Valuation as the Basis for Inheritance and Compulsory Share
The precise determination of the fair market value (Verkehrswert) of a property at the time of death is a necessary prerequisite for calculating inheritance quotas, compulsory share claims, and inheritance tax. While the tax authorities (Finanzamt) often determine the value using standardised formulas (such as the depreciated replacement cost method or the capitalised earnings method), these do not always reflect actual market reality.
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DR. SCHMIDT LEGAL assists heirs in establishing a realistic valuation through certified expert appraisals. This is particularly crucial when co-heirs are to be bought out or when it must be proven that the value assessed by the tax authorities is too high, in order to reduce the tax burden.
Inheritance Tax Privileges and the Family Home
Real estate in an estate is generally subject to inheritance tax, although the law provides for extensive exemptions under certain conditions. A central role is played by the so-called family home privilege (Familienheimprivileg): if the surviving spouse or a child inherits the primary residence and continues to occupy it for at least ten years, the tax may be waived entirely, subject to certain size limits (up to 200 m² for children).
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DR. SCHMIDT LEGAL advises on the strict requirements for this tax exemption and highlights potential pitfalls – such as moving out prematurely or renting the property – which can lead to the retrospective loss of the tax privilege.
Renunciation of Inheritance for Encumbered Properties
Not every property in an estate represents a financial gain. A backlog of renovations, environmental liabilities, or mortgage encumbrances (Grundschulden) exceeding the market value can mean that accepting an inheritance poses a significant financial risk. In such cases, it must be determined within the six-week renunciation period whether the property holds value or whether a renunciation is necessary to protect one's private assets.
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DR. SCHMIDT LEGAL provides support through thorough research of encumbrances and a legal review of the land registry status and existing loan balance information. Our goal is to clarify whether liability-limiting measures, such as estate administration, are a more sensible alternative to full renunciation in order to best protect your personal wealth.
Communities of Heirs and Real Estate
If a property is held as part of the joint assets of a community of heirs, the co-heirs may only dispose of the property collectively. If there is disagreement over whether the property should be sold, rented out, or taken over by one co-heir in exchange for a buyout of the others, there is a risk of permanent deadlock. As a last resort, the law provides for a partition auction (Teilungsversteigerung) to convert the immovable property into liquid funds.
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DR. SCHMIDT LEGAL supports you in this dissolution process with the aim of averting a value-destroying auction. Instead, we work to find an economically advantageous solution through legally sound distribution agreements or severance arrangements (Abschichtungsvereinbarungen).