As of: February 28, 2024, 5:59 p.m
By: Bona Hyun
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The Berlin Will appears to be an attractive option for estate planning.
But a ruling by the Federal Finance Court shows tax disadvantages.
© Wolfgang Maria Weber/imago
The Berlin Will appears to be an attractive option for estate planning.
But a ruling by the Federal Finance Court shows tax disadvantages.
Munich – Although the Berlin will may seem at first glance to be an attractive solution for estate planning, the tax consequences should not be overlooked.
Depending on the structure and the inheritance assets, tax disadvantages can arise, as can be seen from a ruling by the Federal Finance Court, which was presented on Tuesday (February 27) at the annual press conference in Munich.
Disadvantages of the Berlin Will - groundbreaking ruling by the Federal Finance Court
The Berlin will stipulates that spouses designate themselves as sole heirs.
The children only inherit after the death of the second parent.
The main idea behind this is usually that the surviving parent is not forced to pay off the children and may have to sell the previously shared apartment.
However, in the case of large inheritance assets, this regulation already has the disadvantage that only the longer-living parent can use their allowance of 500,000 euros, while the child allowances of 400,000 euros each remain unused, explained BFH judge Anette Kugelmüller-Pugh.
In other words: The child loses a personal tax allowance of 400,000 euros because the parent who lives longer inherits everything.
Each child is normally entitled to the allowance of 400,000 euros per inheritance from each of their parents.
Berlin will probably has tax disadvantages
In addition, the children can demand a so-called compulsory portion of the inheritance.
To prevent this, a “penalty clause” is often introduced: a child who demands his compulsory share after the death of the first parent to die will only receive the compulsory share even after the death of the longer-living parent.
However, it is possible that this child will do better with compulsory shares if the longer-living parent uses up large parts of the assets, for example through long-term care.
When does a Berlin will make sense?
A Berlin will makes sense if spouses want to protect each other and ensure that the surviving spouse is taken care of after the death of the other spouse.
According to Erblotse
, it also
makes sense if the spouses want to ensure that the joint assets pass to their children after their death.
Tax disadvantages of the Berlin will: A ruling by the Federal Finance Court provides clarity
In the dispute decided by the BFH, a couple from Hamburg tried to counteract it with the so-called Jastrow clause.
According to this clause, every heir who does not claim a compulsory share after the death of the first spouse also receives a legacy from the deceased's inheritance.
The parent who dies first essentially gives a promise of money to the children who do not demand a compulsory share.
However, this is only paid out after the death of the longer-living parent.
This should mathematically reduce the inheritance left by the first deceased and thus also the compulsory share of the children who claim it.
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However, the BFH decided that this does not work.
The estate of the first deceased is not reduced by the bequest and is subject to inheritance tax for the surviving parent.
In addition, according to the Munich ruling, the legacy is again subject to inheritance tax if the second parent also dies.
The Federal Finance Court has confirmed the legal structure of the Berlin will as compliant, but points out that it can have tax disadvantages.
(bohy with agencies)
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