Anyone who bequeaths a property decides over more than just walls and square metres: it is about a life's work, family harmony and often substantial tax sums. Without a clear arrangement, the law determines who inherits what, and not infrequently a community of heirs (Erbengemeinschaft) arises in which several heirs must reach agreement over a single house. With a well-considered will (Testament) or contract of inheritance (Erbvertrag), disputes, unnecessary tax burden and unwanted outcomes can be avoided. This guide explains statutory succession (gesetzliche Erbfolge), the available structuring options and the most important tax levers when bequeathing a house in Germany and North Rhine-Westphalia.
Statutory Succession: What Happens Without a Will
If you leave no will, statutory succession (gesetzliche Erbfolge) applies. Upon death, the entire estate passes to the heirs as a whole, that is, the house, accounts and also debts (§ 1922 BGB, universal succession). Who inherits is determined by orders: heirs of the first order are the descendants, that is, children and grandchildren (§ 1924 BGB). They inherit in equal shares; the children of a predeceased child take that child's place.
The surviving spouse has an independent right of inheritance alongside the relatives (§ 1931 BGB). If the spouses lived in the statutory matrimonial property regime of the community of accrued gains (Zugewinngemeinschaft), the spouse's share is increased by a flat additional quarter (§ 1371 BGB). Alongside children, the spouse then inherits one half, while the children share the other half.
- Example: Married couple in a community of accrued gains, two children, no will. The surviving spouse receives 1/2, each child 1/4.
- Consequence: The house now belongs jointly to three persons, a community of heirs.
Particularly with real estate, this often leads to outcomes the deceased would not have wanted in this way. Anyone who wishes to control who receives the house needs a will or a contract of inheritance.
Will or Contract of Inheritance: How to Decide Yourself
With a disposition upon death you place your own will in lieu of statutory succession. Two routes are customary:
- Holographic will (§ 2247 BGB): drawn up entirely by hand, with place, date and signature. Free of charge, changeable at any time, but error-prone where wording is unclear.
- Notarial will (§ 2232 BGB): declared and recorded before a notary. It offers legal certainty and at the land registry generally replaces the certificate of inheritance (Erbschein).
A person has testamentary capacity once they have completed their 16th year and can grasp the significance of their declaration (§ 2229 BGB). Spouses frequently make a Berlin will (§ 2269 BGB): they appoint each other as sole heirs, with the children becoming final heirs. This protects the longer-living partner but has a tax drawback (see below).
The contract of inheritance (§§ 2274 ff. BGB) is recorded by a notary and is binding: unlike a will, it cannot be unilaterally revoked. This is sensible where commitments are to be binding, for instance towards a caring relative, but it restricts later flexibility.
Inheritance Tax and Allowances: Who Pays How Much
When bequeathing a house, inheritance tax generally arises if the value of the acquisition exceeds the personal allowance. The allowances depend on the degree of kinship (§ 16 ErbStG):
- Spouses and registered civil partners: 500,000 euros
- Children (including step- and adopted children): 400,000 euros per child and per parent
- Grandchildren: as a rule 200,000 euros
- Other acquirers (e.g. siblings, nieces, unrelated persons): 20,000 euros
Beyond the allowance, tax is levied according to tax class and the amount of the acquisition (§§ 15, 19 ErbStG); in tax class I for close relatives the rate lies between 7 and 30 percent. Important is the 10-year rule (§ 14 ErbStG): several gifts from the same person within ten years are added together. Anyone who plans early can therefore use allowances several times over the years.
Decisive is the market value of the property under the Valuation Act. Since the Annual Tax Act 2022, properties tend to be valued higher under the income and asset value methods, so the tax burden on valuable houses can rise noticeably.
Family Home Exemption: The Owner-Occupied House Tax-Free
One of the most important reliefs when bequeathing is the exemption of the family home (Familienheim) (§ 13 ErbStG). It can mean that the owner-occupied property passes wholly or partly without inheritance tax, regardless of its value.
