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Gründe für die Gründung einer Familienstiftung
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Asset protection and the long-term safeguarding of family wealth
\r\nFor many families, establishing a family foundation is a proven instrument to secure and strategically manage family wealth across generations. A key motive is comprehensive asset protection: by transferring assets such as real estate, company shares, or other capital investments to the family foundation, the family wealth is protected against fragmentation, access by creditors, or unwanted external influence. This preserves the assets as a single unit and allows them to be managed in the interests of the family and its descendants. In this context, questions often arise regarding tax treatment, the legal framework, and how to deal with inheritances, gifts, or the value of real estate.\r\n
Succession planning and preservation of family businesses
\r\nAnother important reason for establishing a family foundation is targeted succession planning. Particularly in the case of family businesses, the question often arises of how corporate succession can be arranged without fragmenting the company or risking disputes among the heirs. The transfer of assets may take place either as a lifetime gift or as an inheritance upon the death of the testator; in particular, in the case of a foundation established upon death, the role of the deceased testator and succession planning are of central importance, since the heir receives the assets after death. The family foundation offers the possibility of keeping company shareholdings bundled and clearly regulating succession. In this way, the continuity of the family business is secured and the interests of all family members are safeguarded.\r\n\r\nSecuring the family also plays a major role: the family foundation can be structured so that it ensures the maintenance and support of family members in different life situations. This not only creates financial security but also promotes family cohesion. One example: if a property or a large company is transferred to the children, the value of the assets is decisive for tax treatment and the use of allowances.\r\n
Securing the family and providing for it across generations
\r\nIn addition to these aspects, the family foundation offers the possibility of using tax advantages. By transferring assets to the foundation, taxes can be saved under certain conditions and allowances can be used optimally. Especially in the transfer of business assets, the degree of kinship, preferential tax treatment, and the tax exemption of certain assets play an important role. The state levies inheritance tax, although tax exemptions may apply to certain inheritances and gifts. For tax treatment, the value of something—such as a property—is decisive.\r\n\r\nHowever, it is crucial to plan the establishment of a family foundation carefully and to choose the appropriate type of foundation. Here, a distinction can be made between the legally capable foundation, which acts as an independent legal entity, and the fiduciary foundation, in which the assets are administered in a fiduciary capacity.\r\n\r\nThe establishment and administration of a family foundation requires individual and professional advice in order to implement the family’s objectives optimally and to protect the family wealth in the long term. The founder determines the foundation’s purpose and the foundation’s objectives, which is decisive for the orientation and recognition of the foundation. In this way, the family foundation offers a flexible and sustainable way to preserve assets, regulate succession, and safeguard the family’s interests across generations. The family’s interest is the central focus; an overview of the legal issues and a step-by-step approach in multiple steps and in each individual step are indispensable for a successful establishment.\r\n
No substitute inheritance tax for a non-legally capable foreign family foundation – BFH II R 30/22
\r\nA Swiss family foundation whose administrative seat is in Germany is nevertheless not subject to substitute inheritance tax. The Federal Fiscal Court (Bundesfinanzhof, BFH) clarified this with a notable judgment of 4 June 2025 (case no. II R 30/22).\r\n\r\nPursuant to Section 1 (1) no. 4 ErbStG (Inheritance Tax Act), a family foundation is subject to inheritance tax every 30 years. With this substitute inheritance tax, the legislature aims to prevent the foundation’s assets from being permanently withdrawn from inheritance tax. The inheritance tax rate varies depending on the tax class and the degree of kinship and thus affects the tax burden. Particularly relevant are the respective tax allowance, the degree of relationship between the decedent and the heir, and possible tax exemptions that apply to inheritances and gifts. Business assets are often treated separately for inheritance tax purposes and, under certain conditions, may be tax-privileged or partially exempt from tax. The state levies inheritance tax, and the value of the transferred assets—whether real estate, a large corporation, or something else—is decisive for the assessment of the tax. The tax liability generally arises upon the death of the decedent when the inheritance passes to the heirs; in this context, the roles of the decedent and the inheritance are determinative for the tax classification. An example: If a property worth 1 million euros is bequeathed by a decedent to his children, the inheritance tax is calculated taking into account the tax allowance, the degree of kinship, and any tax exemptions. Frequently asked questions concern, in particular, the application of inheritance tax to different types of assets, the amount of the allowances, and the tax treatment of business assets.