Whether private or corporate assets – financial losses can occur in any area and at any time. Currently, the rising inflation rate impacts assets. Aspects of inheritance, family and employment law can also significantly impact assets and entail the risk of considerable financial loss. Taking targeted preventive measures as part of asset protection is a proven way of preventing such losses by carefully organising the legal and tax framework.
To provide our clients with the support they need, the German law firm Schlun & Elseven Rechtsanwälte offers competent and committed legal assistance. Our lawyers ensure efficient protection and a legally secure transfer of your private and business assets by working closely with you to develop solutions that take your individual needs and interests into account in every respect. As an interdisciplinary, full-service law firm with expertise in German corporate, tax, and foundation law, as well as inheritance and family law, we develop a suitable strategy for every conceivable situation – depending on the details of your family situation or the nature of your assets. Please do not hesitate to contact us to benefit from our high-quality legal services and learn more about asset protection.
Asset Protection – Definition
Asset protection is understood as the protection of assets or advice on precautionary measures to protect them. Assets should be protected against access by a third party. This access can be by a creditor, or a person entitled to a compulsory portion, for example. It should be noted that asset protection has legal limits. The transfer of assets to evade creditors or avoid legal obligations can have legal consequences. This is why asset protection is preventative in nature – it takes place before a potential liability event occurs.
Asset protection is a concept that plays a role in a variety of areas and fields of law. Keywords here are in particular: Inheritance and family law, tax aspects, corporate law and company governance. Due to the interplay of most diverse fields of law in such cases, legal advice with a multidisciplinary focus is required. Our German law firm advises private individuals and companies from all over the world. It offers them comprehensive and cross-regional legal advice and individual legal solutions from a single source. Through highly specialised practice groups covering a range of legal areas and working together on interdisciplinary cases, our firm protects and enforces your interests and rights. We will be happy to explain the precautionary measures for asset protection tailored to your case and, if necessary, advise you on other legal matters.
Concept and Options for Asset Protection
There are various ways to protect assets from third-party liability or events such as a divorce, death or accident. The following measures can be taken:
Tax Optimisation
Asset protection starts with the taxes to be paid. This applies to private individuals and companies. However, there are many opportunities to utilise tax advantages, particularly in entrepreneurial activity. Starting with the choice of company form, through the possibilities of holding structures to corporate financing. Measures that minimise liability risk can be taken or implemented as early as the formation of a company. The choice of the suitable company form can be decisive. Our German company law lawyers will be happy to advise you on which company form best suits your business idea. We will also explain the organisational structure of a holding company to you.
In practice, German tax law often overlaps with several other areas of law. Our lawyers will be happy to advise you on German corporate tax law and inheritance tax in Germany. We will check how you can avoid exceeding possible tax-free amounts and minimise the risk of paying excessive amounts of tax.
Family Law Aspects
In family law, optimisations can also be made to protect and manage assets. Divorces often lead to property disputes, which can be minimised by making early arrangements in the prenuptial agreement. However, even if a legally valid marriage contract exists, measures can be taken before the divorce that will work in your favour regarding your assets.
Within the family, passing on assets through a gift can make sense before a liability event occurs. Spouses can also switch between a community of accrued gains and a separation of property. In this way, gift allowances can be optimally utilised, and claims against one of the spouses can be effectively defended against in this way.
One construct that is enjoying increasing popularity is the family office, which our lawyers will happily support you in implementing and creating. Their work focuses on structuring family assets, drafting all types of contracts and tax law aspects. Our family law lawyers support you in drawing up a prenuptial agreement to prevent excessive costs and burdens in the event of a divorce.
Inheritance Law Planning for Asset Protection
It is not uncommon for inheritance cases to lead to protracted legal disputes within the family or among the heirs. Careful estate planning ensures that such ongoing conflicts are reduced and that the deceased’s assets are distributed according to their wishes. In addition to the generally known measure of making a will, estate planning also includes inheritance contracts, waivers of compulsory portions, gifts, and corporate and foundation law arrangements. The appointment of prior and subsequent heirs can also be utilised to dispose of the estate in the best possible way. Our German inheritance and estate law practice group will happily advise you on how to handle your estate efficiently and present you with the available structuring options.
Legal Advice on Company Formation
When founding a company, taking or implementing measures that minimise liability risks is possible. The choice of the proper corporate form can be decisive. Our lawyers for corporate law will be happy to advise you on which corporate form is the most suitable for your business idea. We will also explain the organisational structure of a holding company.
