GERMANY Law and Practice Contributed by: Christian von Oertzen and Philipp Windeknecht, Flick Gocke Schaumburg
4. Family Business Planning 4.1 Asset Protection
5. Wealth Disputes 5.1 Trends Driving Disputes
The most popular methods for asset protection are prenuptial and postnuptial agreements, family founda - tions and partnership structures. Marriage Agreement With a marriage agreement, it is also possible to transfer assets from one spouse to the other without incurring taxes, removing the assets from the reach of Assets that are transferred to a family foundation have left the property sphere of the founder and are attrib - uted to the foundation itself. In order for this effect to occur, it is a prerequisite that the founder has actually given up control over these assets, which is, in turn, assumed by the entities of the foundation. Partnerships creditors by doing so. Family Foundations Partnerships are often used (depending on the types of assets) to transfer wealth to the next generation but at the same time retain a degree of control over the gifted assets. 4.2 Succession Planning See 2.6 Transfer of Assets: Vehicle and Planning A partial interest will generally be valued at the current market value of the underlying assets. However, the Muenster Fiscal Court decided in 2022 that a valua - tion discount may be applicable to a co-ownership share in a real property, compared to full ownership. The valuation discount is subject to a well-founded appraisal. The Higher Regional Court Hamm ruled in 2023 that a substantial discount (30% to 50%) is applicable to a co-ownership share in a real property held by a community of heirs. Mechanisms and 1.2 Exemptions . 4.3 Transfer of Partial Interest
Probate arbitration and mediation are considered as an alternative to probate litigation in solving wealth disputes. An effective way to avoid long and costly probate disputes is to establish an arbitration clause in a last will. This clause is usually combined with a no-contest clause. 5.2 Mechanism for Compensation There is no special mechanism for compensation in wealth disputes. 6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries The use of corporate fiduciaries is not prevalent in German law. 6.2 Fiduciary Liabilities Piercing the veil of a trust or foundation is unusual. Nevertheless, if a trust or foundation is regarded as a mere fiduciary agreement, the veil can be pierced and income as well as capital of the trust will be attributed to the settlor or – in rarer cases – to the beneficiaries. 6.3 Fiduciary Regulation The prudent investor rule is applicable to a fiduciary and also to an investment adviser. 6.4 Fiduciary Investment There are very few investment theories or standards in this field in Germany. The Tax Court Munich (decision of 25 April 2016 – 7 K 1252/14) held that non-profit corporations are largely free to choose their invest - ments. They may choose any form of investment that is economically reasonable, applying an ex ante per - spective.
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