Bequest

A legacy-referred to as a “Vermächtnis” in German law-is a testamentary disposition through which the testator bequeaths a specific asset to a particular person (the legatee) without making that person an heir. In the real estate context, a legacy is particularly relevant when a specific property is to be left to a single person, while the rest of the estate goes to other heirs. The legatee has a contractual claim against the heir(s) for the transfer of ownership of the property.

Distinction: Bequest vs. Inheritance

In the case of a bequest (Section 2147 et seq. of the German Civil Code), the beneficiary is not an heir and is therefore not liable for estate debts. They are merely entitled to the surrender of the bequeathed property-in practice, this means the heirs must transfer ownership of the property to the legatee. The difference from inheritance:

• Heir: Universal successor; assumes the decedent’s assets and debts
• Legatee: Receives only the specific item bequeathed; no liability for debts

The bequest can be arranged in a will or an inheritance contract. It is possible to attach conditions or restrictions to the bequest-for example, stipulating that the bequest becomes effective only if the legatee lives in the property themselves and does not rent it out.

Types of Real Estate Bequests

• Bequest of Property: A specific piece of real estate (e.g., “the townhouse on Musterstraße”) is bequeathed
• Bequest of Money: The legatee receives a sum of money, which may be financed by the sale of a property
• Usufruct bequest: The beneficiary receives the right to use (usufruct) a property for life without becoming the owner-often for the surviving spouse
• Right of residence bequest: Similar to usufruct, but more limited: only the right to live in the home oneself

A particularly practical option is the advance bequest: If a co-heir receives a property via an advance bequest in addition to their share of the inheritance, they do not have to include it in the estate settlement with the other heirs. The advance bequest allows a specific property to be secured for one child, while the other children receive a share of the remaining estate.

Tax Treatment

Bequests are subject to inheritance tax for the beneficiary. The tax value of the property is determined in accordance with the Valuation Act (property value). Exemptions apply depending on the degree of kinship: children receive €400,000, grandchildren €200,000, and siblings or unrelated persons only €20,000. The beneficiary is responsible for paying the inheritance tax; however, they may require the heirs to assume this obligation if the will so provides.

If the bequest consists of a usufruct or right of residence, the capitalized value of the right of use is subject to inheritance tax-calculated based on the life annuity present value factor and the statistical life expectancy of the beneficiary. At the same time, the right of use reduces the inheritance tax value for the heir who acquires the property but cannot use it temporarily.

Special Inheritance Tax Rules for Residential Real Estate

Since the 2009 Inheritance Tax Reform Act, there has been a far-reaching tax exemption privilege for owner-occupied residential real estate (Section 13(1)(4b) ErbStG): If a spouse or registered civil partner inherits the property and uses it as their primary residence, it is completely exempt from inheritance tax-with no value limit. Children benefit from the same tax exemption up to a living area of 200 m². This privilege also applies to bequests, provided the conditions (owner-occupancy, minimum holding period of ten years) are met. Anyone who sells the property within ten years or no longer uses it as their primary residence loses the tax exemption retroactively.

Practical Tip for Property Owners in Nuremberg and Franconia

In the greater Nuremberg area, with its high property values-a well-located single-family home in Erlangen or Nuremberg’s Südstadt can be worth 700,000 euros or more today-bequests are a common estate planning tool for specifically passing a particular property on to a designated person. Without a testamentary provision, the property would fall to the community of heirs, which can lead to protracted inheritance disputes and often an unwanted sale.

We recommend always having a real estate bequest drafted with the assistance of a notary: Unclear descriptions of the bequeathed property, missing subrogation clauses in the event of a right of first refusal or destruction of the property, as well as unclear provisions regarding the assumption of inheritance tax, can lead to costly legal disputes. Contact us-we will connect you with experienced notaries and estate planning attorneys in Nuremberg and Erlangen who specialize in estate planning involving real estate.

Frequently Asked Questions

How long do heirs have to fulfill the bequest?

The bequest becomes due upon the testator’s death (Section 2176 of the German Civil Code). The heirs are obligated to transfer ownership of the property immediately-unless a deadline or condition is specified in the will. If the heir fails to comply, the beneficiary may file a lawsuit to compel the transfer of ownership. In practice, we recommend consulting a notary for the settlement of real estate bequests, who will coordinate the transfer of title and the change of ownership.

Does the bequest have to be entered in the land register?

The bequest itself is not entered in the land register. Only once the transfer of title has been completed is the legatee entered as the new owner. To prevent heirs from selling the property in the meantime, the legatee may have a preliminary notice (§ 883 BGB) entered in the land register. This secures the legatee’s claim to transfer of ownership and prevents a third party from acquiring the property in good faith and free of encumbrances.

What happens if the bequeathed property no longer belongs to the testator at the time of death?

If the testator sold the property during their lifetime, the bequest is generally void (Section 2169 of the German Civil Code). In this case, the legatee is entitled at most to the proceeds, provided the will contains a corresponding subrogation clause. If, on the other hand, the property was sold at a forced auction or destroyed, similar rules apply-careful drafting of the will is therefore essential.

Can a legatee renounce the bequest?

Yes. The legatee may renounce the bequest (Section 2180 of the German Civil Code), for example, if the property is subject to significant renovation obligations or onerous encumbrances. The renunciation must be declared to the heir and is subject to a time limit. Upon renunciation, the bequest reverts to the estate and follows the general order of succession.

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