Ruling of the BFH on Tax Disadvantages due to Jastrowsche Clause
The Berliner Testament is popular among married couples because it is particularly suitable for protecting the surviving partner from the claims of other heirs in the event of death. However, financial security can be accompanied by negative consequences for inheritance tax. This is also demonstrated by a ruling of the Federal Fiscal Court (BFH) of October 11, 2023, regarding the so-called Jastrowsche Clause in the Berliner Testament (Reference: II R 34/20).
In the Berliner Testament, or joint spousal will, the spouses usually appoint each other as sole heirs and their children as final heirs. As a result, the children inherit only after both parents have passed away. This protects the surviving spouse from the claims of other heirs after the death of their partner and provides better financial security. However, after the death of the first parent, the children can claim their compulsory portion. To avoid this, a compulsory portion penalty clause is often incorporated into the Berliner Testament. This clause usually stipulates that a child who demands their compulsory portion after the death of the first parent will also receive only the compulsory portion after the death of the second parent, according to the economic law firm MTR Legal Rechtsanwälte, which also advises on inheritance law.
Jastrowsche Clause and Deferred Bequest
A particularly severe form of a compulsory portion penalty clause is the so-called Jastrowsche Clause. This typically stipulates that the heirs who do not demand their compulsory portion after the death of the first deceased parent will receive a bequest from the estate of the first deceased equivalent to their statutory share of the inheritance. These bequests are only allocated to the children after the death of the surviving spouse and become estate liabilities. Through the estate liabilities, the compulsory portion claim is reduced, and the child who demanded their compulsory portion receives a lower amount.
The disadvantage, however, is that the surviving spouse cannot deduct the bequest obligation as an estate liability since the bequest is not yet due. Upon the death of the surviving parent, the child has to tax this so-called deferred bequest as originating from them. If they have also become an heir, they can deduct the bequest as an estate liability, the Federal Fiscal Court clarified.
Bequest as Estate Liability
In the underlying case, the spouses had made a Berliner Testament and appointed each other as sole heirs, with the surviving spouse being free to dispose of the estate and their own assets. As final heirs, the spouses appointed their children. Additionally, the will contained a Jastrowsche Clause, which granted the children who did not demand their compulsory portion after the death of the first parent a deferred bequest. The bequest was to be as high as the statutory share of the inheritance at the death of the first deceased parent. However, the bequest was to be paid out only after the second parent had died. A child who demanded their compulsory portion, on the other hand, was to receive only the compulsory portion even after the death of the second parent. Two children asserted their compulsory portion and were disinherited.
After the father and then the mother had died, the other children, the plaintiff and her sisters, claimed estate liabilities from the deferred bequests after the father’s death totaling about 3.3 million euros. The tax office set the inheritance tax at about 383,000 euros and did not recognize the estate liabilities from the deferred bequests.
BFH Denies Double Taxation
The plaintiff objected to this, arguing double taxation. Her lawsuit was unsuccessful. The BFH does not see any actual double taxation. The value of the bequest had initially been taxed after the death of the father in the hands of the mother as the sole heir. Since the bequest had already existed at that point but was not due until after the mother’s death, the father’s estate passed to the mother without reduction. The mother could not deduct the bequest obligation since the bequest was not yet due, according to the BFH. After the mother’s death, the plaintiff had to tax the now due bequest. In addition, as the final heir, the mother’s estate had also been subject to inheritance tax, according to the judges. Here she could deduct the bequest as an estate liability.
There is no double taxation, as these are two separate cases of inheritance. The cause of this is the Jastrowsche Clause, said the BFH.
In the present case, the Berliner Testament did not optimally utilize the allowances from inheritance tax. MTR Legal Rechtsanwälte advises on inheritance tax and other questions of inheritance law.
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