Supplementary Compulsory Portion, Gifts from the Estate

What is the supplementary compulsory portion?

The supplementary compulsory portion is an independent claim alongside the regular compulsory portion. It applies when the deceased made gifts during their lifetime that reduced the estate, and thus the compulsory portion. The law protects entitled persons from deliberate erosion of the estate through lifetime gifts. Without this rule, anyone could give away their assets shortly before death and reduce the compulsory portion to zero.

Which gifts are taken into account?

Gifts made within the last ten years before death are taken into account. Their value is not applied in full but decreases the further back the gift lies. Section 2325(3) BGB puts it this way: within the first year before death the gift counts in full, and for each further year it counts one tenth less.

• Gift in the 1st year before death: 100% of its value
• in the 2nd year: 90%
• in the 3rd year: 80%
• in the 4th year: 70%, and so on, one tenth less per year commenced
• in the 10th year: 10%
• Once ten full years have passed since the transfer: 0%, the gift is disregarded

What matters is which year before death the gift falls into, not roughly how much time has passed. Each year costs ten percentage points, which with substantial assets quickly amounts to significant sums. The exact date of transfer is therefore always worth verifying.

The exception for gifts to a spouse

A separate rule applies to gifts to a spouse. Under section 2325(3) sentence 3 BGB, the ten-year period does not begin before the marriage is dissolved. Since the marriage normally ends only with the death of the deceased, the period does not start running at all during an existing marriage. In practice this means a gift to a spouse is generally taken into account regardless of how long ago it was made, even after twenty or thirty years.

Usufruct and rights of residence: when the period never starts

This is the most important and most frequently overlooked point in practice. Property is often transferred during the owner's lifetime while the donor reserves a right of use. Many assume the ten-year period begins with registration in the land register. That is not always correct.

The Federal Court of Justice requires a genuine surrender of enjoyment for the period to begin: the deceased must not only give up their position as owner definitively, but must also refrain from continuing to use the gifted object in any substantial way (BGH, judgment of 27 April 1994, IV ZR 132/93). This produces a distinction that can decide a great deal of money:

• Usufruct reserved over the entire property: the period does not begin. The donor continues to draw the benefits and has economically given up nothing. The gift is still taken into account in full even after thirty years.
• Right of residence reserved over part of the property: the period begins on registration in the land register. The Federal Court of Justice so held in 2016, because in this case the donor is no longer master of the house (BGH, judgment of 29 June 2016, IV ZR 474/15, BGHZ 211, 38).

Anyone planning a transfer, or examining a past transfer as an entitled person, should therefore start with the transfer agreement and the land register. Whether it records a usufruct or a right of residence is not a formality; it often decides whether a claim exists at all.

What value is applied to the gift?

Section 2325(2) BGB distinguishes two cases. A consumable item, such as money, is applied at the value it had at the time of the gift. For all other items, particularly real property, the lower value principle applies: the value at the time of death governs, but if the value at the time of the gift was lower, only that lower value is applied.

Two practical consequences follow. First, the value must be determined at two reference dates, which for real property regularly requires two valuations. Second, entitled persons do not benefit from increases in value after the gift, yet do bear decreases. So that the two dates are comparable at all, case law requires the value at the time of the gift to be adjusted for the loss of purchasing power, that is, indexed to the date of death. Comparing two unadjusted nominal figures almost always produces a result that is too low.

Which transfers do not count as gifts

Not every transfer triggers a supplementary claim. Under section 2330 BGB, gifts made in fulfilment of a moral duty or out of ordinary decency are excluded. This covers customary occasional gifts for birthdays and weddings, or support payments the deceased could reasonably regard themselves as morally obliged to make. The boundary is drawn case by case and also depends on the deceased's financial circumstances.

Transfers matched by genuine consideration are likewise not gifts. With family transfer agreements this is often the point in dispute: where property is transferred in return for an undertaking to provide care or pay an annuity, the result is a mixed gift. Only the gratuitous element then gives rise to a supplementary claim, and its extent must be calculated.

How is the supplementary claim calculated?

The applicable value of the gift is added to the actual value of the estate. The compulsory portion quota is applied to this notional estate. From that result, what you are entitled to from the real estate in any event is deducted. The difference is the supplementary claim.

Example

The deceased leaves two children and no spouse. The actual estate is 100,000 €. Two years and four months before death, they gave away 80,000 €, so the gift falls into the third year before death.

• Reduction in the 3rd year: 80% of 80,000 € = 64,000 €
• Notional estate: 100,000 € + 64,000 € = 164,000 €
• Statutory share per child: 1/2, so the compulsory portion quota is 1/4
• Compulsory portion from the notional estate: 1/4 of 164,000 € = 41,000 €
• Compulsory portion from the actual estate: 1/4 of 100,000 € = 25,000 €
• Supplementary compulsory portion claim: 41,000 € − 25,000 € = 16,000 €

The example is deliberately simple. In reality, estate liabilities, funeral costs, several gifts at different times and valuation questions are added. The method, however, stays the same.

If you received a gift yourself

If you as an entitled person received a gift from the deceased yourself, section 2327 BGB takes it into account twice: it is added to the estate like any other gift and is at the same time set off against your supplementary claim. Gifts you received therefore reduce your claim. This is a point where expectations and outcome frequently diverge, and it should be checked before any claim is asserted.

Who is liable to pay?

The heirs are primarily liable, out of the estate. If the estate is insufficient, the recipient of the gift is liable under section 2329 BGB, but only subsidiarily and only to the extent that the heir is not obliged. Under section 2329(2) BGB the recipient can avert surrender of the gift by paying the outstanding amount. Where several people received gifts, the earlier recipient is liable only to the extent that the later recipient is not.

How do you enforce the claim?

• Right to information against the heir: demand a complete schedule of all gifts made in the last ten years, and beyond that for gifts to a spouse
• Inspect the land register and transfer agreements: this shows whether a usufruct or a right of residence was reserved, and therefore whether the period ran at all
• Valuation: for real property two reference dates must be valued, usually by expert report
• Quantification: calculate the supplementary claim on the values established, taking your own gifts under section 2327 BGB into account
• Assertion: demand the amount in writing, with a deadline, from the heir or the recipient
• Litigation: if refused, civil proceedings are possible, often as a staged action for information and payment

Limitation: two periods you must keep apart

The claim against the heirs is subject to a three-year limitation period. It begins at the end of the year in which you learned of the death, of the prejudice to your position and of the gift. As long as you know nothing of a gift, this period does not run.

This article provides an overview and does not replace advice on the individual case. Whether a supplementary claim exists, and in what amount, depends on the asset structure, the contractual arrangements and the valuation dates. Have the claim examined before deadlines expire.