Power of Attorney: Successful Business Succession and Risk Minimisation

The continuation of a company across generations requires forward-looking planning and targeted precautionary measures.
Besides the succession arrangement itself, risks that can arise during the entrepreneur's lifetime must also be taken into account.

Comprehensive protection therefore includes not only a business owner's will or an inheritance contract, but also accompanying instruments such as general and healthcare powers of attorney as well as marital agreements.

The importance of strategic succession planning

Business succession is a complex interplay of inheritance-law, company-law and tax aspects.
Inadequate planning can lead to existential risks.

Essential measures:

• Disposition upon death: regulate business succession in a will or inheritance contract
• Powers of attorney: ensure the ability to act in case of incapacity
• Marital agreements: protection against claims for accrued gains

Business owner's will and inheritance contract: setting the course for the future

A business owner's will provides clear and legally secure arrangements. Points to note:

• Securing liquidity: compulsory portion claims and taxes must not burden the company's finances
• Ability to act: avoid disputes among co-heirs
• Binding effect: inheritance contracts offer more certainty than revocable wills

For entrepreneurs in particular, the inheritance contract is often the more sensible choice – especially for long-term strategies.

The "Berliner Testament" – a doubtful solution for entrepreneurs

The Berliner Testament provides that spouses appoint each other as sole heirs. Problematic for entrepreneurs:

• Compulsory portion claims of the children lead to liquidity problems
• The company falls into the estate of the surviving spouse – possible misdirected inheritance
• The children's tax allowances remain unused

Alternative: individual wills with a waiver of the compulsory portion or super-legacies.

Business split and the Wiesbaden model for structuring the company

A business split separates the company into independent units. Requirements:

• Material interdependence: making a substantial business asset available
• Personal interdependence: unified management of both businesses

The Wiesbaden model as an alternative

Here one spouse leases the business assets to the company run by the other spouse.
This avoids a tax-damaging personal interdependence.

Note: inheritances must not subsequently trigger a business split – otherwise tax disadvantages threaten.

Ensuring the company's ability to act in the long term

Even in the event of accidents or illness the company must remain able to act – not only in the event of death.

General and healthcare powers of attorney as safeguards

A general power of attorney allows a person of trust to make business decisions immediately.
Without one, court guardianship proceedings may result.

• Supplement with executorship: protects against disputes among heirs
• Clear responsibilities: for private and business decisions

The marital agreement as protection against financial burdens

Under the statutory matrimonial property regime of community of accrued gains, the accrued gains must be shared – even if the company makes up most of the assets.

Solutions:

• Modified community of accrued gains or
• Separation of property

Important: the marital agreement must be notarised to be effective.

Regular review and adjustment of succession planning

Changes in family, company or legislation require regular updates:

• Adjust wills and inheritance contracts where necessary
• Check powers of attorney are up to date
• Optimise marital agreements for tax purposes

Conclusion: early planning protects the company and the family

Preserving a company across generations requires more than just a will.
Holistic, forward-looking planning with a will, powers of attorney and contractual arrangements protects against risks and secures continuity.

Our recommendations for entrepreneurs

• Adjust your will or inheritance contract early
• Use general and healthcare powers of attorney
• Review your marital agreement to avoid equalisation of accrued gains

Do you have questions about business succession or would you like your precautionary documents reviewed?
Contact us – we support you in passing your company on to the next generation long term and in a legally secure way!