Probate and Settlement of Estates in Germany – A Brief Introduction
If you inherit property in Germany you will be dealing with a legal system, culture, and terminology that are unknown to you and your local counsel.
German inheritance law provides that decedent’s property and rights are transferred directly to the heirs by operation of law at the time of death. Under German law the same rule applies to decedent’s debts and obligations. Consequently, besides assets you may also inherit debts in Germany. However, you have the option to disclaim an inheritance in Germany (Erbausschlagung).
There is no US-style probate in Germany and, generally, there is no court supervised administration of a decedent’s estate in Germany. Under German law a will may name an executor and provide for subsequent estate administration, but most wills in Germany do not and no personal representative will be appointed to settle the estate.
There are no living trusts under German law. Germany is a civil law jurisdiction which does not recognize trusts. No trustee will take title to decedent’s assets in Germany.
If you are an heir under German law depends on whether decedent left a will. If there is no will you may still be an heir at law under German law of intestate succession. If there is a will, in most cases you will only be an heir if decedent named you explicitly, or implicitly. If you are not an heir under the will you may still be entitled to a forced share of the inheritance, even if decedent intended to disinherit you, as German law provides in general that certain close relatives cannot be entirely disinherited (Pflichtteil).
How do you find out that you may have inherited property in Germany? Anyone who is in possession or control of a will is required to submit it to the Court where decedent was domiciled. The Court will notify you if you may be considered an heir under the will, or an heir at law. Even if decedent did not leave a will heirs frequently have to apply for a certificate of heirship (Erbschein) which is required to transfer title to inherited property in Germany. The certificate is also required to settle bank accounts and claims in Germany. Once the Court receives the application it will notify the potential heirs at law. If the identity of the heirs is not clear the Court may use investigators (heir finders) to locate and contact possible heirs.
Once you obtain knowledge that you have become an heir at law, or under decedent’s will, you have six weeks to disclaim the inheritance, if you have not already accepted it. Heirs who live outside Germany, or are abroad at the time of death, benefit from an extended period. If you live in the US you have six months to disclaim an inheritance in Germany. Please note that certain acts may imply acceptance of an inheritance under German law. If you accept an inheritance in Germany you may be personally liable for decedent’s debts with your own assets.
Most likely, you will face inheritance tax liability in Germany. Germany, unlike the US, does not tax the estate. Each heir and each beneficiary is taxed individually. Tax rates and exemptions vary. They depend on the degree of kinship and the amount inherited. You will have to file an inheritance tax return in Germany.
Once the inheritance tax is paid, or it is determined that no tax is owed, the German revenue service (Finanzamt) will issue a release letter (Unbedenklichkeitsbescheinigung) which banks and insurance companies require before they will release funds to you.
Although there is no general rule, the administration and settlement of an estate in Germany – if it is properly handled from the beginning - is usually less formal, less time consuming, and more cost-efficient than the administration and settlement of a similar estate in the U.S. would be.