Reform of the Statutory Share

Reform of the Statutory Share - The reform of the statutory share refers to the new provisions on the right to a statutory share introduced by the 2010 Act Amending the Law on Inheritance and Statutes of Limitations (Sections 2303 et seq. of the German Civil Code). Key points include the restructuring of the grounds for exclusion from the statutory share, the introduction of a sliding scale for gifts (pro-rata rule), and the option for heirs to defer payment. The reform is particularly relevant for real estate owners because real estate often constitutes the largest portion of the estate’s assets.

The sliding scale reduction (Section 2325(3) BGB)

Prior to the reform, the following applied: Gifts made more than 10 years before the opening of the estate were completely disregarded in the calculation of the statutory share-before that, they were fully taken into account. Since 2010, a gradual reduction has applied: In the first year prior to the opening of the estate, the gift is taken into account at 100%; in the second year at 90%; in the third at 80%; and so on. Only after 10 full years have elapsed does the gift fall entirely out of the calculation.

For real estate transfers to children or spouses, this means: The earlier the gift is made, the lower the claim to a supplement to the statutory share by other beneficiaries. For example, if someone transfers a multi-family home in Nuremberg worth 800,000 euros to a child and dies three years later, 80% of this gift (= 640,000 euros) will still be added to the estate. A disinherited sibling would then have a correspondingly high claim to a supplementary statutory share.

The reduction rule provides strong incentives for early estate planning: Anyone who waits until the child turns ten and then makes the transfer can expect a transfer that is completely neutral with regard to the statutory share ten years later. In practice, owners often use this period to agree on a right of usufruct, which allows the donor to retain the ongoing rental income.

Deferral of the Statutory Share (Section 2331a BGB)

The reform has significantly simplified the possibility of deferral. The heir may apply to the probate court for a deferral of the statutory share if immediate payment would cause the heir “undue hardship”-particularly if they would have to sell a property from the estate that they themselves inhabit or that forms the basis of their livelihood.

Prior to the reform, deferral was only possible in narrow, exceptional cases. Now, it is sufficient that immediate payment would constitute undue hardship. In doing so, the probate court balances the heir’s interests (retention of the home, stability of living conditions) against the legitimate interests of the creditor of the statutory share. The deferral is subject to reasonable interest-typically based on the statutory interest rate (§ 246 BGB). The duration of the deferral is not legally limited, but should be realistically limited so as not to be permanent at the expense of the compulsory portion creditor.

For homeowners in Nuremberg who wish to bequeath their family home to their children but fear the risk of a forced sale due to compulsory portion claims by siblings, the deferral provision offers important security.

Revision of the Grounds for Disinheritance

The 2010 reform also revised the grounds for disinheritance regarding the compulsory portion. Pursuant to § 2333 BGB, the statutory share may be forfeited if a descendant, for example, has committed a criminal offense against the decedent, the spouse, or other descendants; has maliciously or against the decedent’s will prevented the decedent from making or amending a disposition of property upon death; or has been sentenced to imprisonment for at least one year for an intentional criminal offense. The grounds for revocation are narrowly defined and are interpreted restrictively by the courts. A poor relationship, long-standing estrangement, or financial dependence is not sufficient.

Practical Tip for Property Owners in Nuremberg

We recommend that property owners in the Nuremberg metropolitan area plan early for the transfer of real estate to the next generation and strategically utilize the phased reduction. Anyone who transfers their home in Nuremberg-Erlenstegen or an apartment building in Fürth during their lifetime while reserving a right of usufruct triggers the 10-year period-but only if the donor actually removes the property from their assets.

Note: In the case of a usufruct that leaves the donor with full economic use of the property, the Federal Court of Justice (BGH) has ruled that the 10-year period may not begin to run (BGH, judgment of June 29, 2016 - IV ZR 474/15). In contrast, the period may begin to run in the case of a mere right of residence for a room or part of the house. The exact distinction depends on the individual case and should be discussed with a specialist attorney for inheritance law.

For valuable real estate portfolios in Nuremberg and the surrounding area, we recommend a comprehensive strategy that combines gifts, agreements to waive the statutory share, and, if applicable, family companies. We are happy to put you in touch with specialized notaries and tax advisors in the region.

Frequently Asked Questions

When does the 10-year period for real estate gifts begin to run?

The period generally begins with the execution of the gift-that is, with the transfer of title in the land registry. For gifts subject to a usufruct or right of residence, the legal situation is controversial: The Federal Court of Justice (BGH) has ruled that the period does not begin in the case of a comprehensive usufruct because the donor remains the economic owner (BGH, judgment of June 29, 2016 - IV ZR 474/15). In the case of a mere right of residence, however, the period may begin to run. The exact distinction depends on the individual case and makes legal consultation essential.

Can the statutory share be circumvented by a Berlin will?

No. While the Berlin will (mutual designation of the spouses as sole heirs) excludes the children from the line of succession in the first instance of inheritance, the claim to a compulsory portion remains in effect. Upon the death of the first parent, the child may claim their compulsory portion (half of the statutory share of the inheritance). Many Berlin wills therefore contain a penalty clause for the statutory share: Anyone who claims the statutory share upon the first inheritance will also be limited to the statutory share upon the second inheritance. This clause provides a strong financial incentive not to claim the statutory share upon the first inheritance-but does not exclude the claim.

How is real estate valued for the statutory share?

The statutory share is calculated based on the market value of the property at the time of the inheritance-not on the assessed value or purchase price. In practice, an expert appraisal is obtained. In Nuremberg, appraisal costs for a single-family home range from approximately 1,500-3,000 euros. The beneficiary of the statutory share is entitled to information about the estate’s assets and, if necessary, to have an appraisal obtained at the estate’s expense (Section 2314 of the German Civil Code). Having a current appraisal report available early on helps avoid later disputes over the relevant value.

What is the difference between the statutory share and the statutory share supplement?

The statutory share is based on the estate’s assets at the time of death. The statutory share supplement adds to this the value of gifts made in the last ten years-according to the sliding scale rule. Both claims may exist simultaneously. If the decedent has gifted away their entire estate and dies leaving no estate, there is no claim to a statutory share from the estate, but there may be a substantial claim for a statutory share supplement against the donees.

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