Settlement of the community of heirs

If several people inherit a deceased person, a community of heirs is created. The community of heirs is not intended to exist for a long period of time. Therefore, the main aim of the community of heirs is to dissolve itself. Pursuant to Section 2042 (1) BGB, each co-heir has the right to demand dissolution, unless otherwise stipulated in Sections 2043 to 2045.

 1. Who is responsible for settling the estate?

If the testator has not appointed an executor, the heirs are responsible for settling the community of heirs. However, if the testator has appointed an executor, it is the executor's task to dissolve the community of heirs.

2. can the testator permanently prohibit the division of the community of heirs?

Pursuant to Section 2042 (1) BGB, each co-heir generally has the right to demand the settlement of the community of heirs. However, this right can be excluded, at least temporarily, by testamentary disposition in accordance with Section 2044 (1) sentence 1. However, Section 2044 para. 2 sentence 1 stipulates a maximum period of 30 years after the occurrence of the inheritance for the effectiveness of this disposition. Prior to the expiry of this period, the settlement of the community of heirs can only be demanded pursuant to Section 2044 para. 1 sentence 2 in conjunction with Section 749 para. 2 sentence 1 BGB if there is good cause.

In the context of interpreting the will, however, it must be determined in the specific case whether the disposition in question is a legally non-binding request or advice or a prohibition of division (Karlsruhe Higher Regional Court (11th Civil Senate), judgement of 09/02/2022 - 11 U 7/21, para.27).

3. can the testator permanently prohibit the community from disputing certain items of the estate, such as real estate?

In principle, the testator can limit the prohibition of division to individual items of the estate in accordance with Section 2044 (1) sentence 1 BGB (Karlsruhe Higher Regional Court (11th Civil Senate), judgement of 09/02/2022 - 11 U 7/21, para.27) . However, the maximum period of 30 years from the occurrence of the inheritance must also be observed for the validity of the disposition.

4. can the co-heirs jointly override the testator's instructions?

Yes, the co-heirs can jointly disregard the testator's instructions.

It is important to note that the prohibition of settlement is only a restriction under the law of obligations and not a restriction in rem. If the heirs violate the obligation to refrain under the law of obligations, the in rem effect of the disposal transaction is not affected (Cottbus Regional Court, decision of 18 July 2022 - 7 T 128/21, BeckRS 2022, 30614, para. 17; KG, decision of 25 May 2021 - 19 W 26/21, ErbR 2022, 149 (154)). This was originally established by the BGH in its judgement of 25.9.1963 (Ref. no.: V ZR 130/61).

The prohibition of division applies both to the assertion and fulfilment of the right to division in accordance with Section 2042 (1) BGB. If there is agreement among the co-heirs, they can dissolve the community of heirs without further ado due to the effect under the law of obligations and disregard the prohibition of division as well as a division order of the testator (OLG Munich, decision of 29 August 2018, 8 U 3464/17, para. 22). Something else only applies if the testator has favoured persons outside the community of heirs by means of a condition or a legacy and for this reason there are authorised executors who wish to enforce the prohibition of settlement in their own interest.

(5) How should a penalty clause in a will be interpreted according to which the testator instructs that the co-heir who, contrary to the testator's instructions, pursues the settlement loses his or her inheritance rights and only receives the compulsory portion?

The penalty clause is to be classified as a so-called special forfeiture clause, which makes the demand for settlement by a co-heir a resolutory condition for his or her inheritance. 

According to the BGH, a testator's instruction to make the validity of a testamentary bequest dependent on the fulfilment of a condition is not expressly regulated. However, it is generally recognised and follows from Sections 158 et seq. in conjunction with Sections 2074 et seq. BGB that such an arrangement is possible. The corresponding condition can be based on specific behaviour (BGH, judgement of 24. 6. 2009 - IV ZR 202/07 (OLG Munich), para. 17).

6 What options are there for dividing the estate?

1. Amicable division of money and property
2. Sale of the inherited portion
3. Stratification and accretion
4. Lawsuit and trial

If the heirs by mutual agreement agree on a comprehensive solution, it is sufficient to terminate the community of heirs by Inheritance distribution agreement. This contract requires the signature of all co-heirs and forms the basis for the distribution of cash and assets.

An essential prerequisite for such a contract is that the Maturity for divisionis reached. As a rule, the estate is ready for division when the community of heirs has settled all the liabilities of the estate and the remaining estate can be divided.

Various criteria must be met in order to be ready for division.

