GERMANY Law and Practice Contributed by: Tanja Schienke-Ohletz, Flick Gocke Schaumburg
• preliminary and reversionary inheritance if control is to be maintained. Charity in Succession Although charitable foundations – especially in the academic, cultural and social sectors – are highly regarded, there is no strong culture of generous tes- tamentary donations in Germany. Demographic Pressure and Changing Family Structures Low birth rates, patchwork families and an increasing concentration of wealth among the older generation are changing the dynamics of succession. In patch- work families, certain mechanisms must be used in a will to ensure that the divorced spouse does not inherit. In many entrepreneurial families, it must be taken into account that the children do not always want to continue the business. Summary The German succession culture can be characterised as follows: • family-centred; • focused on asset protection; • strongly oriented towards business continuity, where possible; and • restricted by the principles of compulsory inherit- ance rights. 1.2 Wealth Profiles and Industry Influences There are four groups of companies, which require different planning approaches: • firstly, entrepreneurial business assets of SMEs, where corporate governance, tax relief and conti- nuity are key; • secondly, real estate assets, especially in conurba- tions with high-priced assets – consideration must be given to how illiquid assets can be transferred, and valuation issues also need to be addressed; • thirdly, new tech assets, which require exit-ori- ented, internationally focused structures (private equity, but also crypto-assets); and • fourthly, works of art or art collections – here, too, the lack of liquidity must be taken into account, as
well as the need to prevent the fragmentation of assets.
2. Residency and Domicile for Purposes of Wealth and Estate Planning 2.1 Determining Domicile
There is basically no concept of domicile in Germany. Tax law is more concerned with the concepts of resi-
dence and habitual abode. Inheritance Tax Liability
Inheritance tax liability in Germany is based on the personal domestic connection of the parties involved and the location of the assets. A distinction is made between unlimited and limited tax liability. Unlimited tax liability exists if the testator or the acquirer is a resident at the time of inheritance – in particular if they have a domicile or habitual residence in Germany or are a domestic legal entity. In this case, the entire estate, including foreign assets, is subject to German inheritance tax. A residence is where someone has a home in circum- stances that suggest that they will retain and use that home. A certain minimum length of stay is not neces- sary; it is sufficient to have a key that allows access and use at any time. The habitual residence is the place where someone stays under circumstances that indicate that they are not only staying there temporar- ily. This is the case if someone stays in one place for more than six months, whereby short-term interrup- tions (eg, holidays) are irrelevant. Both terms are based on the actual circumstances; registration or civil law regulations are irrelevant for In private international law, on the other hand, the question of which inheritance law is applicable depends on the habitual residence of the deceased at the time of their death (see the EU Succession Regu- lation). Here, a different term applies than in tax law, referring to the place where the deceased had the tax assessment purposes. Jurisdiction for Inheritance
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