A contract of inheritance is the legal arrangement by which a living person determines to whom, and on what terms, his or her assets are to pass after death. Such agreements may be concluded between the testator and an heir, or equally between the testator and a third party.
What distinguishes the institution from a will is that it rests not on a unilateral declaration of intention but on an agreement between the testator and the other party. Because of this structure, a contract of inheritance is binding on the testator to a certain extent and, as a rule, cannot be set aside by unilateral intention.
In this briefing note we examine in detail the types of the contract, the conditions required for its validity, the legal consequences it produces, the circumstances in which it comes to an end and the grounds on which it may be annulled.
The Concept of a Contract of Inheritance
A contract of inheritance is one of the types of disposition upon death set out in Articles 527 et seq. of the Turkish Civil Code No. 4721. By this contract the testator may appoint a person as heir, leave a specific asset, or make various arrangements concerning inheritance rights.
Article 527 of the Code regulates the matter as follows:
Turkish Civil Code No. 4721, Art. 527
“By a contract of inheritance, the testator may leave his or her estate or a specific asset to the person with whom the contract is made or to a third party.”
In practice, the contract of inheritance is frequently confused with the contract for the division of an estate and with a will. These institutions are, however, entirely distinct from one another in the manner of their conclusion, in their parties and in the consequences they produce.
The Difference from a Contract for the Division of an Estate
A contract of inheritance is a disposition upon death that is concluded during the testator’s lifetime and produces its effects after his or her death. A contract for the division of an estate, by contrast, is the agreement made by the heirs after the death of the testator in order to divide the estate among themselves.
Article 676 of the Turkish Civil Code No. 4721 accordingly allows the heirs to conclude a contract of division covering all or part of the estate. The parties to a contract of division are therefore the heirs, whereas in a contract of inheritance one of the parties is necessarily the testator.
The Difference from a Will
Although a will and a contract of inheritance are both dispositions upon death that take effect after the testator’s death, they differ in important respects.
A will is a unilateral legal transaction and may be altered or revoked by the testator at any moment. A contract of inheritance, being a bilateral transaction concluded by the mutual intentions of the parties, cannot as a rule be set aside unilaterally.
Types of Contract of Inheritance
The Turkish Civil Code No. 4721 addresses contracts of inheritance essentially under two headings: the positive contract of inheritance and the contract of waiver of inheritance. In addition, the rights conferred by the contract may be granted not to the other party but to a third party. For this reason contracts of inheritance concluded in favour of a third party are assessed separately in practice.
The Positive Contract of Inheritance
A positive contract of inheritance is the type in which the testator appoints a person as heir by contract or undertakes to leave that person a specific asset. Under Art. 527 of the Turkish Civil Code No. 4721, the testator may leave his or her estate or a specific asset to the person with whom the contract is made or to a third party.
In this contract the testator may appoint the other party as heir, leave that party a specific asset, or make a disposition upon death in favour of a third party. Such arrangements are among the instruments most frequently resorted to in estate planning.
By way of example, an undertaking by the testator to leave one of his or her immovables to a particular person after death, or the appointment of a person as heir to the whole of the estate or to a specified share of it, falls within the scope of a positive contract of inheritance.
The Negative Contract of Inheritance (Waiver of Inheritance)
The negative contract of inheritance, known as the contract of waiver of inheritance, has as its subject matter the partial or complete relinquishment by a future heir of his or her inheritance rights. By this contract, regulated in Art. 528 of the Turkish Civil Code No. 4721, the heir waives a right that will arise in the future within the framework of the agreement made with the testator.
The contract of waiver is frequently used in family asset planning and in forestalling inheritance disputes that may arise later.
Waiver of Inheritance for Consideration
In a waiver for consideration, the heir relinquishes the inheritance right in return for a specified consideration. That consideration may take the form of cash, of the transfer of an immovable, or of another performance having economic value.
For instance, the transfer of an immovable by the testator to a child, in return for which the child waives the inheritance right that will arise in the future, is an example of a waiver for consideration.
Waiver of Inheritance Without Consideration
In a waiver without consideration, the heir relinquishes the inheritance right without receiving any consideration. The waiver here takes place entirely free of charge.
