Inheritance and Heirs

Anticipated succession and avoidance in insolvency

Anti­ci­pa­ted suc­ces­si­on can have dreadful con­se­quen­ces, this shows a case our col­le­ague Dr. Sebas­ti­an Over­kamp clo­sed recent­ly in Saar­land.

Two spou­ses were mar­ried in the second mar­ria­ge. They each had one daugh­ter from their first mar­ria­ge, no child­ren tog­e­ther. The house belon­ged to the spou­ses half each. In a con­tract of inhe­ri­tance both appoin­ted each other as sole full heirs but no bin­ding final suc­ces­si­on.

The hus­band died first, his daugh­ter clai­med her com­pul­so­ry share against the wife. Both par­ties were legal­ly repre­sen­ted, let­ters were exch­an­ged. It took some time until a valua­ti­on report and a nota­ri­al inven­to­ry of the estate were sub­mit­ted. The wife trans­fer­red the house, which now belon­ged to her, to her daugh­ter and retai­ned the right to live in it. When she pas­sed away, the house was gone, but the com­pul­so­ry share had not been paid yet. The wife´s daugh­ter renoun­ced the inhe­ri­tance.

The com­pul­so­ry heir appli­ed for the appoint­ment of an estate admi­nis­tra­ti­on and the pro­ba­te court appoin­ted an expe­ri­en­ced admi­nis­tra­tor. He found an account balan­ce in the three-digit range and estate lia­bi­li­ties in the high five-digit range oft he com­pul­so­ry share. He appli­ed for the ope­ning of insol­ven­cy pro­cee­dings for the estate. Since the trans­fer of the real estate was sub­ject to chall­enge, the Amts­ge­richt Saar­brü­cken initia­ted the pro­cee­ding prompt­ly. The insol­ven­cy admi­nis­tra­tor appoin­ted us to assert the avo­id­ance claim accor­ding to §134 InsO.

We asser­ted the claim out-of-court and reques­ted per­mis­si­on to regis­ter a note to block the land regis­ter. After the dead­line has pas­sed, upon our request and wit­hout a hea­ring, Land­ge­richt Saar­brü­cken issued a preli­mi­na­ry injunc­tion based on which the note is ente­red in the land regis­ter. The oppo­nent rai­sed objec­tion, arguing that the right of resi­dence con­sti­tu­tes con­side­ra­ti­on, making the trans­fer not gra­tui­tous. This con­side­ra­ti­on is rele­vant, it may be hel­pful in mat­ters rela­ted to gift tax, the right of revo­ca­ti­on accor­ding to §§528,530 BGB, and also in com­pul­so­ry share sup­ple­men­ta­ti­on but not with insol­van­cy avo­id­ance. In this con­text, the retai­ned right of resi­dence only results in the encum­brance of the sub­ject of the gift (§143 InsO), which is to be gran­ted befo­re the gift. The oppo­nent must return the encum­be­red sub­ject, but is not obli­ga­ted to remo­ve the encum­brance. The encum­brance howe­ver, which exis­ted as the right of resi­dence, has alre­a­dy cea­sed due to the death of the wife. As a result, the Land­ge­richt Saar­brü­cken upholds the preli­mi­na­ry injunc­tion. The oppo­nent filed an appeal, and we filed a lawsu­it in the main pro­cee­dings. When the court rejec­ted the appeal due to appa­rent lack of pro­s­pects for suc­cess, we rea­ched a sett­le­ment. The oppo­nent paid near­ly the mar­ket value of the pro­per­ty as com­pen­sa­ti­on for the avo­id­ance claim.

As a result, high five-digit legal costs are incur­red for the avo­id­ance pro­cess throug­hout all three ins­tances. In addi­ti­on, there is a five-figure com­pen­sa­ti­on for the insol­ven­cy admi­nis­tra­tor and high four-figure estate lia­bi­li­ties due to the com­pen­sa­ti­on of the estate admi­nis­tra­tor, inclu­ding their expen­ses for repre­sen­ting the unknown heirs in the insol­ven­cy (ope­ning) pro­cee­dings. Nevert­hel­ess, in the insol­ven­cy pro­cess, a 100% pay­out is achie­ved for the cre­di­tors, and even the sub­or­di­na­ted inte­rest and costs are cover­ed. This is an excel­lent result for the insol­ven­cy admi­nis­tra­tor, the estate admi­nis­tra­tor, the cre­di­tors, and their respec­ti­ve att­or­neys. Ever­yo­ne was satis­fied.

Nota­b­ly, the defen­dant in the avo­id­ance action was not as plea­sed. In the end, she paid the mar­ket price for the house her mother gifted to her, along with the costs of the avo­id­ance pro­cee­ding. Wit­hout the anti­ci­pa­ted inhe­ri­tance and the ren­un­cia­ti­on, she would have inhe­ri­ted the house along with the com­pul­so­ry por­ti­on as a lia­bi­li­ty. That would have been a much bet­ter deal. Her loss amounts to a signi­fi­cant six-figure sum.

View­ed sole­ly from the per­spec­ti­ve of the pro­per­ty trans­fer, this case appears as one of thou­sands car­ri­ed out annu­al­ly in Ger­ma­ny. Howe­ver, it also vivid­ly illus­tra­tes what can hap­pen when such tran­sac­tions are made wit­hout legal coun­sel. If the wife or her daugh­ter had enga­ged a spe­cia­list att­or­ney in inhe­ri­tance law during the pro­per­ty trans­fer or at least during the ren­un­cia­ti­on of the inhe­ri­tance, that att­or­ney could have and should have reco­gni­zed that there was a risk of insol­ven­cy within the estate, inclu­ding insol­ven­cy avo­id­ance pro­cee­dings and asso­cia­ted costs. These issues are rightful­ly part of the exami­na­ti­on mate­ri­al for the title of spe­cia­list att­or­ney. A spe­cia­list att­or­ney would have advi­sed the daugh­ter to sett­le the estate lia­bi­li­ties in the form of the step-sister’s com­pul­so­ry por­ti­on to at least bene­fit from the remai­ning estate, ther­eby saving her a sub­stan­ti­al amount of money.

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