What is a disability will?
A disability will is a special form of will that includes at least one heir with a disability. This will prevents family assets from falling to the social welfare agency and instead remains within the family. The main objective of a disability will therefore in particular that to ensure the financial well-being of the disabled child.
What is the situation under inheritance law without a disability will?
A relative with a disability may experience certain disadvantages as a testator, unless specific testamentary instructions have been made. If the parents of the disabled child have not made an effective will or inheritance contract, intestate succession takes effect.
If there are several legal heirs in the event of death without a will, including a disabled relative with a legal right to inherit, they form a community of heirs. These heirs must jointly decide how to divide the estate - a task in which a disabled relative or a relative in need of care may have difficulty holding his or her own in this group.
It is important to note that because of the disability, there are often high costs for care or institutionalization. Since these expenses are not usually covered by pensions or similar income, the government pays for the costs incurred. However, the principle of subordination applies when granting social benefits. This means that social benefit recipients must first use their own assets to cover the costs incurred. Now, if a person with disabilities inherits money or other estate items, he or she must use them. In other words, the inherited assets would go directly to the state, putting the heir at a disadvantage.
In addition, it should be noted that disinheriting the disabled child is not advisable. Disinheritance would result in the child still being entitled to a compulsory share. While the child is receiving benefits, the social welfare agency can transfer this right to a compulsory portion to itself and offset the compulsory portion against the benefits paid.
Is a disability will legally permissible?
In the case of the deliberate circumvention of potential claims of the welfare state, the question has always arisen as to whether such conduct is contrary to good morals within the meaning of Section 138 of the German Civil Code (Bürgerliches Gesetzbuch - BGB) and, accordingly, whether any instructions are void.
In several rulings, case law has decided that the creation or the instructions of a disability will are not immoral (BGH, decision dated July 24, 2019 - XII ZB 560/18; OLG Cologne, ruling dated December 9, 2009 - 2 U 46/09). Even if the family has considerable assets and the social welfare agency thereby loses large sums, the freedom to make a will, which outweighs the protection of the welfare state, means that immorality must be rejected (OLG Hamm, judgment dated 27.10.2016 - 10 U 13/16).
How is a disability will structured?
In order to avoid the access of the social welfare agency as creditor of the disabled person to the inheritance, means of structuring must be used to protect the inheritance from execution by creditors.
The instruments that can be considered for this are the preliminary and subsequent inheritance as well as the execution of the will. Section 2115 of the German Civil Code (BGB), Section 773 of the Code of Civil Procedure (ZPO) and Section 83 (2) of the German Insolvency Code (InsO) ensure the protection of the estate as a whole, which is subject to the obligation of the successor to inherit and protects it from being exploited by its own creditors.
This means that although objects of the estate may be seized or confiscated, the resolution of these measures is conditional on the occurrence of the succession. During the succession, however, any acts of realization are inadmissible.
In a classic disability will, the relative in need of care is appointed as a preliminary heir and given a share of the inheritance that is somewhat higher than the compulsory share. At the same time, one or more persons are appointed as subsequent heirs, to whom the inheritance is transferred at a time determined by the testator, at the latest upon the death of the previous heir.
The testator must also order a permanent execution of the will for the lifetime of the disabled relative. The executor must be given clear instructions by will as to how the income from the estate is to be used to improve living conditions.
In addition to the inheritance solution outlined above, there is also the bequest solution as a further way of structuring the will. In this case, the disabled child of the decedent is named as an advance legatee, while other descendants are named as subsequent legatees. Typically, the bequest consists of a fraction of the total value of the estate, known as a quota bequest, which is at least equal to the disabled heir's compulsory share. At the same time, an execution of the will is ordered for the administration of the bequeathed object, which extends beyond the time of the occurrence of the subsequent bequest.
The purpose of this order is to protect the bequeathed property from access by the creditors of the preprobate under section 2214 and, at the same time, to prevent the social welfare agency from accessing it. Under a disability will, the executor is given binding instructions under section 2216(2) to grant the preprobate certain uses of the bequeathed item and, if necessary, to make portions of the bequest available.
What are the advantages and disadvantages of the bequest solution?
A not inconsiderable disadvantage of the legacy is that the disabled child becomes part of the community of heirs. However, the aim of this community is to dissolve, since several heirs inherit the assets jointly and must decide how to distribute them in light of their respective inheritance shares.
In the case of a disability will, this distribution often turns out to be particularly complex, especially if the disabled child is under legal care. However, if the child is merely named as a legatee, he or she only receives a claim under the law of obligations. The surviving spouse or siblings can then fulfill this claim more easily compared to the settlement of a community of heirs.
The disadvantages of the legacy solution lie in particular in the uncertainties often attributed to it, since it is not sufficiently secured by case law.