The right succession of assets will remain a major issue in 2018 – including in particular for businesspersons. In order to avoid disputes between heirs and to put assets at risk due to excessive cost, businesspersons and owners of private assets should manage their succession in good time.
Asset succession is everyone's business and is a current topic for companies in particular. With the new tax rules for family businesses, a tax burden can be avoided, but only if properly structured. Inheritance tax is also of particular importance for private assets. One's own life's work should not be consumed by taxes, but rather transferred to the next generation. In the worst case, high tax claims or compensation payments could jeopardize the company’s existence. The new provisions for the transfer of business assets contained in Sections 13a-c of the Inheritance Tax Act are highly complex and difficult to understand for ordinary people. If properly designed, some or all of the tax burden may be avoided. If omitted or improperly designed, they may lead to dramatic endangerment of the company's existence.
If asset succession is not managed at all, or not correctly, considerable financial consequences may be incurred. High tax allowances are irretrievably lost and the family assets are unnecessarily burdened by inheritance tax. Disputes between heirs or the family may lead to high legal expenses. In the event of an unplanned absence of the entrepreneur, a lack of provisions could quickly undermine the confidence of banks and business partners. Clear rules can help to avoid burdens on the company and the family.
With proper gifts during lifetime and with a sound last will, heirs can significantly save on inheritance tax.
In order to ensure that wealth is passed on to the next generation without avoidable financial burden, everyone should take precautions and think carefully and in good time about who should receive which assets – and what the heirs should do with the wealth. Gifts can be a tried and tested means, but only while safeguarding the interests of the donors. For example, each parent may leave 400,000 euros tax-free for each child, and 500,000 euros for his or her spouse. In addition, there may also be a pension allowance of 256,000 euros. The tax allowances may be reused every ten years. Tax rates are now anything but trivial, so that considerable tax burdens can be avoided if used correctly. In addition, there is a wealth of other possibilities for design that should be discussed in a consultation.
Entrepreneurs and owners of private property should therefore deal with their estate succession at an early stage and seek comprehensive advice so that their life's work is not unnecessarily impaired. Tax liability in case of inheritance or gifts also applies to foreigners where domestic assets are concerned. In addition, double taxation may occur if the beneficiaries are also liable to pay taxes in their home country.
The experts from the Tax Law Practice Group are the contacts for questions concerning tax relief in case of succession planning. Lawyer and notary Karl-Georg Wellmann and his team specialize in inheritance law and tax law issues.