17. Nov 16

BGH: Claim to augment compulsory portion where real estate has been gifted

Gifts made more than ten years ago will no longer be taken into account in inheritance cases when calculating the compulsory portion. Having said that, there are exceptions which render this time limit inapplicable.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Attempts to reduce the compulsory portion of those entitled to inherit by making gifts often come to nothing. Succession law provides that gifts which were made no more than ten years ago from the time of the testator’s death shall be accounted for when calculating the compulsory portion. If the gifts were made more than ten years ago from this point in time then the beneficiary of the compulsory portion is not entitled to raise a claim to supplement this.

The ten-year time limit does not apply, e.g. if the donor retains the full right of use of the property. This is frequently the case where real estate is passed on as a gift and the eventual testator retains beneficial interest. Even if a gift of this kind was made more than ten years ago since the death of the testator, the entitlement to raise a claim to augment the compulsory portion still exists. The issue is more contentious if the testator has merely retained the right to reside.

The ruling of the Bundesgerichtshof (BGH), Germany’s Federal Court of Justice, from June 29, 2016 has provided greater clarity (Az.: IV ZR 474/15). In the case in question, a married couple had conveyed a plot of land including a residential building to their second son in 1993. In doing so, the parents retained a right of residence pertaining to the rooms on the ground floor as well as joint use of the garden and several adjoining rooms. The rooms on the second and third floors were not affected by the right of residence. This was entered into the land register in 1994. Following the death of the husband in 2012, the eldest son asserted claims in relation to the plot of land to augment the compulsory portion. However, his legal action was dismissed by the BGH.

The Court held that the ten-year period had already expired by the time of the testator’s death. The parents were said to have merely retained a right of residence and only with respect to the ground floor in conveying the property. It went on to say that leasing to third parties had been excluded, for instance, in the deed of conveyance and the son was able to financially encumber the property with priority over the right of residence. Consequently, the parents no longer had unrestricted beneficial interest and “enjoyment” of the property.

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