In that event the heir abandons, of his or her own free will, the rights that would arise from the status of heir. The scope of the waiver and its effect on the heir’s issue must nevertheless be assessed separately by reference to the content of the contract.
How Is a Contract of Inheritance Concluded?
A contract of inheritance cannot be brought into being by a simple written text drawn up by the parties between themselves. Under Art. 545 of the Turkish Civil Code No. 4721, the validity of the contract depends on its being executed in the form of an official will.
Turkish Civil Code No. 4721, Art. 545
“For a contract of inheritance to be valid, it must be executed in the form of an official will. The parties to the contract shall declare their wishes to the official at the same time and shall sign the contract so drawn up before the official and two witnesses.”
In practice, those wishing to make a contract of inheritance apply to a notary together. The text prepared by the notary expressly sets out the appointment of an heir, the legacy of a specific asset, the waiver of inheritance, or such other dispositions upon death as the parties have agreed.
For the contract to be validly concluded:
- The contract must be executed in the form of an official will,
- The testator and the other party must be present together before the official,
- Two witnesses must be present,
- The parties must declare their intentions to the official at the same time,
- The text must be signed by the parties, the witnesses and the official,
all of which are required.
The power to make a contract of inheritance is, for the testator, a right that is strictly personal in nature. The testator cannot therefore conclude the contract through an agent; he or she must declare his or her intention in person before the official.
Conditions of Validity
Whether the contract produces effects depends on all of the conditions of validity laid down in the statute being satisfied. Because they are dispositions upon death, contracts of inheritance are subject to stricter rules than ordinary contracts. The capacity of the parties, compliance with the official form and the lawfulness of the content come to the fore in this respect.
- Capacity to Act
Under Art. 503 of the Turkish Civil Code No. 4721, in order to make a contract of inheritance a person must have the capacity of discernment, be of full age and not be subject to legal restriction. In other words, the testator must possess full capacity to act.
Persons lacking the capacity of discernment, minors and those subject to legal restriction cannot therefore conclude this contract. As regards the other party, the general rules of capacity apply according to the nature of the contract.
- Formal Condition
The validity of the contract depends on compliance with the official form. Under Art. 545 of the Turkish Civil Code No. 4721, a contract of inheritance must be executed in the form of an official will.
Contracts of inheritance concluded without observing the form required by the statute are invalid. The procedural rules on the conclusion of the contract are explained in detail above.
- Compliance with Law and Morality
As with other contracts, the content of a contract of inheritance must not be contrary to law, morality, public policy or personality rights.
Dispositions made conditional on the performance of an unlawful act, for example, or provisions running counter to mandatory rules, are regarded as invalid.
- Power of Disposal and the Reserved Portion
Although the testator may dispose of his or her assets by a contract of inheritance, that power is not unlimited. The rules on the reserved portion laid down in the Turkish Civil Code No. 4721 in favour of the issue, the mother, the father and the surviving spouse narrow the freedom of disposal.
For this reason, where dispositions made by contract prejudice the rights of heirs entitled to a reserved portion, those entitled may be able to bring an action for abatement.
Dispositions That May Be Made by a Contract of Inheritance
A contract of inheritance affords the testator wide latitude in determining the fate of his or her assets after death. Under the statute, the testator may by this means make various dispositions upon death. It should not be overlooked, however, that these dispositions are limited by the rules on the reserved portion and by mandatory provisions.
- Appointment of an Heir
Under Art. 527 of the Turkish Civil Code No. 4721, the testator may appoint a person as heir. The person so appointed may become entitled to the whole of the estate or to a specified share of it. The person appointed need not be a statutory heir; the testator may designate as heir a person who is not a relative, or even a legal entity.
- Legacy of a Specific Asset
The testator may provide that a specific asset or right is to be left to a particular person after his or her death. Leaving an immovable, a motor vehicle, a bank deposit or shares in a company to a particular person falls within this scope.
- Attaching Conditions and Obligations
The testator may make the dispositions subject to particular conditions or impose certain obligations on those entitled.
An heir may, for example, be placed under an obligation to undertake the care of a particular person, to make a donation to an educational foundation, or to maintain the family burial plot.
- Appointment of a Substitute Heir
The testator may designate a substitute heir to take the place of the heir first appointed, in case that heir should for any reason fail to acquire the inheritance. It is thereby settled in advance to whom the estate will pass should the first heir die, renounce the inheritance or be unable to become an heir.
