The transfer of assets to future generations in general and corporate succession in particular touch on very different areas of law, which makes the details of handling such matters so complicated. This includes, in particular, income tax and inheritance/gift tax, not to mention company, family and inheritance law. Especially the fundamental reform of inheritance tax law in Germany with effect from 1 January 2009 has led to far-reaching changes.

These changes particularly affect business and property assets, the valuation of which has now been brought much more into line with market values. At the same time, the legislator provided for extensive tax breaks. A further reform affecting inheritance tax rates came into force on 1 January 2010, concurrently with a reform of Germany’s inheritance law.

The starting point for planning asset or corporate succession is the wishes of the transferring party in terms of who is to receive which assets. On this basis, various aspects have to be taken into consideration:

  • It is important to check whether renunciations of inheritance/compulsory portion or contracts of inheritance have already been concluded with all of the parties concerned, and whether it would still make sense to conclude such contracts or a corresponding renunciation.
  • In terms of the assets to be transferred, it is important to ensure as far as possible that any existing hidden reserves are not revealed for income tax purposes.
  • The planned transfer of assets must be consistent with any obligations of the transferring party under company law.
  • The process as a whole should be optimised from the point of view of inheritance and gift tax law. As regards business assets, the interaction between income and inheritance tax is very complex if the transferring party would like to retain cash inflows from the assets to be transferred.
  • As for the remaining assets of the transferring party, it is wise to plan at an early stage whom the assets are to be transferred to in order to ensure multiple use of allowances.