Liquidating the Estate of a Deceased Person: The Law of Succession

My research question is: how should we organize the liquidation or the winding up of the estate of a deceased person? In order to explain what this topic is about, I need to place it into a broader context. When a person dies, he or she leaves property behind and the law needs to deal with the fate of that property. The area of law which deals with this question we call the law of succession. When we talk about the law of succession, usually the question we are most interested in is the question of “who gets what”. Even though this question of who gets what is obviously very relevant from a practical point of view, my research question is a different one and it is the question of “how”.

00:53 - How is the desired distribution of the assets actually implemented? How do the assets get into the hands of the heirs or legatees? At first sight, it is a very simple question. The law simply needs to transfer the ownership of the asset from the deceased to the successor. However, in most succession cases, matters are much more complex and the reason is that the desired distribution is too complex to be brought about in a single step. I want to illustrate this point by providing two examples. The first example refers to a testator who writes in his will “I want to give a legacy of €50,000 to my loyal friend Martin”.

Usually, the €50,000 will not be available in cash and lie in the testator’s safe. Rather it will be necessary to retrieve the money from a bank account first or even to sell assets from the estate. So we see the need in such a situation of a person who is in charge of carrying out these acts of transformation and we can call this person an executor or a liquidator. A second example to illustrate the need of such a mechanism refers to the fact that in a typical succession case there are not only assets to be distributed but also liabilities. These liabilities might arise, for example, from the deceased’s funeral.

02:31 - They might also have existed already during the lifetime of the deceased, so the debts the deceased had with other persons, the money he owed them. If we want to protect the creditors of the deceased, again, we need to designate a person who is in charge of paying these liabilities. From basic requirements of justice, it follows that it should be the estate assets that should be used in order to pay these liabilities. So we understand that in many cases it is not possible to simply transfer the assets directly to the beneficiaries. Rather, we need a more complex procedure. We first need to assess the situation. So now we come back to my research question which asks how this mechanism should be structured and there we can distinguish different questions.

We can ask, for example, who should be in charge of the liquidation? 03:27 - Should it be someone nominated by the testator? Should we allow a beneficiary to act as liquidator or should we insist on nominating a neutral, independent person. Also, we need to design the general framework in which the liquidator operates. We need to decide, for example, whether he or she shall be able to act freely or whether we want to subject this person to close supervision, for example, by a court or by some other state institution. Another question which we need to address is what happens if the liquidator mismanages the assets and thereby causes damage either to the creditors of the deceased or to the beneficiaries? My method is both comparative and historical. This means that I do not look only at the law of Germany but also include other legal systems in my analysis and these are both legal systems from the present and from the past.

04:38 - The historical legal systems I look at are the Roman law of the antiquity and the English law of the Middle Ages. There are two reasons for choosing these legal systems. One of the reasons is that these legal systems, the ancient Roman law and the medieval English law, are the foundations of our modern legal systems, they are the building blocks so to speak. A second reason for this historical approach is that both the ancient Roman law and the medieval English law have developed over many centuries step- by-step and have developed towards an ever increasing complexity. And this long development process helps us to understand the problems related to the administration or to the liquidation of estates because the problems unfold step-by- step before our eyes.

05:38 - The contemporary legal systems I look at besides German law are, in particular, French law and English law and to a minor extent I also look at Italian law, Swiss law and Austrian law. The comparative approach is especially useful to show us the huge variety of solutions for the liquidation of estates, the many possibilities that we find in current laws, in the current legal systems, to deal with the problems we are interested in. A first key finding refers to the general methodology of comparative law. When I started my research, I realized that many prior studies on my topic were too formalistic in their approach. They focused too much on questions of concepts.

06:42 - Hereby the mistaken idea was created that the current legal systems in Europe partly are so different that a meaningful comparison is not possible, that these systems are incommensurable so to speak. I realized that it is necessary to adopt a functional approach which takes the problems that need to be solved as a starting point and the reason for this is that these problems are basically the same everywhere, they are universal so to speak. So if we start the comparative analysis by looking at the problems that need to be solved, we have a system-neutral point of reference from where we can proceed to a meaningful comparison and a fruitful comparison. A second key finding of my research refers to the substantive level. I realized that the topic of liquidation of estates is so complex that there are no easy solutions available.

08:01 - There is no silver bullet so to speak even though sometimes this is suggested in legal writing. The reason for this complexity is that there are so many different interests involved, interests which need to be taken into account but which are often conflicting. Every lawmaker is faced with tradeoffs. This means that the more he takes into account one interest, the less he is able to take into account another interest and I can illustrate this point with two examples. One is the trade off between the celerity and the cost efficiency of the liquidation process and the accuracy of its outcome. In other words, the more we want to make sure that the assets get exactly into the hands of those persons which are supposed to receive them, the more costly and the more cumbersome the liquidation process becomes and vice versa.

09:09 - A second trade off refers to the interests of creditors on the one hand and beneficiaries on the other hand. The more we make sure that the interests of creditors are adequately protected, the more we need to limit the interests of the beneficiaries and vice versa. There are three points which I can mention. The first is that my findings increase our understanding not only of foreign legal systems and the way they organize in liquidation of estates but also of our own German legal system. The second point is that this enhanced understanding can be of direct practical value when we deal with concrete succession cases and especially cases which have an international dimension.

10:06 - And the third point refers to a possible future reform of the German rules on the liquidation of estates. It is generally agreed that, in their current form, the German rules are very unsatisfactory. They are regarded as overly complex and impractical. So my findings could give the German lawmaker access to foreign experiences, both positive and negative experiences, and thus provide inspiration for future reform. Although I look at many different aspects of the liquidation of estates and often in great detail, there are still many other issues that need further exploration.

11:04 - I hope that other researchers will build up on my work and will go further down the path which I opened up and follow the approach which I advocate. On a more general level, I hope that my research contributes to the general comparative discourse in matters of succession law. Such a discourse already does exist but it is clearly lagging behind the development in other areas of private law, for example the area of contract law. .