\r\n\r\nUnder Section 2 (1) no. 2, this provision applies to foundations and associations whose management or registered seat is in Germany. However, the prerequisite is that the foundation has legal capacity in Germany. In its judgment, the Federal Fiscal Court has now made clear that a family foundation established under Swiss law that does not have legal capacity in Germany is not subject to the substitute inheritance tax. This is the case even if it has its administrative seat in Germany, according to the commercial law firm MTR Legal Rechtsanwälte, which, among other things, advises on tax law.\r\n
Establishment of a family foundation under Swiss law
\r\nIn the underlying case, the claimant family foundation had been established under Swiss law. The foundation was established by the founder, who contributed the foundation assets to the foundation. When establishing a family foundation, founders determine the foundation’s purpose and the foundation’s long-term objectives in order to safeguard the family’s interests and secure succession of assets. A family foundation can be established either during the founder’s lifetime or upon death, i.e., after the death of the deceased founder. In the context of establishing a foundation, it is advisable to obtain an overview of the individual steps and the step-by-step process in order to meet the legal and organizational requirements. Particularly when establishing a foreign family foundation, questions often arise regarding legal, tax, and practical aspects that should be clarified in the family’s interest. According to its bylaws, the foundation had its seat in Switzerland. However, its administration was carried out in Germany. All foundation board members have been resident in Germany since the foundation was established, and the foundation’s accounts are also maintained in Germany.\r\n\r\nThe tax office therefore classified the foundation as subject to the substitute inheritance tax. The foundation contested this and ultimately succeeded before the Federal Fiscal Court. The BFH found in favor of the foundation and set aside the substitute inheritance tax assessment notice. A family foundation established under Swiss law with its administrative seat in Germany is—provided it does not have legal capacity under German law—not subject to the substitute inheritance tax under Section 1 (1) no. 4 ErbStG, the BFH clarified.\r\n
Governing bodies of the foundation
\r\nDie Organe einer Stiftung spielen eine zentrale Rolle für die Umsetzung des Stiftungszwecks und die nachhaltige Verwaltung des Stiftungsvermögens. In einer Familienstiftung sind typischerweise der Vorstand, ein Stiftungsbeirat und gegebenenfalls ein Kuratorium vorgesehen. Der Vorstand übernimmt die laufende Geschäftsführung und sorgt dafür, dass die Ziele der Familie und des Stiftungszwecks konsequent verfolgt werden. Der Stiftungszweck und die zielen der Stiftung bilden dabei die Grundlage für die Arbeit aller Organe und bestimmen maßgeblich deren Aufgaben und Verantwortlichkeiten. Die Organe handeln stets im Interesse der Familie und der Destinatäre, um deren langfristige Versorgung und den Schutz des Familienvermögens sicherzustellen. Der Stiftungsbeirat und das Kuratorium haben meist beratende und überwachende Funktionen, um die Einhaltung der Stiftungssatzung und die Wahrung der Interessen der Familienmitglieder sicherzustellen. Für einen besseren Überblick erfolgt die Entscheidungsfindung in den Organen in mehreren schritten, wobei jeder schritt klar definiert und strukturiert ist. Häufige Fragen betreffen die genaue Aufgabenverteilung und die Zuständigkeiten der einzelnen Organe, insbesondere wie diese im Rahmen der Stiftungssatzung geregelt sind. Die genaue Zusammensetzung und die Aufgabenverteilung dieser Organe werden individuell in der Stiftungssatzung festgelegt. So wird gewährleistet, dass die Stiftung flexibel auf die Bedürfnisse der Familie eingehen und das Familienvermögen im Sinne aller Destinatäre verwalten kann.\r\n
Foundation supervision and oversight
