Waiver of Compulsory Portion in Family Businesses

Compulsory Portion Law as an Existential Threat to Family Businesses

In many entrepreneurial families, the stake in the family business represents by far the largest asset. The company's value often exceeds the shareholders' private wealth many times over. However, German compulsory portion law provides that certain close relatives - particularly children and spouses - can assert a monetary claim amounting to half of the statutory inheritance share, even if completely disinherited.

For family businesses, this can have dramatic consequences: If the estate consists essentially of the business interest and neither the estate nor the heirs' private assets contain sufficient liquid funds, the required amounts must be withdrawn directly from the company. In the worst case, the company must be sold to satisfy compulsory portion claims - a scenario that can destroy the founder's life's work.

Compulsory portion claims are purely monetary claims. If the family business constitutes the largest part of the estate and no liquid assets are available, satisfying these claims can jeopardize the company's very substance.

The Compulsory Portion Waiver as a Shield

The solution provided by law is the compulsory portion waiver agreement pursuant to Section 2346(2) of the German Civil Code (BGB). Through such an agreement, which must be notarized, between the future testator and the person entitled to the compulsory portion, the latter waives his or her future compulsory portion claim.

This instrument is widely used in business succession practice and belongs to the standard repertoire of forward-looking succession planning. The compulsory portion waiver can be declared for consideration or gratuitously. In practice, waiver for consideration is the rule: The waiving party receives compensation - often in the form of a one-time cash payment, real estate, a life annuity, or other assets. The compensation typically bears a reasonable relationship to the expected compulsory portion, but need not reach its full amount.

A gratuitous waiver - that is, without consideration - occurs less frequently but is legally permissible. The motives then typically lie in family ties: The waiving party wishes to protect the family business, preserve family harmony, or not jeopardize a sibling's succession. These cases are particularly demanding.

When the Waiver Becomes a Dispute: A Practical Example from the Brewing Industry

How contentious compulsory portion waivers can become in practice is illustrated by a widely noted case from the German brewing industry, heard before the Regional Court of Arnsberg in 2025. The constellation is typical for entrepreneurial families and demonstrates the risks that arise when compulsory portion waivers are executed under unfortunate circumstances.

In the specific case, a son of a brewing dynasty had signed a notarized compulsory portion waiver agreement with his mother on the morning of his 18th birthday - according to his own account, overtired and intoxicated. He later claimed that the notary had merely presented the document without reading it aloud or informing him of the legal consequences. The mother subsequently appointed her two daughters as heirs by will and disinherited the son.

More than 40 years after execution of the compulsory portion waiver and approximately 30 years after the testator's death, the son filed suit. He sought a declaration of invalidity of both the will and the compulsory portion waiver agreement. The court dismissed the claim - for several reasons instructive for practice.

The case impressively demonstrates: Compulsory portion waivers have effects spanning decades. What appears as a formality at the time of signing can later prove to be the loss of claims worth millions.

Typical Grounds for Challenging a Compulsory Portion Waiver

Anyone wishing to challenge a compulsory portion waiver after the fact has various points of attack. In practice, the following lines of argument play a particularly important role:

Testamentary Incapacity of the Testator

A will executed by a person with testamentary capacity is generally valid. Anyone asserting testamentary incapacity bears the full burden of proof. In the brewing case described above, the plaintiff could not prove that his mother lacked testamentary capacity despite a serious cancer illness. On the contrary: The fact that the testator had successfully managed the company as managing director until shortly before her death spoke in favor of her testamentary capacity.

Case law sets high standards for proving testamentary incapacity. A serious illness alone - even with brain metastases - does not automatically establish testamentary incapacity. What is decisive is whether the person was able, at the specific time of executing the will, to comprehend the significance of her declaration and act according to this understanding.

Unconscionability of the Waiver

A compulsory portion waiver can be challenged as unconscionable and thus void if the circumstances of its execution violate the sense of decency of all fair and just-minded people. In practice, this is discussed, for example, in cases of a significant imbalance between compensation and actual compulsory portion value, exploitation of a position of duress, or pressure on very young waiving parties.

Proving unconscionability is demanding, however. In the brewing case, the plaintiff offered only his own party examination as evidence - the weakest form of evidence, which moreover requires the opposing party's consent. Better offers of proof would have been, for example, witness testimony from family members, friends, or notary staff.

Challenge of the Will for Omission of a Person Entitled to a Compulsory Portion

Section 2079 BGB permits challenge of a will if the testator omitted a person entitled to a compulsory portion whose existence was unknown to him or her at the time of executing the will. In the brewing case, the son argued that his mother had erroneously assumed the compulsory portion waiver was valid and therefore disinherited him. The court did not follow this argument: The testator had deliberately intended to disinherit the son - regardless of whether the compulsory portion waiver was valid or not.

Statute of Limitations as a Practical Hurdle

Compulsory portion claims are subject to a statute of limitations. Since the inheritance law reform of 2010, a three-year standard limitation period applies from knowledge of the inheritance and the prejudicial disposition. Legacy claims that arose before the reform became time-barred at the latest at the end of 2013. In the brewing case, filing the claim more than 30 years after the inheritance was therefore also doomed to fail for this reason.

The Causa of the Compulsory Portion Waiver:

Why the Legal Basis Is Decisive

A particularly interesting - and often overlooked in practice - aspect of compulsory portion waiver doctrine concerns the question of legal basis (the so-called causa). The compulsory portion waiver is, according to the prevailing view, an abstract disposition. This means: As with any abstract disposition, it must be based on an underlying obligatory causal transaction - precisely the causa.

