Social welfare recourse after the inheritance
A case is currently being heard before the Stuttgart Social Court that is likely to have a lasting impact on the way wills are drafted. The proceedings concern a so-called disabled person's will, i.e. a (protective) will by parents of a disabled child with which they wish to protect and support their child for the time of their death. The pending decision will, however, cover classic spouse wills in the same way. It concerns the question of the order in which the liabilities to be paid from the estate are to be fulfilled if the estate is not sufficient for everyone - and who may be left empty-handed.
1. social law background
Disability wills play an important role in practice if a disabled child receives social welfare benefits. If the child lives in an institution, for example, the costs regularly amount to two to three thousand euros per month or more. These costs are covered by the social welfare office if and for as long as the disabled child - and not their parents - has no realizable income or assets. They can add up to several hundred thousand euros by the end of a disabled child's life. But even if the disabled child lives with their parents for the rest of their life and "only" works in a special workshop, the state will pay for this, albeit significantly less.
Regardless of how high the payments are in individual cases, social law stipulates that the benefits cannot generally be reclaimed. However, Section 102 SGB XII does contain a provision that allows the state to reclaim the money that the disabled child received in the last 10 years of their life after their death. A simple calculation example shows the amounts that can come together here. If the state paid EUR 3,000 per month, the claim for repayment amounts to EUR 360,000. At EUR 1,000 per month, this amounts to EUR 120,000 calculated over 10 years.
2 Disability wills
Disability wills now aim to ensure that the inheritance of a disabled child after his or her father and mother does not lead to the cessation of social assistance. Instead, state payments should continue to be made. This requires that the inheritance is protected from access by the state. Otherwise, social assistance would be discontinued until the inheritance has been largely used up. (Only EUR 2,600.00 is permitted as so-called protected assets.) However, protection from the state is not an end in itself. On the contrary, the inherited assets should be able to be used in full for the benefit of the disabled child, regardless of state benefits, for example for additional therapies, additional medical services or additional leisure activities. In general, the aim is to improve the living conditions of the disabled child, as the declared aim of social welfare is to ensure only absolute basic care, no more and no less. Against this background, the Federal Court of Justice has repeatedly ruled since the early 1990s that wills for disabled people are not immoral, but are in the best interests of parents for their disabled child.
The aim of being able to use the assets for the disabled child is implemented through a combination of execution of the will and so-called prior and subsequent inheritance. The latter means that the part of the inheritance that is not used during the disabled child's lifetime can be kept in the family and passed on to the disabled child's siblings, for example, despite Section 102 SGB XII. If a disabled child inherits EUR 40,000.00, for example, and EUR 10,000.00 is still available at the time of death, the state will not be able to access the money. Instead, the claim of the subsequent heir, i.e. the person who comes after the disabled child as the so-called prior heir, takes precedence.
However, there are also disadvantages to ordering prior and subsequent inheritance. This is because it leads to the longer-living spouse forming a community of heirs together with their disabled child. However, this is anything but ideal for the longer-living spouse. For this very reason, Berlin wills typically provide for the spouses to initially appoint each other as sole heirs in the interests of the best possible legal and financial protection for the longer-living spouse. Not making the disabled child a (co-)heir on the first inheritance is also regularly recommended in the area of disability. It is then necessary to arrange a legacy for the disabled child as compensation, i.e. a kind of gift that the child should receive upon inheritance. It can then be determined that, for example, the siblings of the disabled child receive that part of the legacy that is still available at the time of death. This is referred to as a prior and subsequent legacy. This so-called legacy solution has eminent advantages for the parent who has lived longer, without being disadvantageous for the disabled child. One argument against this, however, is that, unlike in the case of prior and subsequent inheritance, it is not yet clear whose claim takes precedence after the death of the disabled child - the state's right of recourse or that of the subsequent legatee? Due to this uncertainty, almost all form books on the drafting of wills advise against choosing the inheritance route, which is advantageous in itself.
3. proceedings before the Stuttgart Social Court
In the proceedings before the Stuttgart Social Court, the parents of a disabled child had chosen precisely this bequest route. In their spouse's will, they appointed each other as sole heirs and made a bequest of EUR 60,000.00 to their disabled son. The nieces of the disabled child were to be subsequent legatees. When the disabled child died in 2015, all of the assets were still available and were now demanded by the responsible social welfare office. The lawsuit is directed against this. It is a matter of establishing that the claims of the nieces take precedence and that, mirroring this, the state's right of recourse does not cover the EUR 60,000.00 that can be traced back to the father of the disabled child and which he himself, the father, disposed of in his will. Without going into the details, this is quite rightly in line with the absolutely predominant opinion in legal literature. However, there is still no court decision in the area of social law that would confirm this. The proceedings are therefore of fundamental importance.
At the same time, the issue concerns all spouses' wills in which the spouse who dies first has stipulated a legacy that is due, i.e. to be paid, upon the death of the longer-living spouse. Such wills are absolutely common. They lead to a competitive relationship in the same way. In 2007, the Regional Court of Stuttgart ruled that the legatee's claim based on the spouse who died first takes precedence and must first be satisfied within the estate of the longer-living spouse before the latter's estate can be distributed between his or her heirs, legatees and those entitled to a compulsory portion. If the social court agrees with this decision, a number of disabled wills can and should be adapted. If, on the other hand, the court decides in favor of the priority of the state's right of recourse, this in turn will have a major impact on the wills for the disabled that contain the bequest solution. Either way, the decision, which is published at www.voelker-gruppe.com/erbrecht, is likely to have a lasting impact on the drafting of wills.
Status: 23.10.2016