In cases involving a spousal will or Berliner Testament (Berlin will), the tax allowances of children who are entitled to inherit can potentially be wasted. A so-called “Supervermächtnis” (super legacy) can remedy this.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: The aim of a joint spousal will or Berliner Testament is to ensure support for the surviving spouse after the death of the other spouse. In the case of a Berliner Testament, the spouses mutually appoint each other as their sole heirs and any children common to both of them generally as the final heirs.
The result is that one of the spouses will become the sole heir upon accrual of the other’s inheritance. Following the death of the second spouse, the estate goes to the children. While this kind of estate planning is common and makes sense in a lot of cases, it also has disadvantages. This is particularly true when a large fortune is passed on, as the children’s tax allowances are not used and it is possible for the estate to be taxed twice.
Spouses enjoy a tax allowance of 500,000 euros in the event of succession, whereas this figure amounts to 400,000 euros for children. If the husband dies and passes on assets to his wife as sole heir in the value of 600,000 euros, she will become liable for inheritance tax. If, following the death of the wife, these assets go to the children common to both spouses, inheritance tax will fall due for a second time because of the failure to make optimal use of the tax allowances in the first incidence of succession.
This can be avoided by means of a so-called “Supervermächtnis”. This enables spouses to specify in their joint will that the surviving partner and heir be free to determine when and to what extent the children shall inherit, which provides for creative leeway without putting the support for the surviving partner at risk.
Moreover, in cases involving a Berliner Testament, the binding effect of the testamentary disposition ought to be borne in mind. The will cannot be unilaterally altered by one of the spouses, even after the other one has passed away. This can also give rise to problems in practice, which is why it is advisable when drafting a will or contract of inheritance to consult lawyers who are competent in the field of succession law and able to review the consequences of the testamentary disposition as well as formulate the will in such a way as to preclude disputes from emerging among the heirs at a later date.
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