• Determination of the inheritance shares:First of all, it must be clarified who has become the heir.
• List of all assets and liabilities: In order to maintain an overview of all assets and liabilities, a list of all assets and liabilities should be drawn up.
• Settlement of all estate liabilities: Before the division can take place, the deceased's debts must be repaid.
• Implementation of the testator's instructions: Special instructions of the testator, such as compulsory portion claims or legacies, must be fulfilled. The community of heirs can unanimously override the testator's division instructions.
• Clarification of equalisation claims of the co-heirs: If a co-heir receives an asset that exceeds the value of his or her inheritance share, the other co-heirs can demand an equalisation payment. An equalisation payment can also be demanded if a co-heir has cared for the deceased prior to their death.
• The testator is not prohibited from disputing: The testator may prohibit the settlement for a period of 30 years. However, this order can be overridden unanimously by the community of heirs.
• No effective postponement of the dispute:Pursuant to Section 2045 of the German Civil Code (BGB), every heir can request the postponement of the settlement as long as a procedure for the imposition of a public notice has not been completed. This serves in particular to protect the community of heirs as long as it is unclear whether there are any other creditors. If a co-heir fears that there are still claims against the estate, he or she can apply for a stay of proceedings and thus delay the settlement until the proceedings have been concluded. The application is submitted to the local court and does not require a majority decision of the community of heirs; each heir can submit it alone. Once the application has been submitted, the court sets a deadline by which creditors must register their claims.
• Possibility of dividing the estate without loss of value: A division of the estate without loss of value is only possible for divisible items. This applies in particular to money or securities. This is more difficult in the case of property and land. Here, either an agreement must be reached between the heirs or the property must be converted into cash as part of a partition auction. The resulting money can then be divided among the heirs.

Co-heirs who either wish to realise their inheritance share immediately or who feel tired of the dispute in the community of heirs have the option, to sell their inheritance.The consent of the other co-heirs is not required for this. Potential buyers can either be the other co-heirs or external persons. It should be noted that the other co-heirs have a two-month right of first refusal. This enables them to prevent external persons from gaining influence in the community of heirs. Once the contract has been concluded, the co-heir receives the countervalue agreed in the purchase contract, which does not necessarily have to be identical to the value of the inheritance share.

Under the term „Stratification“is understood to mean the waiver of a co-heir's share of the inheritance in return for payment of compensation by the other co-heirs. This leads to „Accretion“of the remaining inheritance shares. The amount of the settlement is determined by the agreements made between the heirs.

7. is there a right to only partial settlement of the inheritance?

In principle, there is no entitlement to a partial settlement of the community of heirs. Co-heirs often mistakenly assume that they are entitled to payment of an account balance in proportion to their inheritance share. However, this is not the case. The claim for settlement is not directed at individual items of the estate, but only relates to the estate as a whole. However, if all heirs agree to initially limit the settlement to individual items of the estate, this is of course possible. This case occurs relatively frequently in practice. Jewellery, cash and accounts are usually divided up first. Immovable property such as real estate is then distributed.

Incidentally, case law is extremely restrictive with regard to partial settlement. In its ruling of 9 January 2013, the Higher Regional Court of Koblenz stated that a partial settlement can only be demanded by co-heirs in exceptional cases if this is justified by special reasons and the interests of the community of heirs and the other co-heirs are not impaired as a result (Ref.: 3 W 672/12).

8. can the settlement of the community of heirs be enforced?

If co-heirs object to the division of the community of heirs, individual or several co-heirs can attempt to enforce their division plan for the entire estate in court.

The prerequisites for the action for distribution of the estate include

• It is not possible to bring an action for the dissolution of an estate if the testator has not prohibited the dissolution of the community of heirs. If the testator has made such an arrangement, all co-heirs must agree to the dissolution.
• In addition, the estate must be ready for division. This is the case when all liabilities of the estate have been settled.
• Furthermore, it must be determined who all belongs to the group of co-heirs.
• The plaintiff co-heir must submit a division plan that takes into account all heirs with a corresponding share of the inheritance.
• A further requirement is that the division plan must have been expressly rejected by a co-heir before the action is filed.
• In addition, indivisible items of the estate must have been converted into a divisible amount of money through a partition auction.

9 What must be observed if there are minors in the community of heirs?

Due to a lack of legal capacity, underage heirs cannot participate independently in the transactions of the community of heirs. Instead, they are represented by their parents. However, if they are also part of the community of heirs, they cannot effectively represent the child, as otherwise a case of „self-dealing“ will occur, which is prohibited by law. In this case, a so-called supplementary guardian must be appointed.

10. is there a time limit for the dispute?

No, there is no deadline for the settlement of the community of heirs.

It is up to the co-heirs alone to decide when the community of heirs should be dissolved. This results, among other things, from the wording of Section 2042 BGB, which states: „Each co-heir can demand the dissolution at any time“.

11. is there a limitation period for the dispute?

The claim pursuant to Section 2042 BGB for the settlement of the community of heirs is not time-barred. § Section 2042 (2) BGB refers to Section 758 BGB. This states that the claim for dissolution of the community is not subject to the statute of limitations.