Claim to a compulsory portion under German heritage law - Necessary information in the estate inventory

Is information on the decedent's marriage required in the estate inventory?

Not only assets must be included in the estate inventory, but also legal relationships that are of significance for the calculation of the claim to the compulsory portion. Thus, it is decisive for the compulsory portion whether the decedent was married and in which matrimonial property regime the decedent lived, for example, whether a marriage contract was concluded and separation of property or community of property was agreed. Other matrimonial property regimes, in particular foreign matrimonial property regimes, are also possible and must be stated, even if the succession is governed by German inheritance law.
The information must also cover whether divorce proceedings were pending. If this is the case, further information must be provided, namely whether the prerequisites for the divorce of the marriage existed, whether the divorce was applied for by the testator or whether the testator had consented to the divorce application of the surviving spouse. This is because it depends on this whether the spouse belongs to the group of statutory heirs and is entitled to a compulsory portion or whether he or she no longer has any claims due to the procedural status of the divorce proceedings. The statutory inheritance quota and thus the compulsory portion quota of the descendants of the decedent then also depend on this in turn.
The information is therefore important for determining the inheritance quota, so that it is needed to determine the basis for calculating the compulsory portion claims. With regard to a marriage of the decedent, the following questions must therefore be answered as part of the estate inventory - but only insofar as a special case arises.

1. Was the decedent married?
2. According to which legal system is the marital property status of the spouses to be assessed?
2.1 When did the spouses marry?
2.2 Where did the spouses marry?
2.3 What was the nationality of the spouses at the time of marriage?
2.4 Where did the spouses live at the time of the marriage? 3.
3. If German matrimonial property law applies, did the spouses conclude a marriage contract? If so, what matrimonial property regime did the spouses agree on? 4.
4. Were divorce proceedings pending at the time of the inheritance?
4.1 If yes, were the conditions for divorce of the marriage met?
4.2 Was the divorce requested by the decedent?
4.3 If no, did the decedent consent to a petition for divorce filed by his spouse?

What is meant by the "actual estate"?

The amount of the claim to the compulsory portion is determined on the one hand by the compulsory portion quota and on the other hand by the value of the estate. In order to be able to quantify his claim at all, the beneficiary of the compulsory portion must therefore receive information about which assets belong to the estate. In addition to the claim to information on the individual estate items, the beneficiary of the compulsory portion has an independent claim to a valuation.

The calculation of the compulsory portion claims is to be based on the adjusted estate value. This is also referred to as the "net estate". The net estate is the sum of the values of all estate assets less the estate liabilities. The estate assets are also referred to as assets. The estate liabilities are also referred to as liabilities.

Objects of the estate in this sense are not only physical objects such as cars, jewelry and real estate, but also claims, receivables and rights.

When the term "actual estate" is used, it refers to the estate at the time of inheritance. The heir must therefore submit a list relating to the date of death. The information regarding the decedent's actual estate is to be provided with regard to the estate items that were in the decedent's assets at the time of the succession, i.e. at the time of the decedent's death. Objects of the estate or estate assets that were already no longer part of the decedent's assets before this effective date are consequently not part of the actual estate. Assets that were already no longer part of the decedent's estate prior to the date of inheritance may, however, have to be taken into account under certain circumstances within the scope of the information on the fictitious estate.

Example: If the decedent died on January 31, for example, the exact bank balances, including an interest rate, as of January 31 must be disclosed. Bank statements showing a balance as of February 1 are not necessarily meaningful if, for example, entries were still being made on February 1. With regard to bank balances, the information that banks are required to provide to the tax authorities under Section 33 of the Inheritance Tax Act (ErbStG) is helpful. This information lists the balances as of the reporting date.

The actual estate can therefore change considerably, depending on whether the testator made any dispositions before his death. If, for example, the testator transferred CAN$ 100,000.00 from his currency account to his wife's account one day before his death, the actual estate on the day of his death is CAN$ 100,000.00 less than it would have been if the testator had died one day earlier.

