In 2015 European Union law led to a major shift of German rules on the conflict of laws for cross-border successions: An EU regulation is applicable on successions of any person who dies on or after 08/17/2015. This EU regulation rules that the applicable law to the succession as a whole is the law of the habitual residence of the bequeather. The habitual residence has to be determined in every individual case and is similar, although not the same, as the definition for a domicile that you might know from Anglo-American jurisdictions. This national inheritance law is applicable to the succession as a whole, including real estate abroad to avoid the partition of a succession.
The EU regulation gives testators an option to chose the law of the country of the testator's nationality, which can be done in a last will that complies with the formal requirements for last wills. The national law chosen by the testator will be applicable to the succession as a whole; there is no option to partition of the estate by applying different national laws on the testator's assets in different countries. Please note that, albeit it is an EU regulation, it did enter into force in all EU member countries. It is applicable law in all EU member countries, with the exception of the United Kingdom of Great Britain and Northern Ireland, the Republic of Ireland and the Kingdom of Denmark.
If an estate is being ruled by German inheritance law, there are some major differences to estates which are ruled by an Anglo-American inheritance law: German law provides, inter alia, that the heir or the community of co-heirs have to take into control and administer the estate, there is no public administrator like in probates ruled by Anglo-American jurisdictions. This also means that an heir can be held liable for the bequeather’s debts. The result of this is that if you are an heir and you do not do anything, the bequeather’s creditors may demand you to pay for the deceased person’s liabilities. To avoid this, there are some ways to avoid such a situation. There are proceedings such as administration or bankruptcy of the estate which can be filed by the heir. If someone does not want to be an heir at all, the inheritance can be renounced; if an hier does not explicitly renounce the inheritance within a certain deadline in a proper form and in German language, he or she will be an heir.
Until 08/16/2015, German inheritance law regulated the succession of German citizens, regardless of their residence. Many other legal systems, like almost all U.S. State laws and English law, state that succession shall be ruled by the law of the last domicile or residence of the deceased. Often, the laws of different countries were relevant to a succession because, for instance, a U.S. citizen had a domicile in Germany and a weekend home in France. For those inheritance cases where a person died before 08/17/2015 the old law is still applicable.
German inheritance or gift taxes apply to virtually all inheritances and gifts that are somehow related to Germany. For example, a gift is subject to German gift tax, if the donor or donee has his domicile by operation of tax law in Germany. Also, German gift tax is imposed on gifted real estate in Germany, no matter where the donor and donee live.
The law firm of Stefan Mannheim is experienced in legal counseling and litigation for foreigners and the testator's surviving dependents abroad. We have also handled many successions involving assets in various countries. We can help you with your estate planning, draft your last will and testament and represent you in court and German tax offices.
Contact us for more details via email or phone:
+49 - 711 - 230 6800