Tax tip: Disallowance of an inheritance in the case of a Berlin will

Where someone dies, there is a succession - either the legal succession or an arbitrary or self-determined succession. The latter, for example in the form of a will, always takes precedence over the legal succession.

The majority of wills concluded in Germany are so-called Berlin wills. In this will, the spouses appoint each other as sole heirs. In addition, the final heirs, such as one's own children, are named. However, caution is advised here: From a tax point of view, this classic type of will can be of considerable disadvantage, especially if there are high assets.

With a Berlin will, it often happens that more assets are transferred than is necessary to provide for the surviving spouse. This results in a high inheritance tax burden.

An example: If the husband of a married couple with four children dies and leaves assets not exempt from inheritance tax amounting to two million euros, the Berlin will, after deduction of the spouse's allowance of 500,000 euros, results in an acquisition subject to inheritance tax amounting to 1.5 million euros. This triggers 19 per cent inheritance tax, i.e. 285,000 euros, due to tax class I.

The surviving spouse has the option to disclaim the inheritance. If the heiress is secured by other assets, this can be done without a settlement payment, otherwise with. 

By disclaiming the inheritance, the wife is treated as if she had never become an heir. Consequently, the inheritance passes to the four children. An exemption amount of 400,000 euros and a tax rate of only 11 percent apply to each of them, so that a total of only 44,000 euros inheritance tax is due. Compared to direct acquisition by the wife, this means a tax saving of 241,000 euros. If the wife receives a settlement from the children in the form of a pension with a value of 400,000 euros, for example, no inheritance tax is due at all in the case described.

It should be noted, however, that the cut-off period in the case of inheritance is only six weeks. It is only extended to six months in the case of foreign matters. This means that in the case of a Berlin will, a quick decision is required upon the occurrence of a death in order to be able to benefit from a larger allowance and lower inheritance tax rates. It is best to check the effects before death occurs and, if necessary, adapt the will during one's lifetime.