A testator who makes a gift during his lifetime may give rise to tax advantages. However, any gifts need to be taken into account when calculating the compulsory portion.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Gifts during the testator’s lifetime can be a good way of reducing the heirs’ inheritance tax burden, particularly in cases involving significant assets. That being said, succession law also stipulates that gifts need to be taken into account when calculating the compulsory portion. The heir is obligated to inform those who are entitled to a share in the compulsory portion about gifts made within a period of ten years prior to the death of the testator. That was the verdict of the Oberlandesgericht (OLG) Stuttgart [Higher Regional Court of Stuttgart] in its ruling of January 26, 2016 (Az.: 19 W 78/15).
In the succession case in question, the testator’s account essentially had no more money in it despite the monthly income. This certainly did not exclude the possibility that gifts had been made during the testator’s lifetime. One party entitled to a share in the compulsory portion therefore requested information from the heir. The latter was clearly not inclined to look into the matter, but he did authorize the former to obtain information for himself from the bank. The OLG Stuttgart took the view, however, that the heir had not done enough to discharge his obligation to provide information. The Court held that the heir was obliged to make reasonable efforts in inquiring as to whether the testator had made any gifts in the past ten years that affected the calculation of the compulsory portion. If there is reason to suspect that gifts were made to third parties, the heir has to avail himself of his right to obtain information and identify potential recipients. This encompasses, in particular, access to bank statements, savings books as well as other banking documents pertaining to the last ten years. It is equally important for him to obtain information from the testator’s relatives. If the heir fails to comply with his obligations, the court can impose a fine.
From the perspective of those who are entitled to a share in the compulsory portion, gifts made by the testator can have a substantial impact on the compulsory portion, which amounts to half the value of the statutory share in the estate and is calculated based on the extent of the assets that have been left behind. Gifts that were made within a period of ten years prior to the death of the testator have to be accounted for in this calculation.
Lawyers who are versed in the field of succession law are able to provide competent advice on all issues relating to inheritances.
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