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A dispute over a single cup? Real estate as inheritance

Almost every second inheritance in Germany includes real estate. The inherited home is often the deciding factor in whether an inheritance is valuable or not. So, in theory, anyone who inherits real estate has something to be happy about. In practice, however, inheritance is usually accompanied by grief for a loved one—and a lot of unanswered questions and bureaucratic hassle. Here's what you need to know if you inherit or bequeath real estate.

The will of the deceased is a reflection of the living

If there is a will, this usually simplifies the inheritance process considerably. This is because the testator has already answered many important questions about the inherited property in advance. For example, a sole heir for the property may have been specified, or the spouse may have been granted a lifelong right of residence, or other conditions may have been attached to the inheritance.

A will can either be drawn up by a notary or written and signed by hand. The former version is usually more legally secure, as claims made by the deceased without legal advice are often difficult to uphold in court. For example, a property cannot always be inherited in its entirety by a sole heir. If there are other heirs who are entitled to a statutory share, this must be covered by the remaining assets in the estate.

Inherited real estate always involves an important decision: what should happen to the property? It is often difficult to assess whether selling or renting is the better option. The decision as to whether the heirs want to live in the property themselves is not always easy to make. It is advisable to consider the situation carefully and, ideally, seek expert advice.

Inheritance and land registry

Anyone who owns real estate must be registered in the land register. However, very few homeowners know why these entries are so important. Misinformation can have devastating consequences. It is therefore important to understand them and use them correctly to avoid unpleasant surprises later on.

The scenario: The new owner has died and did not leave a will. As she was unmarried, her children inherit equal shares. This also applies to the property. While the daughter would like to move into her mother's house, her brother would rather sell his share.

The community of heirs

Now, one might think that the son could simply sell his share to his sister, but it's not that simple. This is because the two heirs initially form a community of heirs, which can only dispose of the house jointly. To change this, the two must draw up a dissolution agreement or inheritance settlement agreement and have it notarized.

The distribution of an estate

This contract specifies the amount that the heiress of the house must pay her brother. To do this, it is important to know the value of the property. The two have this determined by a real estate expert. All debts and mortgages that still need to be paid off must also be included. This is also recorded in the land register and is passed on to the new owner. In our example, the house is the only valuable part of the inheritance, as the mother did not have any large sums of money or other valuable possessions. If this had been the case, her two heirs could have decided to divide the various possessions among themselves in the inheritance agreement.

The amendment of the land register entry

The daughter can raise the appropriate amount. However, before she becomes the sole owner of the house, she must have the land register entry changed. The deceased mother is still listed as the owner there. In Germany, heirs have two years to change the land register entry free of charge. A later change is possible, but subject to a fee. In order for this change to be made, the inheritance claim must be proven. To do this, the heirs have a certificate of inheritance issued. In cases where there is a will, this also serves as proof of legitimacy—provided that the claim to ownership is clearly stated therein. In our scenario, the new owner will also present the termination agreement in order to be entered into the land register as the sole owner.

At your side every step of the way

Have you inherited a house and would like to sell it? Before you make a final decision, there are many questions to ask and answer. We won't leave you to deal with it alone and will support you by putting you in touch with competent partners from our network. Benefit from the best connections to selected experts in the fields of tax, law, finance, and insurance. You will quickly receive appointments to clarify all your questions. Contact us now, we are happy to assist you.

A scenario: inherited property

Anyone who decides to bequeath their property should ideally have clear arrangements in place regarding what should happen to their house or apartment after their death. In many cases, however, this is not the case and disputes quickly arise among the surviving relatives about what should happen to the property.

For my relatives, I should note

  • Where my will is located
  • Where I have stored documents such as birth certificates, ID cards, etc
  • Where I keep my tax documents
  • Who has which powers of attorney
  • Which insurance companies need to be notified
  • Number and location of my life insurance policy
  • Where I keep my funeral contract
  • A list of online and offline passwords
  • List existing contracts and accounts

The following options are available to the community of heirs:

The property is for sale

If none of the heirs wish to move into the property themselves or if there is disagreement about who should move in, the community of heirs often decides to sell the property and divide the proceeds. In this case, each of the heirs must sign the purchase agreement and have it notarized. To prevent disagreements about the sale price, it is advisable to obtain a real estate appraisal. In this context, many decide to have the property sold by a real estate agent. After all, in the event of a bereavement, relatives have little time, resources, and energy to deal with the sale in detail.

One of the heirs purchases the property

Another option is for one heir to buy the property from the others in equal shares, i.e., if there are four heirs, he must pay each of the other three 1/4 of the property value, and then the property belongs to him. To be on the safe side, it is advisable to obtain a legally binding real estate appraisal, known as a market value appraisal. The other heirs must transfer their share of the inheritance to the buyer upon payment.

The property is being given away

The property owner can gift their property to an heir at any time – either upon death or during their lifetime. This prevents any potential disputes over the estate. A notarized gift agreement is mandatory in this case.

Questions you should ask yourself when inheriting real estate

Am I the sole heir or part of a community of heirs?

If there is no will, the legal succession determines who is entitled to a share of the property. First-degree heirs are children and grandchildren, who are entitled to a compulsory portion in all cases. The spouse also receives at least one quarter of the inheritance. Second- and third-degree heirs are only considered if there are no first-degree heirs. So if you are the only child of your deceased parent and have no children of your own, you are the sole heir. In most cases, however, there are several heirs under the statutory succession rules, who then form a community of heirs. This community of heirs is a legal entity that must make decisions about the inheritance jointly. This means that one heir cannot decide to sell their share of the property while another retains their share. To do this, a contract of termination must be drawn up, specifying exactly who is entitled to which part of the inheritance.

Do I have to pay inheritance tax?

There is no general answer to this question. Whether and how much inheritance tax you pay depends on the value of the property, your relationship to the deceased, and how the property is used. If you inherit from your parents, the tax allowance is €400,000. If your property is worth less than this, you do not have to pay inheritance tax. If, on the other hand, you inherit from your grandparents, the allowance is only €200,000. It is often worthwhile to obtain an independent valuation of the property from a real estate expert, such as a real estate agent, because the tax office bases its estimate solely on the local price index. Individual characteristics of the property, such as a damp basement or poorly insulated windows, are not taken into account. The amount of tax payable also depends on the value of the property.

Incidentally, exemption from inheritance tax is possible if the deceased was either your spouse or a parent who lived in the property before their death. If you already live in the property or move in immediately after inheriting it and remain there for at least ten years, no inheritance tax is payable.

Protecting relatives

The topic of inheritance is something that most people would prefer to avoid as much as possible—your own death or that of a loved one is not something you want to think about. However, in the event of an emergency, it is a great relief for everyone involved if provisions have already been made. After all, if you set the course for tomorrow today, you can look to the future with peace of mind. We would be happy to advise you on this and work with you to make all the necessary decisions

If you make provisions today, you won't have to worry about tomorrow: We would be happy to advise you on your options for what should happen to your property in the event of inheritance.

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Regardless of who owns the property in the future, e.g., through sale or transfer to family members, I can continue to live in the property for the rest of my life.

What are the benefits of lifelong right of residence?

Which is better: bequeathing real estate or gifting it?

Both are subject to legal and tax considerations. Therefore, always seek professional advice in advance.

Both have different advantages and disadvantages. It depends on your personal situation.

Which is better: real estate annuity or lifelong right of residence?

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