Compulsory portion of real estate: When property becomes a point of contention

Close relatives can be disinherited in a will – but the compulsory portion remains. It becomes particularly complicated if the estate consists mainly of real estate. The claim to a compulsory portion can then become a considerable liquidity problem for the heirs.

Real estate in compulsory inheritance law

In practice, it is clear that anyone who bequeaths real estate and does not take compulsory portion claims into account risks disputes, high costs and lengthy proceedings. This makes forward-looking estate planning all the more important – legally well thought out and economically feasible.

Legal succession and compulsory portion: What applies without a will?

In the absence of a last will and testament, the law regulates succession. Spouses and relatives (e.g. children, grandchildren) inherit according to fixed quotas. In such cases, compulsory portion claims usually only arise if the value of the estate has been reduced, e.g. through gifts made during the lifetime of the deceased.

Testamentary freedom & disinheritance: What is permitted?

A will or contract of inheritance allows for far-reaching regulations. The testator can appoint or disinherit heirs, make bequests and transfer certain assets in a targeted manner. However, the right to a compulsory portion sets a clear limit to this freedom.

Right to a compulsory portion: protection for close relatives

The compulsory portion protects spouses, children (and grandchildren if the children predecease the deceased) and (in certain cases) parents from being completely excluded from the estate. It amounts to half of the statutory inheritance share and is purely a payment claim against the heirs, but not a direct participation in the community of heirs.

Compulsory portion in practice: sample calculation for a property

Each of two children of a widowed testator is a legal heir to 1/2. If a child is disinherited in a will, their compulsory portion is 1/4 of the value of the estate. For example, if the estate only consists of a property worth €1.0 million, the compulsory portion amounts to €250,000 – in cash.

What are the rights of beneficiaries entitled to a compulsory portion?

Entitlement to the creation of an estate inventory

The person entitled to a compulsory portion can demand that the heirs draw up a comprehensive inventory of the estate as at the date of death (if necessary, this can also be drawn up by a notary). The estate inventory must also contain details of gifts made by the deceased during his lifetime, as these may also be relevant for the calculation of the payment claim. If the heirs refuse to provide this information, it can be enforced in court.

Right to valuation / real estate values

In addition, the beneficiary of the compulsory portion has a claim against the heirs for the preparation/submission of valuations of the real estate (at the expense of the estate). In principle, a publicly appointed and sworn expert must be consulted. The value of the property on the date of death is decisive for the calculation of the compulsory portion. “Courtesy appraisals” prepared for the heirs (with property values that are too low) do not have to be accepted by the beneficiary of the compulsory portion. If the heirs refuse to provide a valuation or do so inadequately, this can also be enforced in court.

Consideration of real estate transferred during lifetime

In order to undermine the compulsory portion, the testator could give away all of their assets during their lifetime and thus reduce the value of the estate and the compulsory portion to zero. To avoid this, there are so-called “compulsory portion supplement claims”. This means that the person entitled to a compulsory portion can also claim their compulsory portion based on the value of property gifted during their lifetime.

In this case, the valuation is usually particularly controversial. The so-called “lowest value principle” applies. This means that, on the one hand, the value of the gift at the time of the gift (plus any loss of purchasing power up to the time of death) and, on the other hand, the value at the time of death must be determined. The lower of these two values is decisive. However, the beneficiary of the compulsory portion may, in principle, request the submission of expert opinions on both key dates.

Reduction of the compulsory portion

In the case of lifetime gifts, what is known as the “reduction of the compulsory portion” must also be taken into account. This means that for every full year (365 days) that passes between the gift and death, the gift is to be taken into account at a rate of 10% less when calculating the compulsory portion.
However, this reduction does not always apply, e.g:

• Gifts to the spouse during the marriage must always be recognized at their full value in the right to a compulsory portion.
• In the case of gifts to other persons (e.g. children), the full value must always be recognized if the donor has reserved extensive rights of use (e.g. usufruct or a full right of residence) at the time of the gift. This means, for example, that a gift made in the 1990s subject to the reservation of usufruct may have to be taken into account in a future inheritance case under the law on compulsory portions.

Gift or not? The concept of gift in compulsory inheritance law

In practice, there are also frequent disputes as to whether individual transactions were gifts or not. A classic example of this is when the testator has sold a property to a child for less than its market value.

