Taxes, debts, community of heirs: What you need to consider when inheriting real estate

If a property falls to the bereaved almost overnight, that is not always a reason to cheer. Because not every heir can look forward to a debt-free, refurbished luxury property in a coveted inner city location. Not every beneficiary can easily pay the tax office what inheritance tax it requires. In addition, not everyone is the sole heir and can freely dispose of everything. And so sometimes even the inherited villa becomes a burden, not to mention bitter quarrels in the family. “Getting information and advice is important. It is not easy to correctly assess the value and consequences of the estate, “says Jan Bittler, Managing Director of the German Association for Inheritance Law and Asset Succession (DVEV). Real estate heirs should know:

Reject or accept property?

Many heirs not only drop a house and assets into their lap, but often also a pile of inherited debts and liabilities. The dilemma: Picking out the savings stocking, the stocks and the valuable furniture, but rejecting the dilapidated terraced house, which is burdened with mortgages up to the roof, is not possible. Anyone who inherits lousy things, for example from their parents, grandparents or sister, must also be responsible for it, even for loans. Inheriting only works on the principle: all or nothing. It is important to hurry up to make the momentous decision not to accept an estate and its house in the first place, but to turn it down. There is only a period of six weeks for this. It starts running as soon as you hear of the death of your mother or aunt. If there is a will or a contract of inheritance, the clock starts ticking from the time the disposition is opened. Every day counts. If the deadline is missed, the inheritance is automatically considered accepted.

Investigate the situation quickly

It is important to quickly get an overview of the actual value and usability of the inherited house. Heirs have the right to request an extract from the land registry. This shows whether the house is still encumbered with land charges and mortgages. The deceased’s banks will provide information about further debts, possible rental income and credit balances. The heir must either present a power of attorney valid after death, a health care proxy or a notarial will. It is also important to check the structural condition of the house with the help of experts. What about the masonry, heating, water pipes, cellar, roof? Old houses are often in need of renovation, which can be expensive. On the basis of all this data, experts can assess the market value – and the heir must decide whether it pays off for him to take on the estate.

Take out a loan for the tax office?

Close relatives who inherit a house, i.e. spouses, children or grandchildren, usually do not have to worry too much about the tax office – as long as they do not leave behind huge fortunes, blocks of shares, a luxury villa or several properties in the very best, high-priced location. A wife, for example, can inherit up to 500,000 euros from her husband tax-free. The same applies to registered life partners. Children can receive values ​​of up to 400,000 euros tax-free from each parent, grandchildren up to 200,000 euros. Taxes are due for assets above the exemptions. For example, when a daughter inherits an apartment building in Munich worth several million euros. Who can pay for that? “In such cases, advice from the tax advisor is necessary,” emphasizes Bittler. Because: Often it can even pay off for not liquid heirs to take out a loan to pay the inheritance tax, depending on the individual case. Anyone who inherits property such as a house must inform their tax office informally within three months. The authority then sends out an inheritance or gift tax return that must be completed.

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Special case of own house

In addition to the tax-free allowance, there is an extra benefit for spouses, legal partners and children. For them, owner-occupied residential property remains tax-free in the event of inheritance – provided that they already live in it or the offspring move in with inheritance. The heirs also have to live in it for ten years. During this time, the property may not be rented out or used as a second home. Exception: the heir has to go to a nursing home. For children there is an additional rule that no inheritance tax is due up to a maximum of 200 square meters. It doesn’t matter whether it is a modest apartment or a luxury villa. For example, if a child inherits a house with 250 square meters of living space from the mother, 200 of them are tax-free and the remaining 50 are not.

Inherited with others?

Three siblings – and a house. Or: stepmother, a child – and a house. Such constellations of heirs within a family very often exist, as inheritance lawyer Bittler explains. Regardless of the relationship between the house-heirs: If they inherit together, they always form a community of heirs. Each individual inherits everything. No one is able to act without the other. Bittler points out that everyone pulls together rarely works because of the mostly different interests. “If one wants to stay, the second wants to rent it out, the third wants to sell or be paid out.” The result is usually family disputes and years of vacancy. If the heirs cannot agree on what will happen to the house, the end of the auction will be auctioned off, the worst possible solution for everyone, warns Bittler.

Sole heirs have an advantage

If you have no co-heirs, you just have to clarify for yourself: Can I keep the house after the cash drop and possible taxes, do I want to move in, rent, renovate or sell it myself? Anyone who is determined to take over the inheritance must correct the land register and register as the new owner. In order to prove legal succession, a certificate of inheritance is often required. This is available on application and for a fee at the probate court. Authorities or banks in particular require the document. The certificate of inheritance is only one way of proving one’s right of inheritance. If the deceased has made a notarial will, this is also sufficient for the transcription. A simple will is not enough. Anyone who makes the correction within two years after the death of the testator and registers as the new owner does not pay any fees. Property transfer tax is generally not due. In a community of heirs, it is possible as an individual heir to receive either a partial certificate of inheritance or a joint certificate of inheritance that is valid for several heirs. Important: Anyone who applies for a certificate of inheritance accepts the inheritance at the same time. It is then no longer possible to refuse the inheritance.

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