Information About the Estate When a Third Party Manages the Assets

“If you die without having put your financial affairs in order,

your heirs will be the lawyers.”

Edgar Watson Howe

Inheritance law in Germany is based on a large number of statutory provisions, among which the German Civil Code (Bürgerliches Gesetzbuch, BGB) occupies a central position. It provides for two possible forms of succession: by will and – in the absence of a will – by operation of law. As in Russian law, intestate succession provides for several orders of heirs, who are called to inherit according to their degree of kinship with the deceased. There are, however, also significant differences.

Under §§ 1924–1929 BGB, German law provides for several statutory orders of succession (Erbordnungen), including:

first order – the descendants of the deceased, i.e. children, grandchildren, etc.; children inherit in equal shares, and the descendants of a predeceased child take that child's place (§ 1924 BGB);
second order – the parents of the deceased and their descendants (§ 1925 BGB);
third order – the grandparents of the deceased and their descendants, i.e. uncles, aunts and cousins (§ 1926 BGB);
fourth order – the great-grandparents and their descendants (§ 1928 BGB);
fifth and further orders – more remote ancestors and their descendants (§ 1929 BGB).

The spouse of the deceased does not belong to any of these orders – § 1931 BGB lays down a special rule for the spouse. The spouse inherits alongside the heirs of the first order or, where there are none, alongside the heirs of the second order or grandparents; however, the spouse is not entitled to an equal share of the estate, but to 25% when inheriting alongside descendants and 50% when inheriting alongside the parents (and their descendants) or grandparents of the deceased (§ 1931(1) BGB); under the statutory matrimonial property regime of the community of accrued gains (Zugewinngemeinschaft), this share is increased by a further quarter (§ 1371(1) BGB). If there are neither relatives of the first or second order nor grandparents, the spouse inherits alone (§ 1931(2) BGB). The other heirs generally inherit by stocks or lines: children inherit in equal shares, and the descendants of a predeceased heir take his or her place; parents inherit in equal shares (§ 1924(3), (4), § 1925 BGB). Every heir may accept or disclaim the inheritance (Ausschlagung); once the heir has accepted it or the disclaimer period has expired, he or she can no longer disclaim it (§ 1943 BGB). The period is six weeks (§ 1944(1) BGB), or six months if the deceased's last residence was only abroad or the heir was abroad when the period began (§ 1944(3) BGB). This period applies equally to intestate and to testamentary succession. It begins when the heir learns of the inheritance and of the reason for being called to it; where the heir is called by will, however, not before the will has been announced by the probate court (Nachlassgericht) (§ 1944(2) BGB).

By accepting the inheritance, the heir finally assumes all rights and obligations arising from the estate, which already passed to him or her on the death of the deceased (§ 1922 BGB), and, under § 1967 BGB, is in principle liable for the deceased's debts with his or her own assets as well. However, the heir can limit this liability to the estate, for example through estate administration (Nachlassverwaltung) or estate insolvency proceedings (§§ 1975 et seq. BGB) or, where the estate is insufficient, by raising the defence of insufficiency of the estate (Dürftigkeitseinrede, § 1990 BGB). If the heirs fail to react – in particular, if they do not disclaim the inheritance – the inheritance is deemed to have been accepted once the disclaimer period has expired.

Clients fairly often approach our firm for legal assistance with taking up an inheritance – both where a will has been made in their favour and in cases of intestate succession. In this article we report on an interesting case from our legal practice. Two brothers – let us call them Dmitri and Konstantin – came to us for a consultation. They told a lawyer at our firm that their father had died three weeks earlier. This tragic event occurred while he was still relatively young; he had not suffered from any chronic or serious illness. His death came unexpectedly as the result of a heart attack, and he had not made a will, so succession took place according to the statutory rules. The estate included considerable assets belonging to the father, among them real estate, vehicles and bank balances. In the course of taking up the inheritance, a remarkable detail came to light: about a year before his sudden death, the deceased had granted his assistant – let us call her Jana – a power of attorney (Vollmacht) to manage his financial affairs. Jana thus had access to the deceased's bank accounts and could control and independently carry out transactions with the funds held in the accounts of our clients' father. What was notable about this complicated story was that the power of attorney had been granted for an unlimited period and did not expire on the death of the principal (transmortale Vollmacht). Rather surprised by this news, Dmitri and Konstantin first tried on their own to obtain information about the current state of the funds and how they had been managed. They wrote to Jana, explaining their relationship to the deceased, and asked her to provide statements for all of their father's accounts that she managed and – above all – to prepare a report on the account movements for a certain period before his death. This obvious request was met with a categorical refusal: the young woman telephoned one of the brothers and declared that the particulars of her relationship with the deceased were nobody's business and that she had no intention of disclosing any information, least of all for the period during which their father was still alive. Faced with the difficult choice of letting the matter rest, fighting for their rights themselves or seeking professional help, the brothers chose the latter and came to our firm for a consultation.