The actual compulsory portion claim relates to the actual estate. It is easy to see that the right to a compulsory portion could easily be circumvented by shifting assets even shortly before the testator's death, if these shifts were in principle no longer relevant. However, dispositions made during life to the detriment of the testator's assets can be of significance in the context of the so-called claim to supplement the compulsory portion.

What is meant by the "fictitious estate"?

As already mentioned, the actual estate as it appears on the date of death can depend quite considerably on whether assets of the decedent were transferred - possibly even very shortly before the inheritance. If the testator made acquisitions before death, this does not initially lead to an outflow of assets from an accounting perspective. If, for example, the testator purchased a painting for US$10,000 shortly before his death, his bank balance may have decreased. However, the painting must now be added to the assets, which - assuming no change in value - must then also be valued at US$10,000. Such a transaction would therefore have no mathematical effect on the claim to the compulsory portion - even if valuation difficulties may naturally arise in the case of non-liquid assets such as paintings and jewelry. Since such transactions, which are in an exchange relationship, are therefore initially irrelevant, there is also no special statutory provision for them. The same also applies if the consideration which the testator received for his disposition of property has been consumed, because of course it is in principle up to the testator whether and to what extent he wishes to consume his assets during his lifetime, e.g. through giants, celebrations and a generally luxurious lifestyle. The testator himself is not subject to any limitations here, even if the expenditure is out of proportion according to the usual standards, at least up to the limit that an incapacity must be assumed. The situation is different if the testator transfers his assets without receiving anything in return. The legislator regulates such behavior in such a way that it then sets aside for the beneficiary of the compulsory portion, in addition to his claim to the compulsory portion, which relates to the "actual estate" on the reference date of the testator's death, a so-called claim to a supplementary compulsory portion. As the name suggests, the compulsory portion is to be supplemented under certain conditions. In fact, not only the compulsory portion, but under certain circumstances even the inheritance portion is supplemented.

With regard to the fictitious estate, the heir must also provide information on gifts and gratuitous donations made by the decedent to the heir or heirs and to third parties. This also includes benefits of use that the testator has granted free of charge, in particular the use of living space.

What information must be provided on the decedent's immovable assets, in particular real estate?

The heirs' duty to provide information regarding the decedent's immovable assets extends in particular to the following assets:

- Developed real estate
- Undeveloped real estate
- Agricultural land
- Condominiums
- Usufruct of real estate
- Residential rights

What are the typical value-forming factors of physical estate items (property)?

Since the claim to information is intended to provide the beneficiary of the compulsory portion with a basis for calculating his or her claim to the compulsory portion, in addition to the designation of the individual movable assets, the factors that are significant for the formation of value with regard to these assets must also be stated. As a rule, the following factors are to be stated as value-forming factors with regard to the decedent's movable assets:

- Age
- date of purchase
- manufacturer
- serial numbers
- Information about the functionality
- existing guarantee- warranty claims
- Condition of the object
- In the case of a motor vehicle, the mileage, the first registration and information on the absence of accidents.

How detailed must the information on the value-forming factors of the estate objects be?

Within the scope of his duty to provide information, the heir must not only name the individual assets. Rather, the heir must also specify the value-forming factors of the respective estate item, already in order to fulfill his duty to provide information. In order for the beneficiary of the compulsory portion to be in a position to understand the value of the decedent's estate items on the basis of the information provided, the information must be provided in such a way that the beneficiary of the compulsory portion can determine which items are specifically involved. This is a prerequisite for the beneficiary of the compulsory portion being able to determine the market value on the basis of the information provided.
In the case of some estate items, it is difficult to state all the factors that determine the value. These can arise on the one hand from the complexity of the individual estate item (real estate, jewelry) or from the quantity of the items (as in the case of extensive household effects).
Thus, with regard to real estate belonging to the estate, the question arises as to what information the testator must already provide within the scope of the estate inventory. For example, must all the information in the land register sheet be provided, or only information on the land register sheet, the location and the ownership? What information is to be provided on the development? In practice, however, there is rarely a dispute about the scope of the information expected from the heir with regard to real estate, because value assessments are almost always required and obtained. The information on the factors that determine the value of the property can then be taken from the expert's valuation report. However, both claims, i.e. the claim to the provision of information through the submission of an estate inventory and the claim to a valuation, are generally treated separately by case law. Court decisions repeatedly indicate that the two claims must be distinguished, which may also be of significance for a different limitation period. The distinction between the claims means, among other things, that the heir who has been requested by the beneficiary of the compulsory portion to submit an inventory of the estate is not obliged to obtain an appraisal at the same time without a separate request. If the heir does so, he or she may not be able to deduct the costs of the valuation as estate liabilities. This raises the question of how detailed the heir's information on the value-forming factors must be in order for the heir to fulfill his duty to provide information. In practice, the decedent's jewelry and household effects are particularly problematic.

