The Effectiveness of Forfeiture Clauses in Dispositions Upon Death

Experience has shown that inheritance is a particularly emotional matter. If one wants to avoid unnecessary disputes and not create additional ambiguities, it is recommended not to use standard, formulaic forfeiture clauses, but to examine in each individual case whether such a clause makes sense and, if necessary, to tailor it to the case.

| Judith Hubatka, Katharina Lux

Why a Forfeiture Clause in Last Wills and Inheritance Contracts?

If a testator draws up a will or concludes an inheritance contract, he/she obviously also wants this will, i.e. his/her wishes and instructions concerning his/her estate, to be respected after his/her death and the dispositions or instructions made, such as legacies, bequests, allocations, division provisions, conditions and requirements, to be implemented without any disputes between the heirs. In order to ensure this and to secure, or (as far as possible) enforce the testamentary dispositions, or the inheritance contract and the dispositions and orders made therein, a testator often uses the so-called forfeiture clause (privatorische Klausel). The validity of a forfeiture clause in a last will or inheritance contract is generally recognized. It should be noted, however, that despite their frequent use in practice, the effectiveness of such clauses and their consequences in the event a testamentary disposition/inheritance contract is challenged, is often uncertain and disputed in case law and doctrine.

What are Forfeiture Clauses in Last Wills and Inheritance Contracts?

By means of a forfeiture clause, the testator stipulates that a beneficiary (heir or legatee) under a last will/inheritance contract is to be deprived of the benefits in the event that he or she does not comply with the testator’s last will or if he or she challenges it (e.g., the last will provides that in this case the legal heir merely receives the compulsory portion or the legatee loses the right to the legacy). Thereby, the testator wants to prevent the beneficiaries from contesting his/her dispositions upon death or, respectively, to create an incentive for his/her last will to be observed. Often seen are forfeiture clauses in connection with dispositions which provide an heir entitled to the compulsory portion, will (for the time being) go away empty-handed at death, however, at a later date (e.g., the death of the primary beneficiary) they will receive the entire estate, and thus more than the compulsory portion.

The forfeiture clause may designate the conduct deemed unacceptable by the testator in general or in specific terms. The “general forfeiture clause” is the clause mostly used. It is intended to prevent challenges to the testator’s last will as such. The following wording is often used: “If an heir does not comply with the provisions of this last will, or if an heir contests this last will, he/she shall be placed on the compulsory portion in favour of the other heirs, or the heir not entitled to the compulsory portion shall lose its share in the estate.” In the case of the “specific forfeiture clause”, the testator wishes to induce the beneficiary to act in a certain way or to ensure compliance with specific provisions. An example clause may be: “I bequeath my apartment to person A. My aunt lives in my apartment. If person A cancels my aunt’s lease for the apartment, the bequest lapses.”

Admissibility of the Forfeiture Clause

In principle, forfeiture clauses are admissible and valid. However, a forfeiture clause may no longer be admissible and a corresponding disposition of property upon death (will/inheritance contract) is in principle inadmissible and voidable, if:

  1. the forfeiture clause is contrary to law or morality;
  2. the (remaining) content of a testamentary disposition/inheritance contract is unlawful or immoral (and these provisions are to be protected by means of a forfeiture clause); or
  3. the forfeiture clause prevents the beneficiary from exercising rights to which she/he is entitled by law,

(whereby in practice and doctrine it sometimes proves difficult to determine which of the aforementioned scenarios applies. Further, in the absence of a supreme court decision, it is unclear whether scenario 3 renders the forfeiture clause invalid in each case).

A forfeiture clause is invalid, for example, if it stipulates that the last will or inheritance contract lapses if the beneficiary does not join a desired religious community (violation of freedom of religion) (scenario 1) or if an heir entitled to a compulsory portion of the inheritance is denied his/her compulsory portion of the inheritance in the event of a challenge (scenario 1). Furthermore, a forfeiture clause is also invalid if the disposition of property upon death itself (will/inheritance contract), violates the compulsory portion of an heir entitled to a compulsory portion (e.g., by appointing the spouse as the sole heir and not considering the children). A forfeiture clause, which in this case, provides that the heir protected by the compulsory portion who contests the disposition will receive only his compulsory portion is invalid (voidable) or, respectively will be declared invalid if the contestation is successful (scenario 2 and 3). Scenario 3, on the other hand, is undoubtedly the case if the testamentary dispositions suffer from a formal defect.

In practice, scenario 3 often causes difficulties. Undeniable is the fact that the forfeiture clause has no effect if it, or the testamentary disposition, or inheritance contract containing this forfeiture clause, is successfully challenged and thus declared (partially) invalid, e.g., on the grounds of incapacity or lack of form. This is a logical consequence since forfeiture clauses cannot have the effect of protecting or maintaining an inadmissible, unlawful situation. For example, if a last will suffers from a formal defect and an heir successfully contests the last will, then the clause in the last will, providing that the challenger goes away empty-handed, has no effect. Instead, in such case, any previous testamentary dispositions, or if there are none, the law then applies. Conversely, this means that forfeiture clauses are only valid if a challenge to the testamentary disposition or the inheritance contract has been unsuccessful. However, whether the forfeiture clause is valid, if there is a legitimate reason for contesting it (e.g., in case of legitimate doubts about the testator’s capacity to dispose), but the court (based on its discretion) subsequently decides at the plaintiff’s expense, is subject to controversy and dispute. According to the prevailing (not uncontroversial) opinion, even in this (unclear) case, the forfeiture clause is valid. As a result, beneficiaries (heirs/legatees) who wish to challenge testamentary dispositions or inheritance contracts, are often exposed to enormous legal risks and uncertainties and are therefore more inclined to refrain from challenging them.

Ultimately, the admissibility of a forfeiture clause must be assessed on a case-by-case basis. In order to avoid disputes and create certainty, general, stereotypical clauses should not be used. The forfeiture clause should be drafted in a way that is tailored to the individual case. Careful drafting of the last will or inheritance contract also helps the heirs dividing the estate at an already difficult time.

If you have any further questions in this regard, please do not hesitate to contact us. We can assist you in choosing a course of action tailored to your needs.

Judith Hubatka
Attorney at Law, Notary Public
[email protected]
Katharina Lux
Ass. iur., LL.M., Attorney at Law
[email protected]

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