With a compulsory portion waiver for consideration, the matter is clear: The causa consists in the agreement on consideration - typically a compensation payment. It is a completely normal synallagmatic (reciprocal) legal transaction.

It becomes more difficult with the gratuitous compulsory portion waiver. Here there is no gift, because the waiving party does not relinquish an existing property right, but only waives a future expectancy. Instead, it is a legal transaction sui generis. The causa lies in the waiving party's deliberate decision, for family reasons - such as securing the family business or preserving family harmony - to waive his or her future compulsory portion.

The causa in a gratuitous compulsory portion waiver is an intrafamilial causa: The waiving party must be conscious of why he or she is waiving the compulsory portion. If this awareness is lacking, the legal basis is also lacking.

Restitution: An Underestimated Ground for Attack

If the causa for the compulsory portion waiver is lacking, this has far-reaching consequences: The compulsory portion waiver was then rendered without legal basis and can be reclaimed - subject to restitution - pursuant to Section 812(1), sentence 1, alternative 1 BGB (the so-called condictio indebiti).

This approach has a decisive advantage over the unconscionability argument: The strict verdict of unconscionability need not be established. Rather, it suffices to prove that the waiving party was not aware, at the time of executing the agreement, of what he or she was waiving and why. This is quite conceivable, particularly with very young waiving parties - for example, if an 18-year-old signs a compulsory portion waiver without understanding its significance.

Restitution leads to different legal consequences depending on the timing: If asserted during the testator's lifetime, the compulsory portion waiver must be revoked by notarial deed. After the inheritance, only a claim for compensation in value remains. Restitution claims are subject to the three-year standard limitation period - the period begins upon knowledge of the circumstances giving rise to the claim.

Can a Missing Causa Be Cured Retroactively?

An interesting follow-up question is whether a compulsory portion waiver that initially lacked causa can be cured, as it were, by subsequent conduct of the waiving party. In the brewing case, it was argued that the plaintiff had confirmed the compulsory portion waiver four years later in another notarial agreement. Could such confirmation constitute the retroactive creation of a causa?

The prevailing view affirms the fundamental possibility of retroactive causa creation. Several arguments support this: First, Section 812 BGB does not require that the legal basis already existed at the time of the disposition. Second, it follows from an inverse conclusion to Section 812(1), sentence 2, alternative 1 BGB that a legal basis that can subsequently lapse can all the more be created retroactively. And third, this follows from the general principle of private autonomy.

For a gratuitous compulsory portion waiver, even the waiving party's unilateral declaration of intent suffices - if necessary, implied and without formalities. What is decisive is that the waiving party later acquires awareness of the reason and significance of his or her waiver and nevertheless maintains the waiver.

For a compulsory portion waiver for consideration, however, the retroactive causa must be agreed with the testator (during his or her lifetime) or with his or her heirs (after the inheritance), since this involves a bilateral legal transaction.

Practical Recommendations for Entrepreneurial Families

Early and Professional Structuring

Compulsory portion waiver agreements should not be treated as mere formalities. They belong in the hands of specialized attorneys and notaries who know not only the legal requirements but also take family dynamics into account. Careful documentation of the notarization process - including reading aloud, instruction, and determination of legal capacity - is indispensable.

Agree on Appropriate Compensation

Fair compensation not only minimizes the risk of an unconscionability challenge but also creates the clear legal basis (causa) for the waiver. The amount should be oriented to the anticipated compulsory portion but need not reach its full amount. It is important that the compensation be justified and documented in a comprehensible manner.

Special Protection for Young Waiving Parties

Particular care is required especially with waiver declarations by young adults. The waiving party must understand the significance and scope of his or her declaration. It is advisable to give the waiving party sufficient time for consideration, if necessary enable independent legal counsel, and document the instruction on the consequences of the waiver in detail.

Regular Review of Existing Waiver Agreements

Existing compulsory portion waiver agreements should be reviewed regularly as part of ongoing succession planning. If the asset situation changes significantly - for example, through strong company growth - an adjustment of the compensation may be advisable to minimize the risk of subsequent challenges.

Flanking Measures: Will and Articles of Association

The compulsory portion waiver is only one building block of succession planning. It should always be embedded in an overall concept that also includes testamentary structuring, succession clauses in the articles of association, prenuptial agreement, and possibly a foundation solution. Only in this way can the long-term continuity of the family business be secured across generations.

Conclusion

Compulsory portion waiver agreements are of existential importance for family businesses. They protect the company from liquidity outflows in the event of inheritance and enable orderly succession. But as the brewing case impressively demonstrates, poorly structured waivers can lead to decades-long disputes that not only cause substantial attorney and litigation costs but also permanently destroy family harmony.

Particularly relevant for practice is the approach via missing causa: If the waiving party was not aware, at the time of execution, of what and why he or she was waiving, the legal basis for the waiver is lacking - and it can be reclaimed. This is a lower threshold for attack than unconscionability and deserves more attention in legal counseling.

Conversely, this means for entrepreneurial families planning their succession: Careful structuring, appropriate compensation, and thorough documentation are the best protection against the compulsory portion waiver being successfully challenged decades later. Invest in professional support for all parties involved - it is one of the most important investments in the future of your family business.