WEALTH SUCCESSION

Wealth succession covers the timely, legally secure and, where possible, tax-efficient transfer of assets to the next generation or other beneficiaries – whether through inheritance, gift or corporate-law structures.

Early planning makes it possible to use tax advantages, avoid legal disputes and make sure assets are transferred according to your own wishes.

Common instruments include wills, inheritance contracts, gifts, the establishment of foundations and the use of usufruct and residence rights.

Through targeted gifts during your lifetime, the use of allowances and the choice of the right asset structure, tax burdens for the heirs can be minimised.
In addition, further optimisation potential can be tapped through the grant-of-usufruct model, the choice of the optimal valuation method (e.g. for property) or early gifts with reservations.

An inheritance occurs after the death of the deceased, while a gift takes place during your lifetime. Both transactions are subject to different tax rules and allowances.
Both are subject to inheritance or gift tax, but different periods for tax exemption (e.g. family home) and valuation dates apply.

Correct tax valuation is important (often under the Valuation Act – BewG), where applicable using the asset-value or income-value method. For owner-occupied properties, exemptions for the family home may apply (§ 13 (1) no. 4a–4c ErbStG).

An inheritance contract is a binding agreement between the deceased and one or more persons on wealth succession. It makes sense when several parties are to be bindingly involved or mutual dispositions are waived.

Through targeted structures such as waivers of the compulsory portion, gifts with a reserved usufruct or the appointment of preliminary heirs, the compulsory portion can be reduced or avoided.
Compulsory portion claims arise only on disinheritance and concern only statutory heirs of the first order and spouses.

An executor ensures that the testator's last will is carried out, handles the settlement of the estate and makes sure the assets are distributed in line with the provisions of the will.

Careful succession planning, including tax optimisation, legal safeguards and early involvement of the successors, is essential for a successful transition.
Also important are valuation questions (§§ 199 et seq. BewG), the relief rules under §§ 13a, 13b ErbStG and clauses in the articles of association (e.g. succession clauses, severance restrictions).

With preliminary heirship, the preliminary heir first receives the inheritance but can only dispose of it to a limited extent. The subsequent heir enters the succession at a later point, for example after the death of the preliminary heir.

Gifts are subject to gift tax, with allowances depending on the family relationship (e.g. €400,000 for children every 10 years). Important: gifts must be reported to the tax office within 3 months (§ 30 ErbStG).

Without a will, statutory succession applies, which may not match your wishes. A will or inheritance contract lets you set out individual wishes bindingly.

Through gifts during your lifetime, allowances can be used several times (every ten years) and the tax burden thus reduced. Assets can also be transferred in a targeted and controlled way.

Unmarried partners have no statutory right of inheritance. Through a will or inheritance contract, however, the partner can be named as heir and thus be provided for.
As an alternative to naming an heir, a legacy, usufruct or right of residence can be agreed. For property, a joint ownership structure or protection through an entry in the land register makes sense.

It is advisable to appoint a guardian or executor who manages the assets until the child comes of age. Rules can also be made on when and to what extent the child may dispose of the assets.
The family court reviews and approves larger dispositions of assets (§ 1643 BGB) – an executor can secure the ability to act here.

By setting up family companies, using usufruct rights or including remarriage clauses in the will, keeping the assets within the family can be promoted.
Subsequent and preliminary legacies, reversion clauses or waiver agreements between spouses ("Berliner Testament light") with a remarriage clause can also help keep assets in the bloodline.

The disclaimer period is generally six weeks from knowledge of the succession. For heirs living abroad, the period may be extended to six months.

It is advisable to create an overview of all digital accounts and access, and to provide access details to trusted persons or record them in a digital will.

Without a will or contractual arrangement, statutory succession applies. This can lead to your assets not being distributed as you wish, high inheritance tax being due or disputes among the heirs. Professional succession planning ensures your assets are transferred optimally and your family is provided for.

Personal allowances apply to gifts and inheritances, depending on the relationship to the deceased or donor. These allowances apply per recipient and donor – and renew every ten years for gifts:

There are also special tax exemptions, e.g. for the family home or household contents (§§ 13, 13c ErbStG). Skilful succession planning uses these allowances optimally – e.g. through multi-stage gifts at ten-year intervals.

The transfer of business assets (e.g. a sole proprietorship, shares in a GmbH or co-entrepreneur shares) is generally subject to inheritance or gift tax. To structure this in a tax-optimised way, the relief rules of §§ 13a and 13b ErbStG apply:

• Standard relief (85%): If the business assets are retained and a holding period of 5 years is observed.

• Optional relief (100%): If stricter conditions are met (in particular the payroll rule).

Important for optimisation:

• Early succession planning with, e.g., step-by-step transfer of shares

• Avoiding "harmful administrative assets" in the business

• Structuring articles of association (e.g. severance clauses, transfer restrictions)

Careful tax and legal structuring is crucial to retain the benefits and avoid later tax traps.

In wealth succession, typical mistakes often lead to unnecessary tax burdens or family conflicts. The most common mistakes are:

• No arrangements made

• Allowances not used

• No valuation of property or businesses

• Compulsory portion rights overlooked

• Donor not secured

Professional succession planning ensures that assets are transferred in a legally secure and tax-optimised way – and that family goals are preserved.

The gift of property can be considerably optimised for tax purposes through targeted structuring:

• Using allowances (e.g. €400,000 per child every 10 years)

• Reserved usufruct: lifelong right of use that reduces the taxable value

• Family home rule: tax-free transfer when used by spouse/children as their own home

• Partial transfers via family companies to control tax and compulsory portion

A tax advisor reviews the suitable strategy and prepares the optimal structure including expert opinion and notary coordination.

The grant of usufruct is a structuring tool with which income can be shifted for tax purposes to other persons – e.g. children or spouses – without transferring ownership of the assets.

Example: the parents remain owners of a property but grant their adult child the usufruct. From then on the child receives the rental income – and taxes it at a possibly lower tax rate.

Tax benefits:

• Reduction of your own income tax

• No gift tax

• Option of later transfer of ownership using the allowances

Important: the usufruct must be granted by notarial deed and implemented in an economically serious manner. Restrictions apply for minor children or financed properties.