Since everyone has only a temporary life, inheritance law has a universal significance. Sooner or later it will be applied to each of us. This is primarily about the transfer of an estate to the heir or heirs. Often there is also a division of inheritance among the heirs. On the one hand, the deceased can still regulate his estate by will during his lifetime. In this case, he is entitled to the so-called test freedom, that is, that he can freely establish all aspects of his estate regulation. On the other hand, however, inheritance law also has a legal framework that protects his kinship from being completely excluded from inheritance. Depending on the degree of kinship, a so-called compulsory part is defined, which is also relevant for inheritance tax. We provide information about the taxation of the compulsory part and the relevant tax relationship between the compulsory part and previous donations.

In some cases, gifting transfers assets from one person to another and passes on a possible future inheritance. But it also happens that the decedent in his estate regulation determines that relatives are excluded from the inheritance. In order to prevent this, the legislature has made the provision to guarantee certain categories of persons (e.g. spouses, children) at least a certain claim on the inheritance; This is called the compulsory part. Although this compulsory part does not include a direct share of the actual inheritance, the actual heir is legally obliged to pay the transferred heir the compulsory part due to him. It should be noted here that even if one only acquires a compulsory part of an inheritance, this is relevant with regard to the inheritance tax and thus subject to notification.

2nd inheritance tax on the compulsory share

In the case of a direct inheritance, the inheritance determined by the testament can usually decide whether to accept or reject the inheritance within six weeks of becoming known. Only upon acceptance of the inheritance is there a tax liability for the heir. If you waive your claim, there is no tax liability.

The same applies to the compulsory part. However, the tax liability arises here only when the entitlement to the compulsory part is made. However, since the claim is a right from another area of the BGB (Section 5: Limitation period BGB), it is also subject to other provisions. Of particular importance is the period within which the claim must be made. While in the case of a direct inheritance, as already mentioned, one usually has six weeks to decide, the limitation period for making the entitlement to a compulsory part is three years.

A tax distinction between a direct inheritance and a compulsory part is not made by the tax office. The so-called compulsory share holder should therefore always carefully consider whether and, if so, when he makes his claim against the actual heir or waives it.

Suppose the beneficiary makes his claim against the actual heir, but does not receive any payment and does not draw any consequence from it; it simply lets the limitation period elapse. After the expiry of the limitation period, if the beneficiary of the compulsory share has now done nothing about it, the actual heir, with reference to the limitation period, can refuse to pay out. In this case, the beneficiary of the compulsory share is therefore empty.

3.1. Entitlement and 10-year period of the allowance

On the other hand, delaying the claim can also be advantageous in certain situations. This may lead to an earlier gift to the beneficiary of the compulsory share exceeding the ten-year period at the end of the allowance period, if the gift took place at least seven years before the death. In such a case, the tax office can no longer count the gift against the compulsory share.

3.2. Limitation period and 10-year period of the allowance

However, if this three-year limitation period is not sufficient to allow the allowance period to elapse, it may be possible to wait beyond the limitation period with the entitlement to the compulsory part, provided that one agrees with the actual heir to a payment obligation despite limitation. Of course, this is a question of trust. However, this risk can still be worthwhile for both parties under certain circumstances. If the actual heir otherwise had to pay tax on his entire inheritance, then in this case the compulsory portion to be paid is taken into account as a liability for the estate. This means that the compulsory part payable has a de facto effect on his inheritance tax like an allowance. It can therefore also be worthwhile for the actual heir to pay the compulsory part, namely precisely when the inheritance tax is taxed at a lower tax rate, whereby the compulsory part should be lower than the inheritance tax otherwise due. A targeted tax advice is therefore certainly appropriate in such a case.