KMU-Magazin No. 09, September 2021 Extended testamentary freedom for testator
At the end of 2020, the Parliament adopted the revised law of succession. The aim of the revision was to do more justice to today's diverse forms of life. The article deals with these newly won freedoms and shows whether there is a need for action for testators who have already disposed of their estate by means of a will or a contract of succession.
Even though the revised law of succession will only come into force on 1 January 2023, it is advisable to look into the amendment to the law in a timely manner. In the light of the greater testamentary freedom and in order to avoid any ambiguities, every testator who has already made a will or concluded a contract of succession, in particular, should ask himself/herself certain questions regarding his/her testamentary dispositions. In this context, decisions on the distribution of the estate should at least be reconsidered and, if desired, adjusted.
Intestate succession/Statutory entitlement
If a person dies without leaving a will or a contract of succession, the law determines how the estate is distributed. This intestate succession can be modified by the testator by means of a will or a contract of succession within the scope of the testamentary freedom. The testamentary freedom is full if the deceased person does not leave any heirs with statutory entitlements, such as children. If there are heirs with statutory entitlements, the testamentary freedom is restricted by the fact that the respective heirs can claim their statutory entitlements. The only exception to this is if there is a reason for disinheritance, but this rarely occurs in practice. Under the current law, the heirs with statutory entitlements are the descendants (children, grandchildren, great-grandchildren), the spouse and registered partner and – if there are no descendants – the parents of the deceased. The statutory entitlement is different for each category of heirs and consists of a fraction of the statutory succession right.
Today, the following statutory entitlements apply:
- Descendants: ¾ of the statutory succession right;
- Parents: ½ of the statutory succession right;
- Spouse/registered partner: ½ of the statutory succession right.
Increased testamentary freedom
As of 1 January 2023, the following new statutory entitlement quotas shall apply:
- Descendants: ½ of the statutory succession right;
- Parents: no longer any statutory entitlement;
- Spouse/registered Partner: ½ of the statutory succession right (as before).
Thus, according to the new legislation, only the descendants and the spouse and registered partner are taken into account as heirs with statutory entitlements. The parents are no longer among the heirs with statutory entitlements.
In addition, the statutory entitlement of the descendants is reduced from ¾ to ½ of the statutory succession right. These seemingly minor amendments to the law give the testator a new starting position, possibly with much greater freedom with regard to the estate.
Thanks to the new legislation, the freely disposable portion of the estate increases slightly to considerably depending on the constellation (+6.25 % to +50 %), as the following constellations show.
Testator leaves parents or one parent
The testator leaves only his/her two parents or one parent (no descendants and no surviving spouse/registered partner). Depending on the constellation, the freely disposable portion increases by 50 percent or 25 percent.
Testator leaves descendants
The testator leaves only descendants (no surviving spouse/registered partner). Whether the parents or one parent is still alive is not relevant, because in the case of descendants, the parents are not heirs. The freely disposable portion increases by 25 percent.
Testator leaves descendants and spouse/registered partner
The testator leaves descendants as well as a spouse/registered partner. Whether the parents or one parent is still alive is not relevant, because in the case of descendants, the parents are not heirs. The freely disposable portion increases by 12.5 percent.
Testator leaves parents or one parent and spouse/registered partner
The testator leaves only his parents or one parent as well as his spouse/registered partner (no descendants). Depending on the constellation, the freely disposable portion increases by 12.5 percent or 6.25 percent.
Background to the revision
The trigger for the new law of succession lies in the diversity of forms of family life that have become more and more established in our society in recent years. Marriage has lost its monopoly position in partnerships. Due to the increase in the number of divorces, second and third relationships have become more common. So-called patchwork families are also no longer a rarity and there are more and more couples who prefer a marriage-like community – a so-called de facto cohabitation (concubinage) without a marriage certificate or a registered partnership.
Thanks to the new legislation, the testator can in many cases transfer a larger part of his/her assets to, for example, persons close to him/her, by favouring them under the law of succession by means of testamentary dispositions. In this regard, one thinks in particular of:
- Persons who by law are never entitled to any succession right, such as the life partner or stepchildren, stepsiblings or stepparents, or unrelated persons such as godchildren, etc.
- Persons who, due to the specific succession constellation, are not entitled to any succession right, such as parents or siblings, if there are descendants.
- Persons already entitled to inherit, who are to receive a further bequest.
The new law of succession applies if a person dies on or after 1 January 2023. There are no special statutory transitional provisions from the old to the new law of succession.
Where action is needed
A person who has descendants or who, childless, still has parents has greater testamentary freedom to dispose of his or her estate due to the reduced statutory entitlement protection granted to the descendants, respectively the elimination of the statutory entitlement protection granted to the parents. This can be of benefit, for example, in the context of a succession plan for the company, in that a child can be given priority over his or her siblings. Wills and contracts of succession that have already been drawn up remain valid. However, if heirs have been limited to the statutory entitlement therein, it must be verified whether these limitations to the statutory entitlements still correspond to the will of the testator under the new law and whether the wording is also clear under the new law. The following two examples illustrate this issue:
Example 1: In her will, the childless testator has reduced her father's succession right to the statutory entitlement, in contrast to that of her mother ("my father shall only receive the statutory entitlement"). Does this mean that she would not have bequeathed anything to her father, with whom she has been at odds for many years and does no longer exchange a word, if she had been legally allowed to do so?
Example 2: In her will, the widowed testator reduced the succession rights of her two children as follows: "Both of them together shall only receive the statutory entitlement of ¾", and appointed her life partner as heir as follows: "My life partner shall receive the remainder of ¼." Are these inheritance shares also valid under the new law? Or does this mean that her descendants will always only receive the statutory minimum (statutory entitlement)? In other words, would the statutory entitlement of the two children now have to be adjusted downwards to ½ and would the additional freely disposable portion have to be allocated to the life partner, who would thus receive ½ instead of only ¼? A review of such formulations in the interests of clarity, also under the new law, prevents disputes over the interpretation and thus possibly also litigations among the heirs. Such review is therefore urgently recommended. In any case, the new law gives rise to reconsider the content of the will or the contract of succession in order to make use of the increased testamentary freedom.
Everyone is free to arrange his/her inheritance. The new provisions applicable as of 1 January 2023 provide an opportunity to think about individual dispositions in respect of his or her estate or to review a will or contract of succession that has already been drawn up. If a disposition is to be made or adapted, this must be made in the legal form. In the case of a will, this must be made in handwriting or in the form of a public deed executed by a notary. In the case of a contract of succession, there is only the public deed. The adjustment of an already existing contract of succession can only be made jointly by all contracting parties.
When drawing up a will or contract of succession, it is important that the wording of the dispositions is clear and does not give rise to any discussions. There exists a wide range of possible dispositions, such as appointments of heirs, legacies, substitutions, remaindermen, obligations and conditions, executors, etc. In this regard, it is advisable to consult specialists. Notaries, for example, can also carry out the public deed at the same time.
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