The decision to disclaim an inheritance should not be taken lightly
Issue – Directive disclaimer of an inheritance
In a recent court case, the children of a father who had passed away had also been thinking about a ‘directive disclaimer of the inheritance‘. They disclaimed their inheritance under the assumption that, by doing so, their widowed mother would be made the sole heir and the sole owner of the home in which she had been living. This is because, in the event that the inheritance is disclaimed, the act of inheriting is deemed not to have taken place from the outset and the order within the line of inheritance will be as if the person disclaiming the inheritance had never lived.
However, the parties involved had overlooked that – hitherto unknown to them – the father had half-siblings who then, in accordance with the legal order of inheritance, became the heirs instead of the children and, thus, not solely their mother as they had ultimately planned. With reference to this mistake, the deceased person’s son appealed against his renunciation declaration and requested that a certificate of inheritance be issued stating that he and his mother were each heirs to ½ the estate.
Decision – No appeal against the renunciation declaration
However, the probate court (Nachlassgericht) refused this request because this had been merely an insignificant error in motive that did not justify any appeal against the renunciation declaration. The Federal Court of Justice (Bundesgerichtshof, BGH), in its ruling of 22.3.2023 (case reference: IV ZB 12/22) has now confirmed this view and, as a result, clarified a much-disputed point of law. The error as to the specific person who would then be included in the line of inheritance once the deceased person’s children had been removed is an error relating to an indirect side effect of the renunciation declaration and would not justify an appeal. Therefore, in this case, it also did not matter whether or not the son had been aware of the existence of the half-siblings.
Recommendation
We would therefore strongly recommend that heirs who are considering disclaiming their inheritance should get an overview not only of the inventory of the deceased’s estate, including any over-indebtedness, but also of the family connections and the substitutes in the line of inheritance.
You will not have a lot of time for this because an inheritance can only be disclaimed within a period of six weeks after becoming aware of it. You will need to make a declaration to a German probate court either for the court record, or in an officially or notarially authenticated form.
Please note: Sometimes, disclaiming an inheritance can also be an appropriate course of action from an inheritance tax perspective. This could possibly involve the popular Berlin-style will (Berliner Testament) where, to begin with, spouses mutually appoint each other as sole heirs. Here, tax advantages could be generated if the surviving spouse does indeed renounce the inheritance and the assets are then transferred directly to the children. Otherwise, the tax-free allowance that would be available after the first death would be wasted. Since the disclaimer can also be made in return for a financial settlement, structuring potential would definitely be available in such a case.