Why you should make a will – before the law does it for you

Many people put off dealing with their will. However, anyone who has assets – whether in the form of real estate or company shares – or a complex family structure should not rely on the legal succession process. This often leads to disputes, tax burdens or outcomes that nobody wanted.
A good will not only provides clarity – it protects your assets and your family. Especially when it comes to larger estates, it is negligent to leave succession to general legal provisions and thus largely to chance.

1. Why legal succession is often insufficient

Many people believe that their spouse automatically inherits everything. This is not true. According to the law, spouses usually inherit only a quarter to half of the estate, depending on the matrimonial property regime. It is even possible for parents-in-law or siblings-in-law to inherit.

Example:

The entrepreneur U. (marriage contract with separation of property) dies suddenly without a will. His wife and two children each inherit one third. The problem: 80% of the assets are tied up in the family home. The widow cannot simply ‘pay out’ her children. A partition sale is looming – and with it a considerable loss of assets.

2. Patchwork families need clear rules

Patchwork constellations are particularly risky. Without a will, only biological children inherit – stepchildren are not legally recognised. Conversely, children from a first marriage may be disadvantaged if the surviving spouse benefits alone through gifts or inheritance and later passes on the assets to other heirs.

Example:

Ms H. lives with her new partner and his two children. She has a child of her own. Without a will, her assets will go to her biological child after her death – but not to her partner or his children. If she had wanted things to be different, she would have had to make active arrangements.

3. Secure company succession

Company shares require special care. Without clear provisions in a will and the articles of association, shares may pass to several heirs who are not legally competent or interested in the business. This can lead to deadlock within the company or even a forced sale.

Recommendation:

• Arrange for the execution of your will
• Use company succession clauses
• Only appoint suitable persons as successors
• Observe compulsory inheritance rights / settle them early on

4. Foreign real estate: avoiding double taxation

Many wealthy individuals own property abroad. However, such assets may also be subject to inheritance tax in Germany. In addition, tax may also be payable abroad. Inheritance law may also vary (e.g. due to the EU Succession Regulation).

What you should bear in mind:

• Choose the applicable law in your will
• Check the tax consequences in both countries
• Consider transferring assets during your lifetime (e.g. with reservation of usufruct)

5. Save taxes with smart estate planning

Anyone who inherits more than €400,000 per child or €500,000 for their spouse will quickly trigger inheritance tax. Real estate in particular (often with significantly increased market value) leads to a high tax burden if no forward planning is done. A will allows you to make targeted use of existing tax exemptions or distribute assets among several people in order to make optimum use of existing allowances. However, if several people receive something, a good will must also prevent legal disputes between the parties involved. Gifts made during your lifetime can also help to reduce the tax burden and prevent disputes over the distribution of estate assets if planned early.

Strategies for tax optimisation:

• Gifts during your lifetime
• Use of tax allowances
• Distribution among several heirs
• Utilisation of valuation discounts (e.g. for business assets)

6. Risks of handwritten wills

A will can also cause harm if it is unclear or incorrectly worded.

Example:

An entrepreneur writes by hand: ‘My son should get the company.’ What is missing? For example, a precise description of the company, the treatment of the other heirs, valuation rules, compulsory portion claims, liquidity. This can lead to years of litigation and tax burdens.

A good will does not always need to be lengthy – but it does require the right degree of clarity, legal precision and tax foresight.

Conclusion:. Responsibility instead of chance

A will is not a question of age, but of responsibility. Anyone who has assets and a family should make provisions in good time. An individually tailored will is essential, especially in the case of real estate, company holdings or complex family circumstances. A precisely drafted will avoids conflicts, minimises tax burdens and preserves your assets.

Would you like to draw up your will with foresight or obtain comprehensive information on inheritance and bequests?