BGH on calculating compulsory portion where estate includes property

Calculating an heir"s compulsory portion is challenging if the testator was merely a co-owner of a property. Last year, the Bundesgerichtshof (BGH) [Federal Court of Justice] had to get to grips with this very issue.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: German succession law (http://www.grprainer.com/en/legal-advice/law-of-succession.html) provides that the compulsory portion equates to half of the statutory share in the estate. However, calculating the compulsory portion can be problematic if the testator passes on co-ownership of a property.

In its ruling of May 13, 2015, the Bundesgerichtshof established that a 50% co-ownership share in a property site corresponds to half of the value of the entire property when determining the former"s value in the context of claims being asserted to a compulsory portion. This holds true if the sole heir is already the notional proprietor of the other 50% co-ownership share (IV ZR 138/14).

In the instant case, the testatrix had a daughter. Following her divorce, she lived together with her new partner. They jointly acquired a terraced house as co-owners, with each of them owning a 50% stake, which they lived in. The wife drew up a will in which she appointed her partner as her sole heir. Following the wife"s death, the daughter asserted her right to a compulsory portion. After obtaining an expert opinion concerning the market value of the property, the Landgericht (Regional Court) awarded her a compulsory portion to the tune of some 11,000 euros. The sole heir lodged an appeal and demanded that the claim be rejected.

He argued that it would be difficult to sell the co-ownership share and its estimate should therefore be significantly reduced. However, the 4th Civil Panel of the Bundesgerichtshof reached a different conclusion, ruling that the value of the 50% co-ownership share in the property equated to half of the value of the entire property if the sole heir is already the notional proprietor of the other 50% co-ownership share. The Court held that in that case utilizing co-ownership was unproblematic, with the result that a reduction was not justified. It went on to say that that is why the party entitled to the compulsory portion has a right to half of the value of his statutory share in the estate. According to the Panel, there is no particular method for determining the value of the estate.

Lawyers who are competent in the field of succession law can provide further assistance on issues relating to inheritances.

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