Partition order vs. advance legacy: What you need to know!

Testators can specify in their wills which heir should receive what from the estate or how the estate should be divided – with a partition order or an advance legacy. However, the effect of these options varies greatly and has a significant impact on the estate and the heirs.

The distribution of an estate harbours potential for conflict

Communities of heirs often lead to disputes among the heirs. This is because, in this situation, the heirs initially own everything jointly; under German inheritance law, heirs cannot be appointed to individual items of the estate. Above all, the division of the estate among the heirs (settlement) is often difficult.

However, individuals who wish to plan their estate have the option of avoiding disputes among heirs over the distribution of the estate: inheritance law provides options for determining which heir receives what from the estate and how the estate is to be distributed: the partition order and the advance legacy.

However, these two options have very different effects and have a significant impact on the estate and the heirs.

It is therefore important to know exactly what effects and consequences partition orders and advance legacies have in order to be able to choose the right regulatory instrument. The second step is to clearly formulate what is desired so as not to create any additional risk of inheritance disputes.

The partition order

Testators are often concerned, and not without reason, that disputes will arise among the heirs regarding the distribution of the estate after their death.

One way to counteract this during one’s lifetime is to use a partition order (Section 2048 of the German Civil Code (BGB)). This provision allows the testator to determine how the estate is to be divided among the heirs. He or she can assign specific items of the estate, such as real estate, movable assets, deposits, etc., but also rights (such as a monetary claim) to individual or all heirs.

Please note! The division order must comply with the formal requirements for testamentary dispositions, i.e. it must be written entirely by hand or certified by a notary.

As the name suggests, a partition order is ‘only’ an order relating to the distribution of all or part of the estate among the heirs. Nevertheless, a partition order should not be made in isolation, but should be part of a uniform will.

This is because inheritance shares and division arrangements should always be regulated jointly.

What might such a division order look like?

An example:

A testator is the owner of a multi-unit building consisting of eight flats. In her handwritten will, she stipulates that flats 1 and 2 shall become the property of heir A, flats 3 and 4 shall become the property of heir B, flats 5 and 6 shall become the property of heir C, and flats 7 and 8 shall become the property of heir D.

As a general rule, the term ‘division order’ does not have to be explicitly mentioned in the will for it to be considered a division order. The decisive factor is the presumed will of the testator, which in case of doubt must be determined by (contentious) interpretation. However, it is advisable to use clear wording and designate it as a division order.

A key feature of a partition order is that the inheritance share of the persons to whom estate assets are allocated by way of a partition order is not changed by the partition order. The value of the allocated estate asset must be credited in full to the inheritance share of the respective heir.

What effect does a partition order have?

An example:

The deceased’s estate is worth €1 million and there are four heirs who will inherit equal shares. The will contains a distribution order stipulating that heir A shall receive a property worth €200,000; there are no orders regarding the rest of the heirs.

Heir A must then offset the value of €200k against her share of the inheritance during the settlement. If the value of the allocated estate exceeds the inheritance share, there is an obligation to pay compensation. If, for example, the property in the above example were worth €300k, heir A would have to pay the difference between the value of the property (€300k) and her inheritance share (€250k), totalling €50k, to the remaining heirs.

Note: When it comes to the division of assets, the valuation of assets and compensation claims often lead to disputes between the heirs.

Advance bequest: more for individual heirs

Advance bequests work differently (Section 2150 of the German Civil Code (BGB)). With the help of an advance bequest, testators can give individual heirs certain items from the estate in addition to their actual share of the inheritance, thereby removing them from the estate to be distributed among all heirs.

Note: Here too, the testator must comply with the formal requirements for testamentary dispositions, and here too, the following applies: the provision of an advance legacy should not be made separately, but should form part of a single will.

Unlike in the case of a partition order, the value of the advance legacy is NOT credited against the inheritance share of the heir who benefits from the advance legacy. This means that regardless of the value of the advance legacy, the other heirs have no claim for compensation against the heir who benefits from the legacy.

Ultimately, the bequest reduces the estate to which all heirs are entitled by the value of the bequeathed estate item.

An example:

The estate consists of various assets: real estate, securities, valuables and jewellery, totalling €1 million. There are four heirs. The testator stipulates in her will: ‘I bequeath my flat to my heir A as an advance legacy.’ (Value €400k)

Although heiress A’s inheritance share is exceeded by the flat, she does not have to pay compensation to the three remaining heirs. However, it is debatable whether heiress A should receive a share of the remaining estate corresponding to her inheritance share in addition to the flat. If nothing else is specified, all four – including the advance legatee – will each inherit 25% of the remaining estate, worth £600k. The legatee therefore also benefits from the remainder of the estate. In practice, however, this is often a matter of interpretation. Here, too, clear wording is recommended.

The purpose of an advance legacy is to give certain heirs an advantage over others, i.e. to give them more than their share of the inheritance. The heir who benefits from an advance legacy may demand its fulfilment even before the rest of the estate has been divided.

Unclear wording: risk of additional disputes among heirs

When individual heirs are ‘considered’ in a will or individual heirs are ‘assigned’ items from the estate, it is often unclear whether this constitutes a partition order or an advance legacy. In such cases, it is difficult to distinguish between a partition order and an advance legacy, but this distinction makes a significant difference for the estate and the heirs.

If it is not expressly stated whether it is a partition order or an advance legacy, it must be determined by way of interpretation whether it was the testator’s intention to give one heir more than the others or not. These questions harbour great potential for dispute and, in practice, often have to be settled in court between the heirs.

Reliable wording with legal support

It is therefore important that testators clearly formulate their wishes in their last will and testament and use the legally correct terms for what they want.

In professional will drafting, advance legacies are often used to avoid disputes between heirs over the (future) value of individual estate items.

I will be happy to assist you in deciding whether you only want to determine the distribution of the estate (partition order) or whether you want to give one person from among the heirs more than the others (advance legacy). Of course, I will also assist you in including the appropriate wording in your last will and testament. If you are an heir and there is a dispute with other heirs as to whether a partition order or an advance legacy has been made in a will, I will be happy to advise and represent you in resolving such a conflict!

Frequently asked questions about partition orders and advance legacies:

What is the difference between a partition order and an advance legacy?

A partition order determines which heir is to receive what from the estate. It is ‘only’ an order on how the estate is to be distributed. It does not change the share of the inheritance received by the individual heirs. A preliminary bequest, on the other hand, gives an heir an additional advantage that is not counted towards their share of the inheritance. With a preliminary bequest, they receive more than just their share of the inheritance and more than the other heirs.

Why is it so important to use clear wording in a will?

Unclear or incorrect terms and vague wording make it unclear whether the provision is a partition order or an advance legacy. Such unclear wording often leads to disputes between the heirs. If you want to avoid disputes as a testator, you must use the correct legal terms and clear wording.

What are the advantages of a partition order in a will?

With a partition order, the testator can determine who receives which estate items, e.g. real estate, accounts or valuables. This avoids conflicts within the community of heirs over the distribution of these estate items, because clear allocations have been made.

When does an advance legacy make sense?

An advance legacy is useful if an heir is to receive a specific additional asset, e.g. a property, valuable jewellery or a particular vehicle. The advantage is that the advance legacy is not counted towards the inheritance, but is granted in addition to it. This allows the testator to favour certain individuals while avoiding disputes over compensation claims between the heirs.

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