Inheriting means saying goodbye to someone. For many people, inherited property is the first property they own. This often leads to feeling overwhelmed, because in the midst of mourning, it is difficult to deal with suddenly owning real estate.
- 50% of all wills contain a real estate inheritance
- Descendants are entitled to statutory compulsory portions
- If there is more than one heir, a community of heirs is formed
- Modernization measures are often necessary to increase the value
- An inheritance contract or gift is possible before the testator's death
Inherited property—what now?
An inherited house or apartment is often associated with mixed feelings. After all, inheriting means saying goodbye to a parent, aunt, or grandmother. For many younger heirs, the inherited property is the first property they own. This often leads to feeling overwhelmed, because in the midst of mourning, it can be difficult to deal with a complex issue such as sudden property ownership. This is especially true when third parties come into play who have their own ideas about what should happen to the inheritance. Here we show you what you need to know about inheriting property.
With the aging of the baby boomers, it is already expected that almost half of all wills will include one or more properties. This is because in the financially strong 1960s to 1990s, building your own house was an integral part of the life plan. However, many younger generations are planning differently. They then inherit these often aging properties, which may not always have been kept in top condition.
What is my inherited property worth?
An inherited property can be kept, sold, rented out, divided, or even rejected as an inheritance. And even between these options, there are many other ways to deal with inherited property. After all, not everyone who becomes a property owner in this way becomes rich overnight. In order to make the best possible decision, the actual current market value of the property should first be determined. To obtain a reliable result, it is advisable to seek the assistance of a professional. A real estate agent's valuation not only includes basic data such as the year of construction or number of rooms, but also individual characteristics such as location, regional price developments, and a number of other factors that can tip the scales in determining whether a property is sold at a good or the best possible price.
The current condition of the property does not necessarily indicate whether the value calculated at that point in time is also the selling price. If the property is in poor condition, it may be worthwhile to carry out modernization measures such as renovation, renewal of sanitary facilities, or replacement of the heating system—all of which are decisive factors for selling at the best possible price.
Your options
Legal regulations: Who inherits how much?
As a general rule, as the sole owner, the testator can bequeath their property to any person, provided that this person has been named as a legal heir in their will. However, there are exceptions: under German inheritance law, children or surviving spouses always receive a compulsory portion. This amounts to approximately 50% of the legal inheritance. If there is no will, the testator's children inherit the property in equal shares. If one of the children is named as the sole heir in the will, the other child is still entitled to a legal share of 25% of the estate.
If there is more than one heir, all heirs form a so-called community of heirs, which is a legal entity under the law and must act as a legal entity. This means that every decision must be made jointly and unanimously – at this point, siblings often become estranged from each other, often forever. But it doesn't have to come to that. If you notice that disagreements are brewing within the community of heirs, it is better to call in a mediator who can mediate on behalf of all parties. As brokers, we are familiar with such situations from our everyday work and can professionally and neutrally ensure that the wishes of each individual in the community of heirs are fulfilled as far as possible.
Division among the community of heirs
If the heirs cannot agree on who is allowed to move into the property, selling it is one of the most common decisions. The proceeds are then divided equally among the heirs. If there are two siblings, the other receives 50% of the property value; if there are three siblings, each of the other two receives 33%, and so on. In this step, too, it is important for all parties involved to be clear about the value of the property. To ensure that each of the heirs can sell with confidence, it is advisable to commission an expert to prepare an appraisal. The so-called market value appraisal provides this clarity and is also valid in court.
Preventing disputes: The inheritance contract or gift
An inheritance contract is equivalent to a legally valid will. The difference is that the inheritance contract must be drawn up jointly with the heirs and signed by all of them. This means that you not only agree to the distribution of the inheritance, but must also fulfill all the terms of the contract in order to receive your inheritance. One of the conditions could be that the testator's retirement provision is linked to a later inheritance of real estate.
Real estate can also be officially gifted to family and friends during your lifetime. Like an inheritance contract, the gift contract can also contain gift conditions, including a right of usufruct, which entitles the testator to dispose of the property as an owner-occupier or landlord for life. However, as with a traditional inheritance, the recipient must pay taxes on their new property. There are tax allowances ranging from €500,000 to €20,000 depending on the degree of kinship, but if the value of the property exceeds this amount, up to 40% tax may be payable. To avoid this, partial donations can be made every 10 years, provided that the tax allowance applies.
