Estate Planning By Contract
German civil law is governed by the principle of private autonomy. Regarding inheritance law, the testator can thus devise his assets whichever way he/she desires. Yet, that autonomy is not without factual restrictions. It is, for example, not possible to totally disinherit certain relatives. If they are not appointed as heir, they may claim a compulsory share from the heirs appointed by the testator. The testator can also be bound by a joint will or a contract of inheritance. However, as he is not legally obliged to make a joint will or conclude a testamentary contract, it is his/her free decision whether he/she will restrict his/her authority to dispose of his/her assets.
According to German law, a testamentary contract or contract of inheritance is only valid if recorded by a notary in the simultaneous presence of both parties. There is no such thing as a “holographic testamentary contract” or the possibility to make one before a mayor or three witnesses as the law provides for regarding a will in case of emergency.
Whereas individual dispositions contained in a will may be revoked as much as the will to its full extent, the testator, as a rule, is bound by the dispositions made in a testamentary contract. There are a good many reasons to commit oneself by this means: E.g., children with good training and excellent career prospects may make their employment with a family business conditional on them inheriting (part of) the business. Or, a testamentary contract is the only alternative to a joint holographic will that spouses can make. We would be pleased to advise you whether a testamentary contract may suit your situation and, if so, how it should be designed.
Contract on Renunciation of Inheritance or Compulsory Share
We also assist you with drafting estate planning contracts dealing with renunciation of inheritance or compulsory shares. Under German inheritance law, a contract on renunciation of inheritance, e.g., may be a tool to avoid the discrimination of potential heirs if the testator wants to provide a child with funding so he/she can set up a business. However, with such a contract, it is only possible to renunciate the right of inheritance, be it in part or entirely. Renouncing certain assets is not possible. This is a difference to the renunciation of a compulsory share: It is possible to stipulate that certain assets of the inheritance may not be considered when calculating the compulsory share. Also, a ceiling amount may be agreed upon or the considering of gifts made to the person entitled to a compulsory share when calculating its compulsory share after the testator’s death. Last not least, testator and potential heir may agree on installment payment or a deferment of payment.