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.