With regard to jewelry belonging to the estate, the heirs usually lack the expertise to provide sufficient information on the value-forming factors. If the heir has knowledge of the degree of purity or fineness of the precious metals used, for example because they are stamped on the piece of jewelry, he will be able to state this. With regard to the market value of a piece of jewelry, however, the information is only meaningful if the piece of jewelry - which is not infrequently the case - is determined only by the material value and the craftsmanship beyond that does not carry any weight. More difficult is the indication of the carat of the processed gemstones. The indication of the carat is not sufficient to determine the value. Cut, clarity and color are equally decisive for the value of a gemstone. In addition, of course, there is the condition of use. Without a special expertise, the heir will not be able to give any information about the value-forming factors.

The practice tries to help itself by attaching pictures of the individual jewelry items to the estate inventory. We also recommend this from time to time. However, it is unclear whether the beneficiary of the compulsory portion can be referred to this or whether he/she cannot rather demand that the heir describe the objects of the estate to him/her in detail and provide information that will enable them to be valued. Even if the beneficiary of the compulsory portion has not explicitly requested an appraisal, the heir must decide whether to have an appraisal prepared or to run the risk of possibly submitting an incomplete estate inventory. The latter alternative course of action can be costly for the heir if the beneficiary of the compulsory portion pursues his claim in court and the heir - because he has defaulted on his obligation - has to bear the costs of the legal dispute. However, the heir will also be reluctant to commission an appraisal without being asked to do so because of the often very high costs involved. The reference that the beneficiary of the compulsory portion is economically involved in the costs of a value appraisal, at least in the amount of his compulsory portion, is usually not convincing. On the one hand, the heir must make advance payments and can only deduct the costs as a liability item in the estate inventory. On the other hand, the share of the costs depends on the proportion of the compulsory portion, so that those entitled to a compulsory portion with only a small proportion find that insisting on a valuation is an effective lever for improving their negotiating position.

Must information also be provided on items that are jointly owned by the testator and his or her spouse or whose ownership situation is unclear?

Information on the decedent's movable assets must be provided in such a way that the beneficiary of the compulsory portion is able to determine the value of the movable assets on the basis of this information. For this reason, the heirs are also obliged to indicate in the estate inventory those items in which the decedent had an interest only by way of co-ownership or joint ownership.

Even if the ownership and possession situation is unclear, the objects of the estate must be stated. The information is also required because otherwise the possibly lay assessment of the heir would be decisive as to whether an item belongs to the estate or not. Since the beneficiary of the compulsory portion can essentially only form a picture from the information provided by the heir, such items must therefore also be stated that could belong to the decedent's estate - even if the heir is of a different opinion in this respect. It is likely to be of significance whether an object of the estate was in the possession of the testator at the time of the inheritance. Even if the object was not owned by the testator, it is advisable to indicate with a corresponding note what ownership situation deviates from ownership. The right to information is intended to enable the beneficiary of the compulsory portion, with the help of the information to be provided, to make up for his deficits with regard to knowledge of the testator's estate. Restrictions on the duty to provide information about the testator's movable assets from the point of view of co-ownership or an unclear ownership situation are incompatible with this function of the right to information.

