What to do with the property in case of inheritance?

In Germany, every second inheritance includes real estate. Real estate often constitutes the majority of the inheritance. If the inheritance hasn't been addressed in a will, heirs frequently face many questions. What do we do with it? Sell it, rent it out, move in? Do we have to pay inheritance tax?

Are there multiple heirs?

If there are multiple heirs, they initially form what is known as a community of heirs. For example, children, spouses, or grandchildren can be part of a community of heirs. Spouses and children are entitled to a compulsory share of the inheritance. Grandchildren also receive a compulsory share if their parents have already passed away. It is important to note that no member of the community of heirs can decide on the inheritance alone. For example, if one heir wants to move into the property, but another wants to sell it, it cannot be sold without the consent of both. Conversely, an heir must buy out the other heirs if they want to keep the property alone. Both when selling and when buying out the other heirs, it is important to know the value of the property. Professional real estate agents offer free valuations. However, if the heirs cannot reach an agreement, a forced auction is a possibility. Experts advise against this, as properties are often sold below market value in such auctions. A forced auction can be requested by any member of the community of heirs at the local court.

When is inheritance tax due?

When inheritance tax is due depends on the value of the property and the degree of kinship between the heirs and the deceased. This is because there are different tax-free allowances depending on the degree of inheritance

• Spouses: 500,000 euros
• Children and grandchildren whose parents have died: 400,000 euros
• Grandchildren: 200,000 euros
• Parents and grandparents: 100,000 euros

Inheritance tax is also waived if the property is used by the owner for a period of at least 10 years after the inheritance.

Does a will exist?

In a will, the testator can regulate their inheritance. However, there are also more complicated cases. For example, if the testator transfers the property to their spouse, any child is still entitled to a statutory share. The child can claim this share.

Sell, rent, or use the property yourself?

Selling an inherited property is often the simplest solution. Unlike other real estate, the proceeds from the sale – i.e., money – can be more easily divided among the heirs. Living in the property yourself is often only worthwhile if you are the sole heir, can buy out the other heirs, or have a lifelong right of residence. Renting it out, on the other hand, can be advantageous if one of the heirs might want to live in the property themselves later on.

Have you inherited a property and would like to learn more about your options? Contact us now, we'd be happy to advise you!

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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