\r\nFoundation supervision and oversight are essential to ensure compliance with the foundation’s bylaws and the proper management of the foundation’s assets. The state plays a central role here, as the competent public supervisory authority monitors whether the foundation fulfills its stated purpose and whether the family’s assets are used in accordance with the foundation’s purpose. An important step in this process is the regular review of the annual financial statements as well as monitoring compliance with tax and legal requirements, with tax oversight by the tax authorities being of particular importance. An overview of the individual steps of foundation supervision shows that it takes place in several steps: from the review at the time of establishment, through ongoing monitoring, to the possible ordering of measures in the event of deviations. Frequently asked questions on foundation supervision and oversight concern, in particular, the state’s responsibility, compliance with tax obligations, and transparency in administration. If deviations occur, the supervisory authority may intervene and order measures. This monitoring ensures transparency and protects both the assets and the rights of the family members and beneficiaries. In this way, family assets are preserved in the long term and the foundation can reliably fulfill its tasks.\r\n
Legal capacity of the foundation as a prerequisite for liability to substitute inheritance tax
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Significance of legal capacity for the substitute inheritance tax
\r\nThe Federal Fiscal Court (BFH) made it clear that the foundation’s legal capacity under German law is decisive for liability to substitute inheritance tax. The concept of legal capacity forms the basis for the tax treatment of family foundations, because only a legally capable foundation can act as an independent legal entity and manage the foundation’s assets independently of the founder. Only a legally capable foundation can have its own legal personality and thus be the holder of its own assets. The state plays a central role here, as it governs both the recognition of the foundation and the collection of the tax.\r\n\r\nAn overview of the individual steps shows that the recognition of the foundation and the tax treatment take place in a step-by-step procedure: first, the foundation must be recognized under German law; subsequently, the state tax authorities examine the tax liability. Recognition may also be relevant upon death (e.g., a foundation established by testamentary disposition), especially where assets are transferred after the testator’s death.\r\n\r\nIn connection with liability to substitute inheritance tax, the importance of the inheritance, inheritances, the estate, the testator, and the testator should be emphasized, since the transfer of assets after death is treated for tax purposes as an inheritance. Frequent questions concern the foundation’s legal capacity and the tax treatment, in particular how inheritances and the estate are valued and taxed by the state within the framework of substitute inheritance tax.\r\n
Applicable law and lack of recognition under German foundation law
\r\nThe question of which law is to be applied when assessing legal capacity is therefore of central importance. Here, the foundation may have been established under Swiss law, but that is not determinative. What is decisive is the law of the place where the administration is located. And because the foundation is administered from Germany, German foundation law is relevant, according to the BFH.\r\n\r\nUnder German law, however, the foundation had not obtained recognition pursuant to § 80 BGB. Such recognition is necessary for a foundation to become legally capable. Since this did not occur, the foundation was not legally capable and therefore not included within the scope of application of § 1(1) no. 4 ErbStG, the judges in Munich made clear.\r\n
Tax classes and their effects
\r\nClassification into the correct tax class is of central importance for inheritance tax and gift tax, as it largely determines the amount of the tax burden. In Germany, heirs and recipients of gifts are divided into three tax classes: Tax class I applies to spouses, children, and grandchildren and offers the highest tax-free allowances as well as the lowest tax rates. Tax class II includes, among others, siblings, nieces, nephews, and grandparents, while tax class III applies to all other persons, such as cousins. With each tax class, the tax-free allowances decrease and the tax rates increase, which significantly raises the tax burden for more distant relatives or unrelated persons.\r\n\r\nA family foundation can be used in a targeted manner here to secure family assets across generations and to minimize the effects of unfavorable tax classes. By pooling assets in the foundation and making skillful use of tax-free allowances and tax rates, gift tax and inheritance tax can be optimized. Particularly for children and other close relatives in tax class I, the family foundation offers the possibility of transferring assets in a tax-efficient manner and reducing the burden on the family. In this way, the family foundation helps to preserve family assets in the long term and to make optimal use of the tax advantages of the respective tax class.\r\n
Ongoing taxation
