Protecting assets is a high priority for companies and private individuals. The “family asset pool” in Germany has proven to be a suitable instrument for transferring assets to a large number of people and preserving family assets for the family in the long term during their lifetime. This legal construct enables efficient asset management, which is intended to secure the family assets across generations. Therefore, careful contract drafting and a thorough analysis of all aspects of German tax law are necessary. A family asset pool can protect assets from being broken up in inheritance or divorce cases and offer considerable tax advantages. A family asset pool can also be advisable when arranging business succession and minimising inheritance tax in Germany.
To provide you with the support you need, Schlun & Elseven Rechtsanwälte offers comprehensive legal services in asset protection. Our German family and corporate lawyers will ensure that your individual wishes and needs are realised while complying with all legal requirements. Our lawyers have excellent expertise, in-depth knowledge of German tax law, and experience dealing with the relevant authorities.
The Family Asset Pool or Family Investment Company in Germany
The family asset pool offers an efficient and adaptable way of preserving family assets for the family in the long term. The construct of the family asset pool makes it possible for the asset holder to contribute assets to a company known as a family investment company. Shares in the company are then transferred to other family members, such as spouses, children or grandchildren, through a gift (during their lifetime) or inheritance. Special provisions in the articles of association ensure that the donor has a lasting influence on the assets and protect them from access by unwanted creditors or those entitled to a compulsory portion.
Restrictive agreements in the articles of association can also stipulate the permanent pooling of assets in the company and protection against liquidation. In addition, you can protect yourself with possible rights of reclaim within the gift agreement with which the shares are transferred to the family members. In addition, powers of attorney, existing marriage contracts, and any existing wills and powers of attorney can also be used for structuring.
Advantages of the Family Asset Pool in Germany
The family asset pool in Germany enables private and business assets to be pooled. The assets can consist of companies, shareholdings, private property, and financial and securities assets. It offers many advantages from a tax and strategic perspective:
- Long-term preservation of family assets: The assets remain within the family.
- Rules on the inheritability of shares: Articles of association can specify persons entitled to succeed, often descendants.
- Securing the passing on of shares in the direct line: Shares can only be passed on to direct family members.
- Controlled transferability of shares: Transfer of company shares can be regulated.
- Organisation of anticipated succession: Enables efficient use of tax allowances through precise determination of company shares.
- Customised administration and management: Clauses in the articles of association can regulate administration and management according to the needs of the family.
- Special regulations by managing directors: Managing directors can make individual regulations on representation, voting rights and profit distribution.
Family Pool or Family Investment Company: The Appropriate Legal Form
In practice, the family asset pool is usually established as a partnership under civil law (GbR) or as a limited partnership (KG) in Germany. Both company forms enable the realisation of individual contractual arrangements. The KG and the GbR are partnerships, so the partners are the central point of the contractual arrangements.
In Germany, a partnership under civil law (GbR) is characterised by the fact that all partners are liable for the partnership’s liabilities with all their assets. As a partnership that pursues the purpose of managing family assets or family property, it is not considered a ‘merchant’ within the meaning of the German Commercial Code (HGB). In the past, there was no obligation to enter the GbR in the German commercial register. However, this has changed since 01.01.2024 with the entry into force of the German Act on the Modernisation of Partnerships (MoPeG). This law introduces a registration requirement for civil law partnerships holding real estate. Registration in the register can be prepared and carried out by the notary either with the articles of association or independently of them. The KG also requires an entry into the German commercial register.
However, a significant difference to a GbR lies in the liability of the partners. A KG requires at least one personally liable partner, the general partner, which can also be a GmbH or an entrepreneurial company (UG) (limited liability). The KG also offers the option of including family members as limited partners, who are only liable with their contribution and not with their private assets. In Germany, a GmbH & Co. KG has a commercial character, which gives rise to business assets for tax purposes. This can be avoided by including a natural person as an additional general partner.
Regardless of which form of company you choose, no form is superior to another in all respects. Instead, a case-by-case assessment must be carried out, in particular considering the assets included, the type of income (rents, capital gains, etc.), and the intended transactions within the family investment company. Our experienced lawyers will advise you on all the advantages and disadvantages of the respective company forms and will find a customised solution for your situation.
Difference to a Family Foundation in Germany
Whether establishing a family foundation or a family investment company is advisable depends on the individual case. As with the family asset pool, a family foundation can be considered to protect assets from fragmentation. Unlike a company, a foundation has no shareholders and no co-determination rights. In this structure, family members are merely beneficiaries who receive payments from the foundation. The individual modalities depend on the German foundation law. Tax-saving foundation modalities could be of particular interest.
On the other hand, the family investment company has the advantage that family members retain indirect ownership of the assets through their shares in the company. It allows more organisational options and has fewer rigid structures than the family foundation. For the (company) succession, clauses can be included at the family’s request that define the group of people eligible to become shareholders. For example, it can be ensured that the family assets are reserved for the closest family members.
Schlun & Elseven Rechtsanwälte: Legal Support for Setting up your Family Business in Germany
After analysing your specific situation and objectives in detail, we will use this as a basis for developing an individual solution tailored to your needs and those of your family. Based on your preferences, our lawyers will develop a suitable strategy, including financial planning (estate planning), business and asset management, risk management, legal advice and compliance factors. With Schlun & Elseven Rechtsanwälte, you have a legal partner who will stand up for your interests and goals.
In addition to drafting and reviewing contracts, we advise you on all aspects of German tax law. Our tax lawyers work closely with our practice groups for inheritance German law and foundation law, as well as family office and experienced tax advisors, to ensure the best possible outcome for you and your company, even in cross-jurisdictional matters. Contact us today to benefit from our expertise.
Practice Group: German Corporate Law
Practice Group:
German Corporate Law
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