Estate concerns: “Help, I have inherited”
Inheritance — that sounds like future peace of mind and luxury living, but the reality is often completely different for now. Anyone who has received surprising consideration should not put off rummaging through documents and account statements. Author: Florian Junker
Get rich out of the blue through an inheritance? That is definitely not the norm. Most inheritances tend to be in the lower five-digit range. With so many people concerned, there is hardly anything or even only debt (see chart). However, regardless of the amount of the estate, heirs may in any case take care of a large mountain of paperwork.
Forecast for the distribution of inheritance volume in Germany
“In principle, the so-called footsteps theory applies: heirs succeed the deceased for everything, this applies to assets as well as liabilities and most other obligations,” explains Carolin Vogel, tax law specialist at the Munich law firm CHP in an interview. This also means, for example, that the heirs still have to file the last tax return and that any resulting tax liabilities must also be paid. Anyone who becomes an unexpected heir should not only quickly consider whether they really want to be that.
No one has to inherit — if they hurry
Because as soon as someone learns of an inheritance, they have six weeks under German law to completely refrain from it. If he does nothing at all during this time, the inheritance is automatically considered accepted. A waiver must either be declared in person to the competent district court or obtained with a document certified by a notary. Important to know: There is no such thing as cherry-picking, it's all or nothing. This means that it is not possible to take out a share portfolio, for example, but to forego the indebted house in need of renovation. It is therefore important to fight your way through all the testator's documents as soon as possible and also to clarify the current situation with banks and insurance companies. This is because the deadline for waiving cannot be extended in principle.
“In individual cases, it is often not so easy to obtain information, because many banks do not provide any information without a certificate of inheritance issued by the probate court, for example,” says CHP expert Carolin Vogel. However, if this is requested, this can be regarded as acceptance of the inheritance. If there is such a thing, a notarial will can alternatively be presented that identifies you as an heir. In the case of privately written handwritten wills, this can also work if it can be proven that proceedings have already been opened before the court. “But it would be even better if the testator informed his future heir about the hereditary material while he was still alive,” advises the specialist lawyer. Even though it is not the rule, many can still look forward to a significant increase in wealth in the event of an inheritance, but here, too, there is no need to wait too long.
The first steps
If you don't turn down an inheritance, it's important to think about how it can be embedded in your own financial planning as soon as possible. As a first step, we recommend a status quo analysis of all assets and liabilities. “Everything has to be on the table,” says Samir Zakaria, financial planning expert and H&H site manager in Frankfurt.
Multi-banking tools such as the digital asset cockpit provide a clear presentation. This is the only way to make sensible decisions and answer initial questions: Are there any cluster risks in an asset class? What is the risk structure of the investments? Does this fit my risk tolerance? Do the “maturities” of investments coincide with my investment horizon? Does your own inheritance planning possibly have to be adjusted? What return expectations are the basis for the individual positions?
Financial plan brings added value
“A precise cost-benefit analysis for inherited real estate is essential,” Zakaria adds, “a renovation backlog in particular can have an impact on the heir's financial situation.” In order to obtain an even more precise basis for deciding on asset structuring, it is advisable to have complex assets prepared in addition to a status quo analysis as well as a financial plan. This is possible at Hansen & Heinrich through trained Certified Financial Planners. For many wealth owners, family security comes first, so this is often a focus of consideration.
A private financial plan takes a look at the future and examines liquidity and asset development, taking into account risk scenarios such as occupational disability and death. “Parameters such as higher inflation or future cash flows from insurance should also be included in the planning,” explains Zakaria, “in order to create realistic scenarios for the financial future.” Even though it is important to make quick considerations in the event of an inheritance, these should be based on a holistic analysis. “Expert support is usually essential here,” Zakaria concludes.
“Anyone who inherits unexpectedly should take action! ”
In order to avoid negative financial consequences, time is an important factor when an inheritance occurs, explains Carolin Vogel, a specialist in tax law at the Munich-based law firm CHP.
How does an heir outside the family find out that he has inherited?
bird: Anyone who does not belong to the immediate family usually finds out about an inheritance through a letter from the probate court. However, to do this, the court must first become aware that the testator has died. Once the will has been filed with a court or a notary or someone from the family presents it, the heirs named therein will be informed.
