11. Oct 16

Contract of inheritance has strong binding effect

Anyone who does not wish to be subject to the rules of intestate succession can set out arrangements for their estate in a will or contract of inheritance. A contract of inheritance has a strong binding effect.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Both wills and contracts of inheritance are generally well suited for organizing an estate in accordance with the testator’s wishes. Having said that, a will affords the testator more freedom compared to a contract of inheritance when it comes to drafting the document. Most notably, the testator is able to alter or revoke his will at any time. In the case of a contract of inheritance, however, this is only possible under a limited set of circumstances due to the fact that the parties enter into binding agreements. As such, it is usually necessary for both parties to consent to any changes.

Because of its strong binding effect, a contract of inheritance must always be certified by a notary and every contractual detail ought to be carefully considered. This applies both to the testator as well as the heir, since both parties enter into binding obligations. Notwithstanding this, a contract of inheritance does offer potential benefits, e.g. if the testator designates an heir and the latter in return makes a contractual commitment to care for the former. In doing so, the heir essentially commits to render services in advance. A contract of inheritance can also play a crucial role in the context of business succession, enabling the successor to be gradually introduced to the company before fully taking on the reins.

While spouses are able to mutually appoint each other as sole heirs in a “Berliner Testament” (Berlin will), this option is not available to unmarried couples. If there is nevertheless a desire to provide one’s partner with financial security, a contract of inheritance might make sense in these instances, as it allows the partners to appoint each other as heirs with binding effect.

In the cases mentioned above, the strong binding effect associated with a contract of inheritance is desirable. That being said, it is possible for circumstances to occur that could, for example, lead to the testator wanting to designate different heirs. If both parties agree to terminate the contract then this is not a problem. However, it can often give rise to disputes. For this reason, it is advisable to include a right of withdrawal in the contract of inheritance. In order to be able to assess the possibilities and consequences arising from a contract of inheritance, it is essential to obtain competent advice from lawyers who are experienced in the field of succession law.

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