What rights and claims of the decedent must be disclosed in an estate inventory?

All rights and claims to which the decedent was entitled at the time of the inheritance must be included in the estate register without exception. In practice, the most important category of rights and claims are certainly the claims of the decedent against banks and credit institutions, since most decedents held at least one account at the time of their death. Of particular importance are

- credit balances on bank accounts,
- credit balances on savings bank accounts,
- credit balances on savings accounts at banks and savings banks, and
- credit balances on time deposit accounts.

The obligation to provide information in this regard extends to the specification of the bank or savings bank holding the account, the branch and the account number or IBAN, as well as whether the account is an individual account of the decedent or a joint account.
In the category of claims against banks and savings banks, safe deposit boxes and their contents must also be mentioned.

Securities accounts are also to be indicated, stating the entity managing the account and the individual securities held in the account, stating a securities identification number that enables the security to be identified, e.g. ISIN (International Securities Identification Number) and the quantity of the security ( e.g. 1000 shares Volkswagen (VW) vz. ISIN DE0007664039).

Receivables from employment relationships include claims to vacation pay, claims to severance pay already accrued, bonus payments, death benefits, outstanding salary claims. The amount of the claim and the employer as the debtor of the claim must be indicated.

The subcategory of participation under company law includes, for example, shares in companies under the German Civil Code (BGB), partnership companies, stock corporations and limited liability companies, as well as cooperative shares.
If the estate includes company shares, it is again not entirely clear to what extent the heirs must provide information about the company and its key figures. Certainly, the heirs must provide the information necessary to identify the company and the extent of the shareholding. However, the naming of all value-forming factors, i.e. all circumstances that are necessary to determine a company's value, should not be required within the scope of the information stage - at least not without further request, because the amount of data appears to be too extensive to be recorded in an estate inventory. Here, too, problems arise in practice less at the information stage, i.e. within the scope of the estate inventory, since - as in the case of real estate - the claim for valuation is usually also asserted and thus the value-forming factors of a shareholding under company law are worked out within the scope of an expert's valuation report. It also follows from the relevant case law that the beneficiary of the compulsory portion has a claim in relation to the decedent's shares in the company that he or she be provided with those documents, records and deeds that are necessary in order to be able to determine the value of the shareholdings. The same applies to this obligation to present documents as to the decedent's real estate holdings. The beneficiary of the compulsory portion is also entitled to have the value of the decedent's company shares and participations in companies determined by the heirs.

It is not important whether the companies or firms are legal entities or partnerships. It is true that different disclosure requirements apply depending on the legal form. However, this distinction is of no further significance in the law on the compulsory portion, since the beneficiary of the compulsory portion is entitled to information on the shareholding in a company regardless of the legal form of the company and is entitled to information on the factors forming the value. Furthermore, it is irrelevant for the claim to information on the merits whether the companies and firms were continued or discontinued after the death of the decedent, because due to the cut-off date principle only the time of the inheritance is relevant. However, the prospects of future profits from the perspective at the time of the inheritance will naturally influence the value of the shareholding in the company, and a shutdown of the business, liquidation or insolvency of the company at a later point in time is likely to have already been planned as a rule at the time of the inheritance, at least insofar as the time gap between the inheritance and the event is not too great. The right to information also extends to any claims to compensation arising from the partnership agreements.

With regard to the duty to provide information, it is irrelevant whether the claims in question are enforceable. Therefore, the claims and rights must be included in the estate register even if the claims are time-barred or disputed. However, supplementary information must then be provided, i.e. it must be stated whether the claims are already time-barred, whether the plea of limitation has already been raised. If a claim is disputed, the circumstances from which the uncertainty regarding this claim arises must be presented. As in the case of movable items belonging to the estate, those whose existence or enforceability is questionable must therefore also be stated with regard to claims and rights. Here, too, it is not the layman's idea of the heir that counts. Finally, however, there must be some indication for the heir that the claims and rights belonged to the decedent.

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