Foundation Law
If assets are transferred to an independent legal entity such as a foundation at an early stage, they can neither be seized by the founder’s creditors nor divided by the founder’s heirs in the event of inheritance if they are organised correctly. German foundation law can, therefore, offer preventative measures for asset protection. A foundation can, for example, serve as a financial investment or for estate planning. Establishing a (private or company-related) family foundation is particularly popular regarding asset protection. Compared to other types of foundations, a family foundation does not pursue a charitable purpose. Instead, it serves to secure the succession of assets or a company.
From a tax perspective, a foundation can offer enormous advantages. The capital transferred to the foundation does not count towards your taxable income. You can also transfer inherited assets to the foundation on a tax-privileged basis. Finally, the income you earn from a foundation is tax-free and fully benefits the foundation’s purpose.
Real Estate Law
The inflow of capital that a property can bring is particularly popular. However, the ownership of such a property can also be endangered, for example, by a forced sale or other enforcement measures. Here, too, our lawyers can present you with suitable asset protection measures and – if you are threatened with foreclosure – advise you on the legal protection options available to you.
If you need legal advice on asset protection, please do not hesitate to contact us using the form below.
Contestability and Criminal Liability of Asset Transfers
Asset protection must always consider the legally permissible optimisation options. A professional advisor will always point out the legal and ethical limits of asset protection. To adequately protect a creditor’s rights, any asset transfer is generally contestable. In particular, the following avoidance requirements must be observed:
- Section 129 Insolvency Code (1) (Insolvenzordnung, InsO): Transactions made prior to the opening of insolvency proceedings and disadvantaging the insolvency creditors may be contested by the insolvency administrator under sections 130 to 146.
- Section 3 (1) Contestation Act (Anfechtungsgesetz, AnfG): A legal act carried out by the debtor ten years before the avoidance to disadvantage their creditors is voidable if the other party was aware of the debtor’s intention at the time of the act. This knowledge is presumed if the other party knew that the debtor’s insolvency was imminent and that the action was detrimental to the creditors.
- Section 4 (1) AnfG: A gratuitous performance by the debtor is contestable unless it was made more than four years before the contestation.
Criminal proceedings for fraud or similar may be initiated, particularly in the event of wilful discrimination against the creditor.
An Overview: Frequently Asked Questions about Asset Protection
Asset protection provides advice on legal precautionary measures to protect assets from liability and third-party access (legal asset protection).
Various strategies can be used to protect your assets effectively. The various options should be combined so that you are in the best possible position. The following strategies can be considered:
- Tax optimisation
- Contractual arrangements, e.g. exclusion of liability, marriage contract, etc.
- Making gifts | Transferring assets
- Establishing a foundation
- Utilisation of seizure-proof investments | Retirement provision, residential rights, etc.
The decisive – but not the only – difference in taxation already exists in assessing a partnership or a corporation. In the former, the shareholders are taxed through income tax, in the latter, the company itself is taxed through corporation tax.
Through the holding company, profits, or losses of one subsidiary can be included in the assets of another subsidiary so that the assets can be offset within the holding company as tax-efficiently as possible. In addition, a holding company can be exempt from corporate income tax or taxed at lower rates under certain conditions.
When assets are transferred to the family foundation, they no longer form part of your personal assets. As a result, it is not available for personal liability or creditor claims. Furthermore, the family foundation can help minimise inheritance tax, as the foundation’s assets are not considered part of a private estate. This can also reduce compulsory portion claims, as the estate is smaller.
Some companies are particularly suitable for asset protection due to the possibility of limiting liability to the company’s assets. In the context of asset protection, the following “asset protection companies”, in particular, come to the fore:
- Holding company,
- family foundation,
- trusts,
- limited liability company,
- offshore companies.
International corporate structures are particularly relevant for cross-border asset protection. This requires careful expertise, as these are highly complex legal structures in which different legal systems and agreements interact and apply. Strategic asset transfers across national borders are also possible. However, they should always be protected by legal advice to ensure that no laws are violated, and you cannot be held liable – or even have criminal proceedings initiated against you (e.g. for tax evasion, fraud, or breach of trust).
Yes, in principle, asset transfers are legal and also desirable. Asset transfers can be gifts, the transfer of assets in the event of inheritance also falls under the term or the transfer of assets to a company or foundation. However, the principle of asset protection must be observed here: Asset transfers must be made before a liability event occurs. Otherwise, the creditor can contest the asset transfer. In such a case, criminal proceedings for fraud or similar could be initiated – especially if you can prove intent.
Yes, inheritance tax can be legally avoided. German law provides some possibilities, particularly the allowances for close relatives. In addition, certain assets are already tax-exempt by law. Therefore, Inheritance tax can be avoided or minimised through skilful asset and estate planning.
Practice Group for Asset Protection
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