- Appointment of a Subsequent Heir
The testator may provide that the estate is to pass first to one person and thereafter to another person of his or her designation. Under this arrangement the first person entitled is called the provisional heir and the person who is subsequently to take over the estate is called the subsequent heir.
The appointment of a subsequent heir is preferred in particular where the aim is to keep family assets within a particular line of descent.
The Effects and Consequences of a Contract of Inheritance
A contract of inheritance comes into legal existence the moment it is concluded between the parties; because it is a disposition upon death, however, it produces its effects as a rule only on the death of the testator. Although the conclusion of the contract gives rise to certain legal consequences for the parties, the heirship and the benefits it provides for become capable of implementation only when the succession opens.
Taking Effect on Death
Even though the contract is concluded on the date of its execution, the dispositions it contains take effect on the death of the testator. In other words, even where the contract has been made, the person appointed as heir or the person in whose favour a specific asset is left obtains no inheritance right during the testator’s lifetime.
On the death of the testator the estate is opened and the dispositions provided for in the contract become capable of implementation. A contract of inheritance is therefore not an inter vivos transfer but a legal transaction that produces effects after death.
Consequences for the Testator
The contract is binding on the testator to a certain extent. Unlike a will, a contract of inheritance cannot as a rule be withdrawn from or set aside unilaterally by the testator.
The testator may nevertheless continue to dispose during his or her lifetime of the assets that form the subject matter of the contract. It is possible, for example, for an immovable left by the contract subsequently to be sold or transferred. Where such dispositions are of such a nature as to defeat the purpose of the contract in a manner contrary to the rule of good faith, however, various disputes may arise.
In certain exceptional cases provided for by the statute, the testator is also granted a right of withdrawal.
Consequences for the Heir or Beneficiary
A person appointed as heir by the contract, or in whose favour a specific asset is left, may assert the rights arising from the contract upon the death of the testator.
An appointed heir acquires the status of heir when the succession opens; a legatee of a specific asset, for his or her part, becomes entitled to demand the transfer of the asset that is the subject of the legacy.
The exercise of these rights depends on the contract being valid and on the disposition not having been subsequently set aside.
The Relationship with the Rules on the Reserved Portion
Although a contract of inheritance affords the testator a wide freedom of disposal, that freedom is not unlimited. The rules on the reserved portion laid down in the statute narrow the testator’s freedom of disposal.
The testator cannot therefore leave the whole of the estate by contract to persons of his or her choosing. The portions protected by law for heirs entitled to a reserved portion — the issue, the surviving spouse and, in certain cases, the mother and father — are reserved.
Dispositions made by contract may be subject to abatement to the extent that they infringe the rights of heirs entitled to a reserved portion.
The Effect on the Action for Abatement
Where the benefits conferred by the contract prejudice the rights of heirs entitled to a reserved portion, those heirs may bring an action for abatement.
At the conclusion of the action the court may rule that the dispositions infringing the reserved portion be reduced to the statutory limit. This may arise in respect of appointments of heirs made by contract as well as in respect of legacies of specific assets.
Observing the rules on the reserved portion when a contract of inheritance is drawn up is therefore of great importance. Otherwise a significant part of the dispositions may be rendered ineffective by way of abatement after the testator’s death.
How Does a Contract of Inheritance Come to an End?
Since, unlike a will, a contract of inheritance is a bilateral legal transaction, it cannot as a rule be set aside by a unilateral declaration of intention. The legislature has nevertheless allowed the contract to come to an end where the parties so agree or where particular grounds materialise.
When it comes to an end, the rights and obligations arising from the contract are extinguished. The manner and consequences of its ending may differ, however, according to the ground on which it rests.
Termination by Agreement of the Parties
Under Art. 546 of the Turkish Civil Code No. 4721, the parties may at any time set aside a contract of inheritance by a written contract concluded between them.
The statute does not require the termination agreement to be made in official form. It is therefore sufficient for the agreement terminating the contract of inheritance to be drawn up in simple written form.
By the mutual and corresponding declarations of intention of the parties the contract comes to an end without retroactive effect, and the rights arising from it are extinguished.