The lawyer in charge of the case listened carefully to the clients and explained that they had already become heirs on their father's death (§ 1922 BGB); to prove their status as heirs, for example to Jana, it was advisable to obtain a certificate of inheritance (Erbschein, §§ 2353, 2365 BGB), although one is not always required – banks may not insist on one if the right of inheritance can be clearly proven in another way (BGH, judgments of 8 October 2013 – XI ZR 401/12 – and of 5 April 2016 – XI ZR 440/15). It would then be necessary to clarify the legal relationship between the deceased and his assistant in order to determine for which period there was a right to information (Auskunftsanspruch) about the movements on their father's accounts. The lawyer explained that if the father had been entitled during his lifetime to information about the transactions carried out on his accounts, this entitlement had passed to his heirs by way of succession (§ 1922 BGB). Whether the father had such an entitlement depended on the legal nature of his relationship with his assistant. Anyone who manages someone else's money usually does so on the basis of a contract – if unpaid, on the basis of a mandate (Auftrag, § 662 BGB) – and must then provide information, render account (§ 666 BGB) and hand over everything obtained (§ 667 BGB). The position could be different only in the case of a mere favour without any intention to be legally bound (Gefälligkeit) or of a special relationship of trust, as recognised in BGH case law, for example, between spouses; in that case the duty to account for the past may be limited. A right that the deceased himself did not have could not have passed by way of succession either. Our case involved substantial funds in the accounts as well as securities belonging to the deceased. After analysing private correspondence and other circumstantial evidence, our lawyer concluded that an asset management agreement (Vermögensverwaltungsvertrag) – probably concluded orally – had existed. It followed that the young woman had been obliged to use the deceased's funds prudently and appropriately, exclusively in his interest. She had also been obliged to inform the deceased of all financial transactions she carried out. Independently of this, heirs also have rights to information of their own: against a possessor of the estate (Erbschaftsbesitzer) and anyone who has taken possession of items belonging to the estate (§§ 2018, 2027 BGB), and against members of the deceased's household (§ 2028 BGB); they can demand an inventory or an account and, where necessary, an affirmation in lieu of an oath (eidesstattliche Versicherung, §§ 259, 260 BGB), enforced in court by means of a step-by-step action (Stufenklage, § 254 ZPO). In addition, the heirs can revoke the power of attorney that continued after death and request account statements directly from the bank (§§ 675, 666, 1922 BGB).

The lawyer began work without delay. After receiving the corresponding power of attorney from the clients, she started preparing the documents required for the application for a certificate of inheritance. With her help, the father's death certificate and documents proving the clients' relationship to the deceased were obtained, and finally a certificate of inheritance (Erbschein) was issued. Having become heirs on their father's death (§ 1922 BGB) and now holding the certificate of inheritance as proof, the young men were able to request information about the state of the funds entrusted to Jana for fiduciary management. On behalf of the clients, the lawyer at our firm prepared a formal request for information addressed to the young woman and requested statements of the relevant accounts for the entire period of the asset management. A copy of the certificate of inheritance and a copy of the power of attorney granted to the lawyer to represent the interests of Dmitri and Konstantin were enclosed with this request. As expected, the account statements and reports on the management of the funds were soon made available to our clients. Should the review of these transactions reveal any indications of irregularities or fraudulent conduct, we will continue to support our clients in enforcing their rights and legitimate interests.

As mentioned at the beginning, an inheritance in Germany (Erbrecht) can pass in two different ways: by law and by will. The purpose of a will is to reflect the testator's wishes precisely and to avoid many misunderstandings when the inheritance is taken up. There are numerous aspects that must be taken into account when making a will. A carefully worded will therefore avoids disputes between heirs and helps to ensure that the testator's wishes are implemented correctly. The lawyers at our firm will be glad to assist you in drafting such a document – a public will is notarised by a notary (§ 2232 BGB, BeurkG) – in order to avoid unwanted inheritance disputes in the future. As inheritance law is one of the core areas of our firm's work, we also provide legal assistance with taking up an inheritance and support you with all related legal questions and problems.

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This article is for general information only and does not replace individual legal advice.

Inheritance & Estate Law