Whenever performance and consideration do not match in terms of value, the difference in value is a gift. This share must be taken into account as part of the claim to a supplementary compulsory portion. In order to determine the value of the benefit and consideration, expert opinions are often required which, in addition to the value of the property, must also take into account, for example, the value of an agreed monthly pension, a partial right of residence or an agreed care obligation. The valuation is often the main point of contention in such cases.

Compulsory portion and real estate: liquidity is crucial

Heirs usually face great difficulties if claims to a compulsory portion have not been considered beforehand and the heirs are surprised by the amount of the claim. This is because the heirs have to pay the compulsory portion – either by taking out a loan or, if necessary, by selling the property. In the case of owner-occupied properties, this can have dramatic consequences. Deferrals are not ruled out, but enforcing them in court involves high hurdles.

How can the compulsory portion of real estate be reduced?

Reduce compulsory portion through lifetime gifts to heirs

Many testators would like to transfer real estate during their lifetime in order to reduce the compulsory portion. This can be achieved by acting early. However, it is important that the gifts are structured in such a way that the reduction of the compulsory portion actually starts. In practice, property owners often overlook the possible effects of gifts in terms of compulsory portions. Furthermore, in the case of intended gifts, care must be taken to ensure that one’s own financial security is sufficiently guaranteed – even without a reservation of usufruct.

Eliminate compulsory portion by concluding a waiver of compulsory portion

If you want to specifically exclude claims to a compulsory portion, you can conclude a “compulsory portion waiver agreement” with the relatives concerned during your lifetime. This agreement must be notarized. It should also be noted that the parties involved will generally only waive their right to a compulsory portion if they receive adequate consideration in return.

Reduce compulsory portion through gifts to those entitled to a compulsory portion

Even if no general waiver of a compulsory portion is agreed, lifetime gifts to future beneficiaries of a compulsory portion can significantly reduce their compulsory portions. However, this generally requires that it has been (verifiably) stipulated at the time of the gift that the value of the gift is to be offset against the compulsory portion. The donor is therefore strongly advised to include such an offsetting provision in the gift agreement. Without the consent of the donee, this provision can no longer be made retrospectively.

Balanced will drafting: preventing disputes over compulsory portions of real estate

A well thought-out will not only prevents formal errors, but also emotional conflicts. The compulsory portion is often claimed when relatives feel ignored or treated unfairly. This can be counteracted:

• through transparent dispositions,
• through clear communication during your lifetime,
• through clear compensation arrangements for care or family work,
• through bequests or partial allocations,
• through uniform regulations for the use and utilization of real estate.

Especially when it comes to real estate, it is worth drafting a will with foresight that takes both economic and family aspects into account. This often helps to avoid later conflicts and financial predicaments.

Practical tips for avoiding disputes over compulsory portions

1. Agreeing waivers of compulsory portions at an early stage
   Contractual waivers of compulsory portions can be agreed with children or spouses – often in return for compensation or other benefits.
2. Transferring real estate with a sense of proportion
   A gift with complete transfer of ownership and use triggers the 10-year amortization period (except in the case of spousal gifts). It may be worthwhile for the heirs not to include a reservation of usufruct.
3. Formulate the will clearly and comprehensibly
   Unclear wording leads to disputes. A will drawn up with expert advice ensures legal certainty.
4. Consider those entitled to a compulsory portion – even symbolically
   A small legacy or gift can mitigate the exclusion and promote emotional acceptance. However, it is no guarantee that the compulsory portion will not be claimed after all.
5. Review the asset structure
   Real estate-heavy estates without liquidity harbor risks. A balanced mix of cash assets and tangible assets facilitates compulsory portion payments.
6. Hold family discussions
   Clear words during your lifetime can avoid misunderstandings after the inheritance.
7. Consider tax aspects
   Compulsory portion payments reduce the heirs’ inheritance tax burden – this should also be taken into account in the planning.

Conclusion: Compulsory portion of real estate – plan your estate with foresight

The compulsory portion regulations offer protection to close relatives, but often present heirs with major challenges – especially in the case of high property values.
Therefore, the earlier estate planning takes place, the easier it is to avoid disputes, forced sales and financial burdens. Whether through early gifts, balanced wills or waiver agreements – the law on compulsory portions requires not only legal expertise, but also a sure instinct.