Laws governing disclaiming of inheritance

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This concerns my wife who is a dual German and US citizen. When her mother passes away (she is approaching 90).in Germany, my wife would like to have her share of inheritance, if any, to go to one of her sisters. While her mother is a Demenz-WG, this sister has the primary responsibility for her and my wife would like to recognize that.

 

Is that possible in German law? If so, is there a legal procedure for it? I am sure her other sisters would be totally fine with it but do not know if it can be decided within internal family discussions if there is a will.

 

Many thanks!

 

PS: The scenario described is not possible in the US law where it is possible to disclaim an inheritance but not to influence the recipient of the disclaimed share.

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No matter what happens, once your wife gets her share she can gift it to the sister in question surely.

That way you avoid any messing around with inheritance law and wills, and simply give a gift.

 

I have no idea if that will be tax efficient in either the US or Germany, but it seems clear that it will be legal in both countries.

 

 

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Thank you! That is definitely an option for her, though it is inefficient from a tax perspective.

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@Kavm

 

Unfortunately the German law governing disclaimers (Ausschlagen) of an inheritance (§1953 of the BGB) are pretty inflexible compared to what is allowed in many US states.

 

In some respects, however, they are similar:

 

Both legal systems treat an effective and timely disclaimer as creating a legal "fiction" that the disclaimant has predeceased the decedent. As a consequence, the person(s) designated by the decedent's will - or by the rules of intestate succession if there is no will - to receive the disclaimant's share in the event the disclaimant predeceases the decedent succeeds to the disclaimant's share.  If there is no such person, then the disclaimant's share will augment the estate to be shared by the decedent's other "surviving" heirs.

 

Under both systems the disclaimant/person disclaiming (die Ausschlagende) cannot designate the person who will receive the benefit of her disclaimer.

 

Unlike many US states, in Germany a disclaimer is total.  There is no possibility of a partial disclaimer.  In addition, with the exception of spouses in special circumstances or situations involving specific bequests/legacies, a disclaimer in Germany also effectively disclaims any subsisting forced share rights (Pflichtteilsanspruch).

 

The only way to accomplish what your wife wishes to do would be to have her mother execute a will with appropriate provisions.  As you indicate, however, it may be too late for that.

 

While post-mortem gifts to the "good sister" are indeed tax inefficient, you and your wife could both give her €20K each every 10 years tax free and you might be able to persuade her other sisters (and their husbands) to be similarly generous. 

 

 

 

 

 

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@Straightpoop

 

Thank you so much! This is the information I was looking for.

 

We already gift the ‘good sister’ some amount of money, so the 20k per 10 year limit is already exhausted.

 

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35 minutes ago, Kavm said:

so the 20k per 10 year limit is already exhausted.

 

Don't forget the additional 20K you can give her. And then there is Christmas, birthdays, anniversaries, travel and vacation expenses, etc.  Done correctly there are many legitimate - albeit modest - ways to make non-taxable transfers of value in addition to the 20K limit.

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Would giving her an interest-free loan which will only have to be paid back in 100 years or so be a legal option?

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2 hours ago, jeba said:

Would giving her an interest-free loan which will only have to be paid back in 100 years or so be a legal option?

 

Yes and no.

 

See this comment on a 2014 case in which a loan at below market rate of interest was deemed to be a gift of the difference between the uncollected interest and the going market rate for a loan of that type at that time.  The "loan" principle itself, however, was not - in this case anyway - deemed to be a gift but I think it is perfectly possible that if the FA were to get wind of such a transaction they might argue that the loan was in fact a sham transaction to disguise a gift:

 

Zinsloses Darlehen bedeutet Schenkung der Zinsen (steuertipps.de)

 

 

 

 

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On 8/5/2022, 8:54:24, Straightpoop said:

 

Don't forget the additional 20K you can give her. And then there is Christmas, birthdays, anniversaries, travel and vacation expenses, etc.  Done correctly there are many legitimate - albeit modest - ways to make non-taxable transfers of value in addition to the 20K limit.

Thank you so so much! We had not thought of that.

 

My wife and I have same bank account used to transfer money to her. How can we designate gifts to be separate from one another?

 

Any advice in this regard would be very welcome.

 

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9 hours ago, Kavm said:

How can we designate gifts to be separate from one another?

 

 

If your joint account is located in Germany and there is no clear evidence to contrary, the assumption is that you and your wife are 50-50 owners.  Hence, a single total gift of €40K would be deemed to be €20,000 from each of you.  To make it clearer, you and your wife would separately initiate two transfers and reference each separate transfer: "gift from H" or "gift from W".  In the highly unlikely event such piddling small transfers even come to their attention, the FA has much better things to do with its time than investigate the "real" economic ownership/source of funds held in an Oder Konto in the longshot hope of maybe snagging an extra couple thousand Euro.

 

 

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Thank you very much! Our account is joint but in the USA and we send a monthly stipend  to her sister in discussion through (Transfer) Wise, which was suggested here. Fewer transfers would be better but my sister-in-law is poor at managing money. My wife does have a German account but we fund that at a low level to avoid tax filing obligations in the USA. But, we can and will designate transfers as Gift From ,,, messages in the future. 

 

Many thanks!

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