On that date the new EU Succession Regulation enters into force, and it could result in a change in the applicable succession law. This could mean that their estate is suddenly governed by foreign law instead of German law.
Under current German choice-of-law rules, succession is governed by the law of the state of which the decedent is a national at the time of death. For Germans, therefore, the basic rule is that German law applies to their estates. However, in many other legal systems, the applicable law is not based on the nationality of the decedent, but on the decedent's habitual abode at the time of death. This could mean that an estate is governed by the laws of more than one country. To avoid this situation, it has now been established within the EU (with the exception of the UK, Ireland and Denmark) which country's succession laws will be applied to all aspects of a decedent's estate. The German legislature has also taken action on this issue and will transpose the relevant provisions into German law by August 17, 2015.
From now on, the decedent's estate will be governed by the succession laws of the country where he had his habitual abode at the time of his death. It has not been expressly established how to determine habitual abode. It will be based on an overall evaluation of the life circumstances of the decedent prior to his death and at the time of his death. As a result, difficulties of interpretation between the countries involved are almost bound to happen.
For example, it is not completely clear which succession laws will apply if the decedent spends six months in Spain and six months in Germany in a year. Even more difficult (and largely dependent on chance) is the determination of the applicable law when the decedent has spent different amounts of time in Germany and at his vacation home outside Germany.
To be on the safe side, therefore, you should expressly establish in your will or inheritance contract which law governs your estate. Contrary to the situation under current German law, in the future decedents will be able to select the succession law of the state of which they are a national. This express right to choose the governing law should be taken into consideration if you spend longer periods of time at a vacation home outside of Germany. But it should also be considered if you move to another country, even temporarily, for work reasons, since this could change your habitual abode.
If you are planning your will or inheritance contract, as a general rule you should provide for the governing law — you never know whether for health reasons you might end up having your habitual abode in another country or whether you might decide to retire to sunny Southern Europe, without remembering to amend your will or inheritance contract.
By establishing the law of the country of which you are a national as the law governing your estate, you can avoid uncertainties that could arise from a change in your habitual abode. On the other hand, foreign law might allow you to structure your estate in a way that it is more in line with your wishes. So you should weigh your options carefully.
There are various ways to draw up a will in Germany: it can either be in the form of a "public" will (recorded by a notary) or in the form of a handwritten (holographic) will.
Inheritance contracts can be entered into between the decedent and any third party of his choosing. There is no requirement that the third party be related to him by blood or by marriage. However, inheritance contracts must be in notarial form and can only be executed before the notary if both parties are present at the same time.
The choice of law in a notarially-recorded will or inheritance contract will result in additional fees, so that it might be better to establish your choice of law in a handwritten will. The new Succession Regulation does not in any way change the tax consequences. German and foreign succession and gift tax laws will continue to govern side by side. Because there is often no double taxation treaty with regard to this type of tax, there will frequently be double taxation, because a vacation home may be taxed in Germany and in the country where it is located. This double taxation is mitigated by the fact that the foreign tax can be offset against the German succession and gift tax.