The pitfalls of Berliner Testaments

A Berliner Testament (Berlin will) is a widespread form of will in which spouses mutually appoint each other as sole heirs. While this spousal will offers many advantages, it also entails potential disadvantages.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: A Berliner Testament is often the favoured means of making provisions for one’s estate among spouses. The spouses mutually appoint each other as sole heirs and generally designate their children as final heirs. The advantage of this arrangement is clear: it ensures material security following the death of one of the spouses. If, on the other hand, the rules of intestate succession apply, the children become entitled to their share in the inheritance as soon as the first spouse dies. One possible consequence of this could be that the family home has to be sold. In the case of a Berliner Testament, they do not inherit until both parents have passed away. Having said that, the children would still be able to assert their right to a compulsory portion notwithstanding the Berliner Testament. This can be avoided, e.g. by incorporating a so-called “Pflichtteilsstrafklausel” (compulsory portion penalty clause).

A Berliner Testament can also entail tax disadvantages, particularly in cases involving larger sums and assets, because the tax allowances may not be fully exploited. Tax allowances for spouses amount to 500,000 euros, whereas the figure is 400,000 euros for children. If, for instance, an estate valued at 600,000 euros is passed on solely to the surviving spouse, it is not possible for the tax allowance for the children to be taken advantage of. Should the assets remain undivided and the children become final heirs, this gives rise to new tax disadvantages.

When it comes to Berliner Testaments, it is also important to be mindful of the strong binding effect associated with the jointly agreed testamentary dispositions. These can only be altered by both parties together. If one of the spouses dies, it is no longer possible to change the joint dispositions unless arrangements to this effect were included in the will.

The EU succession regulation has been in force since last summer. According to this, the applicable national succession law is that of the country in which the testator was habitually resident. That being said, Berliner Testaments are not recognized by all countries, which means that the testamentary dispositions might not be effective as the case may be. However, the testator is able to specify that the succession law of his home country apply.

Lawyers who are competent in the field of succession law can advise on all matters pertaining to wills and contracts of inheritance.

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