- Surviving spouse or civil partner (§ 13 para. 1 no. 4b ErbStG): inherits the family home tax-free, without any floor-area limit, if they move in themselves without delay and live there for at least ten years.
- Children (§ 13 para. 1 no. 4c ErbStG): inherit the family home tax-free up to a living area of 200 square metres, likewise upon immediate owner-occupation for ten years. The portion exceeding that is taxable.
If owner-occupation is given up within the ten years without a compelling reason, for instance through moving out or sale, the exemption lapses retroactively. This exemption applies only to acquisition upon death, that is, to bequeathing, not to a lifetime gift to children. Anyone who wishes to keep the house within the family thus has a strong argument for bequeathing it.
Compulsory Portion, Bequest and Appointment as Heir
Even those who make a will cannot leave close relatives entirely empty-handed. Disinherited children, spouses and, in certain circumstances, parents have a compulsory portion (§ 2303 BGB). It amounts to half of the statutory share and is a pure monetary claim against the heirs, not a claim to the house itself. This is delicate with real estate: heirs may have to pay out the compulsory portion even though the value is tied up in the house.
Gifts made in the last ten years before death can even increase the compulsory portion (supplement to the compulsory portion, § 2325 BGB); the value taken into account thereby diminishes by one tenth per year.
In structuring, the difference between two instruments is central:
- Appointment as heir (§ 1937 BGB): The heir becomes universal successor, receives a quota of the entire estate and is liable for estate liabilities.
- Bequest (§§ 2147 ff. BGB): A specific person receives a single item, for instance the house, without becoming an heir. They have merely a claim against the heirs for its transfer.
Through a bequest, a particular property can be specifically allotted to one person, while others remain entitled to the rest of the estate.
Avoiding a Community of Heirs and Prior/Subsequent Heirship
If several persons inherit jointly, a community of heirs (§§ 2032 ff. BGB) arises. The co-heirs can then dispose of the house only jointly, and each may at any time demand the dissolution (§ 2042 BGB). If they reach no agreement, in the worst case a partition sale by auction looms, in which the property is often realised below value. This is precisely what can be prevented with clear arrangements:
- Appoint a sole heir: One child receives the house, the others are compensated through monetary bequests.
- Partition directive (§ 2048 BGB): You stipulate which heir receives which item, where appropriate with value compensation.
- Preferential bequest (§ 2150 BGB): A co-heir is allotted the house in addition to their inheritance quota.
If the estate is to be channelled over two stages, for instance first to the spouse and thereafter to the children, prior and subsequent heirship (Vor- und Nacherbschaft) (§§ 2100 ff. BGB) helps. The prior heir uses the house but can dispose of it only in a limited way; the subsequent heir receives it securely upon the subsequent succession. This protects the family assets but is complex and belongs in expert hands.
Bequeath or Give During Lifetime? A Weighing-Up
The question often arises whether one should bequeath a house or already transfer it during one's lifetime. Both use the same allowances under § 16 ErbStG; the decisive difference lies in the timing and in control.
- In favour of bequeathing: You remain the owner until the very end and can change your disposition at any time. The family home exemption for children applies only in the case of inheritance.
- In favour of a lifetime gift: Allowances can be used afresh every ten years (§ 14 ErbStG), and a reserved usufruct (Nießbrauch) continues to secure a right of residence or rental income. Gifts moreover reduce the value subject to the compulsory-portion supplement with each passing year (§ 2325 BGB).
- Against a gift: You relinquish control over the ownership.
A further point concerns the Berlin will: if spouses appoint each other as sole heirs, the children's allowance remains unused upon the first succession, and upon the second succession the accumulated assets meet the allowance only once, which can increase the tax.
Which route fits depends on assets, family situation and personal goals. The detailed tax structuring is best discussed with your tax adviser and a notary. This article is general information and does not replace legal advice.