Why is it important to pay attention to the time and not wait too long?
bird: Heirs have a six-week period to decide whether they want to inherit or not. The time runs out as soon as you become aware of the inheritance, and the period cannot be extended. Ideally, the testator and heir have therefore discussed everything well beforehand and the inheritance does not take you unprepared. If all of this is a big surprise, it makes sense to seek advice from experts as quickly as possible.
In which cases is it advisable to refuse an inheritance?
bird: Heirs are virtually following in the footsteps of the testator and this applies to assets as well as liabilities. It is not possible to just pick out the positive things, but the all or nothing principle applies. If the total debt is higher than the value of the estate, it makes sense not to take up the succession in the first place. But this requires closer examination.
Why is it highly recommended to pay attention to appointments, especially when it comes to inherited real estate?
bird: There are several aspects of why timing plays a role, such as holding periods when taxing profits. If, for example, the family home and the spouse or children of the testator live in it for another ten years, there is usually no inheritance tax for the deceased. The right of ownership, i.e. the registration of heirs in the land register, is also only free of charge for the first two years, which can mean significant cost savings.
Why are communities of heirs often the starting point of disputes, especially when it comes to real estate?
bird: If more than one person inherits a property, this automatically always leads to a community of heirs and a need for coordination. That is not a problem if everyone agrees, but experience has shown that this is not always the case. The more people are bound together in a community of heirs, the more difficult it can be to agree on a joint approach here. What restructuring measures are being carried out, for example, who is allowed to move in, and under what conditions is renting out? This often leads to a dispute and ultimately a sale of the property, which may not necessarily be the best solution.
Does it make more sense at the moment to keep a property or is it better to sell?
bird: There is no general answer to this question and depends on many factors in individual cases, such as the situation, demand for rent or the need for restructuring. But in principle, real estate remains popular as a long-term asset class. In individual cases, however, possible costs and the time required, for example for maintenance or rental, must be included. However, particularly in view of high inflation in recent years, the proverbial concrete gold is likely to retain its legitimacy as a stable asset class in a broad-based mix of assets.
Important five steps as a sudden heir:
- Anyone who finds out about an inheritance should not wait, but immediately get an overview of the assets and liabilities. In order to obtain information from banks and the like, a certified will or a court opening report of the inheritance is usually required. If there are uncertainties, it makes sense to seek advice from experts such as lawyers and tax advisors who are familiar with such topics as possible right from the start.
- After six weeks, are you unsure whether it is better to forego the inheritance altogether? You can then apply for estate administration. Here, an administrator appointed by the probate court first pays the debts from the inheritance; in addition, the costs of estate administration are deducted from the inheritance. The big advantage: If the money is not enough, the heir is not liable with his private assets.
- It only becomes clear to you after a few months that your heir may not be a “golden goose” after all, but a “bottomless pit”? Good to know: The estate administration can be applied for up to two years after the inheritance has occurred.
- Missed it all? Then there is a last resort, probate bankruptcy proceedings. Here, too, liability for the testator's debts is limited to the existing estate. This “insolvency” has no effect on the heir's creditworthiness, but costs fees and proving that the inheritance is over-indebted can be labor-intensive.
- Surely there is a positive result for your inheritance and does it involve multi-digit amounts? Then you should get an overview of your financial and life situation. This is because anyone who cleverly positions larger sums of money early on can build up significantly more for retirement, for example in old age or save taxes by transferring the inheritance to children if the inheritance is passed on in good time.
Only a few inherit much, some just debts
For more than half of the inheritances, the volume is less than 75,000 euros. Only one out of 50 cases of inheritance transfer more than one million euros. In 13 percent of cases, the inheritance is worth nothing financially or even consists only of debts; in these situations, it may be beneficial to consider waiving it within the six-week period.
H&H and Erblotse
The complexity of inheritance law and unclear duties and tasks can put heirs in a difficult position. There are also many uncertainties when it comes to inheritance, as you always want to ensure that you do everything right. We cooperate with Erblotse.de, a tool that helps you in these situations. For heirs, the Erblotse provides answers to important questions and guides you step by step through your individual inheritance. When bequeathing, he helps you to record your wishes in a legally valid manner and gives you clear recommendations for action quickly and easily.
Inheriting is easy with Erblotse.
Note: The original text by editor Florian Junker was edited and adapted by Hansen & Heinrich before publication.