\r\nThe ongoing taxation of a family foundation covers various tax aspects that must be taken into account when managing the foundation’s assets. An overview of the individual steps and the step-by-step process of ongoing taxation is particularly important for founders and beneficiaries in order to understand the complexity of the tax obligations. The ongoing income of the family foundation may derive from capital investments, letting, the transfer of real estate, or shareholdings in companies and is relevant for tax purposes. In taxation, the value of something—such as a property or business assets—plays a central role, because this value forms the assessment basis for the tax. In Germany, the foundation is generally subject to corporate income tax at a rate of 15% on its profits. If the foundation carries on a commercial activity, trade tax is additionally incurred. Value added tax may also apply to certain transactions of the foundation. Certain assets such as business assets, real estate, or large enterprises may, under certain conditions, benefit from tax exemptions, which can substantially reduce the ongoing tax burden. Frequent questions on ongoing taxation concern, in particular, the tax-specific features when transferring business assets, the valuation of the value of real estate, and the requirements for tax exemptions. It is therefore important to keep the tax obligations constantly in view in order not to risk disadvantages due to omissions. Professional tax advice helps to make optimal use of the advantages of the family foundation and to meet the tax obligations efficiently. In this way, the foundation can achieve its objectives and protect family assets as effectively as possible.\r\n
Tax optimization for family foundations
\r\nTax optimization is a decisive factor in the establishment and administration of a family foundation. An overview of the individual steps and the step-by-step process of tax optimization helps to understand the complexity and proceed in a targeted manner. Through careful planning, numerous advantages can be realized and disadvantages avoided. This includes choosing the appropriate legal form, the optimal drafting of the foundation’s statutes, and the use of tax allowances and tax exemptions to minimize the tax burden. The tax treatment of business assets, business assets, real estate, and large enterprises requires particular attention, as special relief rules and valuation approaches apply to these types of assets. Minimizing taxes on income and taking the family’s individual objectives into account also play an important role. The value of something, especially of the transferred assets, is crucial for tax optimization, as it determines the assessment basis for the tax and the application of allowances.\r\n\r\nAn example: When transferring assets to children, significant tax savings can be achieved—taking into account the degree of kinship and the value of the assets—by using allowances and tax exemptions. Frequently asked questions on tax optimization concern in particular the application of allowances, the valuation of real estate and business assets, and the tax advantages for different degrees of kinship. A well-considered tax strategy helps ensure that the family’s assets are preserved in the long term and that the foundation can fulfill its purposes efficiently. It is advisable to involve an experienced tax advisor at an early stage in order to structure the family foundation’s tax optimization professionally from the outset.\r\n
Asset protection through family foundations
\r\nA family foundation is an effective instrument for permanently protecting family assets and safeguarding the family’s interests. By establishing a family foundation, the assets are removed from the direct reach of individual family members or potential creditors and transferred into an independent foundation structure. This provides effective asset protection, because the foundation’s assets are no longer part of the private assets of individual persons and therefore remain protected from third-party claims, such as those of creditors.\r\n\r\nIn addition, the family foundation ensures clear structures in succession planning and prevents disputes within the family, because the management and distribution of the assets take place according to the rules set out in the foundation’s statutes. The family foundation can be flexibly adapted to the family’s individual needs and offers additional advantages through targeted tax exemptions. Thus, establishing a family foundation not only enables the long-term preservation of family assets, but also creates security and stability for future generations. The combination of asset protection, tax advantages, and clear succession planning makes the family foundation an attractive solution for families that wish to secure their assets sustainably.\r\n
Asset management
