In certain cases of the transfer of assets within the family, the transfer of family assets to a “family” company (or family pool) can be considered to safeguard family assets and succession planning. This can offer considerable advantages over the usual transfer agreement with reservation of usufruct. Both partnerships (civil law partnership, limited partnership, GmbH & Co. KG) and corporations (in particular GmbH) are conceivable for structuring such a “family” company. The advantages and disadvantages of each structure are determined by the civil law characteristics of the respective company and by tax law.
Assets (usually real estate or securities accounts) are initially contributed to the company by the asset holder(s). Other family members such as spouses, children and grandchildren can acquire shares in the company immediately upon formation. Instead of or in addition to this, the founders can also transfer company shares to other family members by way of gift or inheritance after the company has been founded.
The influence of the asset holder can be structured in such a way that they retain decisive influence. For example, it can be stipulated that - in contrast to a usufruct solution - he can continue to decide on the purchase and sale of real estate, asset reallocations or other investments. In addition, his influence can be secured by corresponding rights of reclaim.
The aim of such a “family” company is to keep the family assets in the family in the long term by means of appropriate regulations, to prevent the family assets from being split up by heirs, divorced children-in-law or creditors and to place the joint preservation and further development of the assets on a secure and comprehensive basis. The individual partners can - provided this is not expressly excluded in the partnership agreement - terminate the partnership and receive a settlement. However, the settlement amount can be set lower than the value of the shareholder's share.
In addition, the “family” company saves inheritance tax and income tax in many cases.
The advantages and disadvantages of such a “family” society can be summarized as follows:
ADVANTAGES:
- Formation and preservation of family wealth in a single company, independent of the company's membership, often for several generations
- Transfer of family assets to other family members possible through transfer of company shares
- Secure prevention of unwanted third parties entering the company
- In the case of partnerships (namely GbR/KG), transfers are also possible in written form only - i.e. without a notary.
- In the case of transfers between shareholders (without a shareholder leaving completely), no change in the land register is necessary.
- When partners leave and join the company, the necessary entry in the land register is often less expensive than in the case of a fractional community.
- No fragmentation of family assets by the next generation, for example through inheritance, divorce or creditors.
- The transferor retains control and management of the assets; if necessary, he may be granted a right of recovery.
- Reduction of inheritance, gift and income tax.
- Comprehensive and flexible regulation of the joint management of family assets according to your needs, in particular with regard to joint decisions/votes/majorities, investments, reserves, distributions, termination, exclusion rights, succession.
- Reduction of compulsory portion claims possible.
DISADVANTAGES:
- Complex legal and administrative framework, which generally requires constant tax and corporate law support.
- Amendments to the articles of association are only possible with a corresponding majority of votes.
- Additional costs are incurred for the preparation of the articles of association.
- The transferor is not released from responsibility for the property and other assets, although he is already handing over values and influence. Of course, the same applies to the usual transfer of real estate against reservation of usufruct.
- The acquirer is regularly subject to strict instruction structures, which can inhibit his own identification with the transferred assets and the development of his own responsibility.
Please contact us if you would like advice on the right family company or form of transfer for you!
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