testator and the compulsory portion beneficiary. If a child waives their claim against a parent, there is a tax-free amount of €400,000.