Grounds of Termination Provided for by Statute
The legislature has accepted that in certain special situations the contract may come to an end automatically or upon the occurrence of particular legal events.
Where, for example, the person in whose favour the disposition was made dies before the testator, implementation may become impossible depending on the content of the contract and the nature of the disposition. Likewise, the disappearance of the subject matter of the contract or the legal impossibility of its performance may in certain cases bring about its termination.
Withdrawal from a Contract of Inheritance
Although the contract cannot as a rule be set aside unilaterally, the statute grants the parties a right of withdrawal in certain cases.
Under Art. 547 of the Turkish Civil Code No. 4721, the testator may withdraw unilaterally from the contract where the person in whose favour the disposition was made engages in conduct constituting a ground for disinheritance against the testator or one of his or her relatives.
In addition, in contracts of inheritance for consideration, a right of withdrawal may arise within the framework of the general principles of contract law where the other party fails to perform the undertaking assumed or breaches the obligations arising from the contract.
Annulment of a Contract of Inheritance
Where the contract is made contrary to the conditions of form and capacity laid down in the statute, or where the intentions of the parties have not been formed lawfully, annulment may be in issue. A contract of inheritance does not, however, become void of itself even where it has been unlawfully concluded. As a rule, therefore, an action for annulment must be brought by those concerned in order for the invalidity to be asserted.
The provisions on annulment are set out in Articles 557 et seq. of the Turkish Civil Code No. 4721.
Grounds of Annulment
Under Art. 557 of the Turkish Civil Code No. 4721, annulment of a contract of inheritance may be sought in the following cases:
- The disposition was made without observing the formal requirements laid down in the statute,
- The testator lacked the capacity to dispose at the time the disposition was made,
- The disposition came about through mistake, fraud, duress or coercion,
- The content of the disposition, the conditions to which it is subject or the obligations attached to it are contrary to law or morality.
Where one of these grounds is present, those with an interest may seek the annulment of the contract.
Who May Bring the Action for Annulment?
Annulment may be sought by those who have a legal interest in the contract being set aside. Those persons may include:
- Appointed heirs,
- Statutory heirs,
- Heirs entitled to a reserved portion,
- Legatees,
- Those who take a right under a later disposition upon death
The action may be brought by anyone whose interests are affected by the invalidity of the contract.
Time Limits in the Action for Annulment
Under Art. 559 of the Turkish Civil Code No. 4721, the action for annulment must be brought within one year of the date on which the claimant learned of the disposition, of the ground of annulment and of the fact that he or she is entitled.
In any event, this action lapses upon the expiry of:
- ten years from the opening of the disposition where the respondent is in good faith,
- twenty years from the opening of the disposition where the respondent is in bad faith
The periods in question are preclusive in nature and are taken into account by the court of its own motion. It is therefore of great importance not to delay in bringing the action once the ground of annulment has become known.
The Independent Legal Assessment
Although the contract of inheritance is the most binding instrument in estate planning, that very feature also makes it the most hazardous. The absence of any unilateral right of withdrawal for the testator means that a structuring error made when the contract is concluded may become impossible to correct years later. For this reason the choice of the type of disposition must be settled correctly at the outset, as must the content of the text.
The two problems most frequently encountered in practice are non-compliance with the official form and neglect of the reserved-portion calculation. The first causes the contract to be regarded as wholly invalid; the second causes the disposition to be largely rendered ineffective by an action for abatement. In any given matter it is advisable to give priority to the following heads:
- Documenting the parties’ capacity as at the moment the contract is concluded and, where necessary, supporting it with a medical report
- Completing in full every element of the official-will form — the official, the two witnesses and the simultaneous declaration of intention
- Calculating in advance the heirs entitled to a reserved portion and their proportions, so as to quantify the risk of abatement
- Recording in documentary form the performance of the counter-obligation in waivers for consideration and in contracts of inheritance for consideration
- Drafting the order of succession in appointments of subsequent and substitute heirs so as to leave no room for doubt
- Recording the moment at which the one-year period for the action for annulment begins, taking the date of knowledge as the reference point
Independent Legal provides advisory services and conducts litigation across the whole field of dispositions upon death, from the drafting of contracts of inheritance to reserved-portion and abatement analysis and the conduct of withdrawal and annulment proceedings.