Inheritance & legacy: “I inherit my house to my employees” – an ominous gift?

• Inheritance Law
• Private Clients

Inheritances and legacies need to be carefully planned. Beneficiaries must have sufficient cash to pay the (short-term) inheritance tax due and the bills incurred for the operation of the inherited property (e.g. house/property, etc.). For example, if you bequeath your house to your household members without them being able to pay the very high inheritance taxes and costs incurred by non-relatives, this (social) gift would become a disastrous gift. In the worst-case scenario, such an inheritance or legacy would plunge the recipients into ruin.

Appointing an heir (appointment of an heir) and making a bequest (legacy) can drive the beneficiaries to ruin. Planning under inheritance law becomes more challenging if the beneficiary is distant or not related to the testator.

Non-related heirs/legatees

Example: The testator appoints his domestic staff as heirs or legatees of his beautiful house. If the testator dies, the heir (or legatee) must pay the substantial inheritance tax after accepting the inheritance (up to 50%, sometimes more abroad). If the heir does not have the amount of money required to pay the inheritance tax, he or she can try to take out a mortgage.

Mortgage application fails – distress sale – mountain of debt

Due to a lack of sufficient income, the mortgage is not affordable. In desperation, the originally happy heir sells the house under time pressure. The proceeds are less than he had hoped. The sale also incurs property gains tax. Now the recipient of the inheritance or legacy can only hope that a mountain of debt does not remain.

Planning and realisation

Inheritance (or leaving a legacy/bequest) requires careful planning. Once the inheritance, legacy or bequest has been defined, the planning begins. For each individual heir (or legatee), factors such as inheritance tax and the amount of money required for maintenance/operation must be determined. The individually calculated amount of the inheritance or bequest/legacy of each individual heir must be supplemented if the gift is not to degenerate into a dower gift. In international circumstances, this planning and implementation must be orchestrated with great care.

Specialised inheritance lawyers

As specialised inheritance lawyers, we advise you and implement your social intentions.