\r\nAsset management is the core of every family foundation, because it is decisive for the preservation and growth of the foundation’s assets. The value of something, such as a property or a large enterprise, plays a central role here, as the valuation of these assets is crucial for the tax treatment and long-term planning.\r\n\r\nAn overview of the individual steps and the step-by-step process of asset management helps to understand the complexity and proceed in a structured manner. In practice, questions frequently arise regarding the valuation and management of assets, in particular with regard to real estate, large enterprises, and their valuation approaches.\r\n\r\nAsset management aims not only at financial preservation, but also at safeguarding family values. The goal is to secure the family’s assets across generations and to fulfill the foundation’s purposes sustainably. Professional asset management relies on broad diversification, for example through investments in real estate, equities, bonds, or alternative investments. The investment strategy is tailored individually to the foundation’s goals and needs and is reviewed regularly. This allows flexible responses to changes in the market or in the lives of family members. Engaging an experienced asset manager ensures that family assets are managed optimally and that the foundation can provide long-term security for its beneficiaries.\r\n
No circumvention of inheritance tax
\r\nFurthermore, the BFH rejected the view that substitute inheritance tax applied solely due to the place of effective management being in Germany: § 2(1) no. 2 ErbStG does regulate personal tax liability in the case of a seat or management in Germany, but it says nothing about the material scope of application, i.e., about whether a foundation within the meaning of § 1 ErbStG exists at all.\r\n\r\nThe state levies inheritance tax on inheritances and transfers of assets on death, with the tax treatment after the death of the deceased testator being determined by statutory provisions. An overview of the individual steps and the step-by-step process of tax treatment in an inheritance case shows that tax liability, the valuation of the estate, and the application of allowances are precisely regulated. Frequently asked questions concern the possibilities of circumventing inheritance tax, in particular in connection with family foundations and the transfer of assets after the testator’s death.\r\n\r\nThe Federal Fiscal Court (BFH) further clarified that assets tied up in family foundations are not intended to be permanently withdrawn from inheritance tax. In connection with the estate, it must be noted that, under civil-law principles, the estate of a non-legally-capable foundation is attributable to the natural persons behind it. However, there is no circumvention of the tax liability here, since, under civil-law principles, the assets of a non-legally-capable foundation are attributable to the natural persons behind it.\r\n
A judgment with far-reaching implications
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Implications of the BFH ruling for family foundations
\r\nIn practice, the BFH ruling is of considerable significance. It makes clear that the state plays a central role in the tax treatment of inheritances, gifts, and succession arrangements, particularly with regard to inheritance tax and the tax obligations of the heirs and the deceased. Accordingly, foundation and succession arrangements involving foreign family foundations that are managed from Germany are not automatically subject to substitute inheritance tax, provided that the foundation is not legally capable under German law. In contrast to the tax treatment of domestic family foundations, for which different tax classes, tax rates, and allowances may apply, in the case of cross-border family foundations it is not only the foreign law of establishment but, above all, German law on the registered seat that must be observed. Even small structural differences—for example, whether a foundation is recognized under German law—can determine whether there is a tax burden or a tax exemption, in particular in the case of business assets, real estate, or large companies.\r\n\r\nAn overview of the individual steps and the step-by-step process of succession planning shows that the valuation of assets (e.g., the value of a property or of business assets), the consideration of the degree of kinship, and the application of allowances are decisive for the tax burden. Frequent questions concern the implications of the ruling, the tax effects on inheritances upon death, the role of the deceased testator, and the possibilities of tax exemption for certain assets.\r\n\r\nAn example: If a testator transfers a property worth 800,000 euros to their children, the tax burden depends on their degree of kinship, the applicable allowance, and the valuation of the assets. If the value of the inheritance exceeds the allowance, tax is due on the excess amount; under certain conditions, a tax exemption is possible for business assets and large companies. It may be somewhat different in the case of inheritances upon death or the transfer of business assets if special relief provisions apply.\r\n\r\nMTR Legal attorneys provide comprehensive advice in tax law.\r\n\r\nFeel free to contact us!”
