A will alone is not sufficient
Even if, for example, a spouse or a child of the business owner has been designated as the successor in a will, this is generally not sufficient. The will and the company’s articles of incorporation should always be aligned with one another. After all, in the event of discrepancies, the articles of incorporation always take precedence, which may negatively impact the compulsory portion provisions set forth in the will. This is because compulsory portion rights may also apply to other descendants, such as the entrepreneur’s grandchildren. The key point, however, is this: The statutory share amounts to 50 percent of the legal inheritance quota, cannot be revoked, and is a monetary claim that becomes due immediately. And this can place a considerable strain on succession processes.
A loss of liquidity is often the result
As (business) assets grow over the course of an entrepreneur’s life, the amounts required to cover statutory shares of the estate increase continuously. As a rule, however, these very assets are tied up in the business and are not freely available. Often, loans must then be taken out to satisfy the statutory share claims. Consequently, the business loses valuable assets. What planning options are available to address this challenge?
General Strategy: Proactively Minimizing Statutory Inheritance Claims
This does not mean disadvantaging individual beneficiaries of the statutory share. Rather, the goal is to ensure both the future viability of the business and the financial security of the family. In doing so, finding an amicable solution should take priority whenever possible. In practice, the following measures have proven effective.
Entering into inheritance and statutory share waiver agreements
Under this option, the beneficiary of a statutory share agrees—for example, in exchange for a lump-sum payment—to waive their statutory share. Similarly, this applies to the
conclusion of prenuptial agreements
between spouses.
Reducing the estate
Transferring assets during one’s lifetime—for example, through gifts to beneficiaries entitled to a statutory share for educational purposes or to purchase a home—can also minimize statutory share rights.
Transfer of assets to a family foundation or family corporation
Both measures result in the assets no longer being directly owned by the decedent, thereby excluding statutory inheritance rights to them. Family assets can also be held together through another organizational structure, such as a t3://page?uid=156t3://page?uid=156family foundation. High-net-worth individuals and entrepreneurs particularly value the tax advantages and flexibility that can be achieved through customized wealth succession strategies such as the family foundation—keyword: asset protection. Important: This should not be confused with a charitable foundation, into which assets are transferred for charitable purposes.
Utilization of International Legal Standards
In this scenario, foreign law—which recognizes no or only limited statutory inheritance rights—is applied either through a choice of law in the will or by relocating one’s habitual residence to another country.
However, all of the measures outlined here—whether used individually or in combination—have one thing in common: they require a comprehensive analysis of your individual situation in advance. The more proactively the succession process can be planned, the greater the chances of achieving your individual goals.
