A couple can agree in a prenuptial agreement that in the event of divorce, a severance payment will be made instead of ongoing maintenance payments. Possible gift tax must be considered in this regard.
German family law stipulates that a married couple lives under the marital property regime of community of accrued gains. However, different arrangements can be made in a prenuptial agreement and separation of property can be agreed upon. Likewise, in the case of potential spousal support after divorce, it can be agreed that instead of ongoing maintenance payments, only a one-time severance payment is to be made, explains the economic law firm MTR Legal, which also has a focus on family law.
Such arrangements for the payment of a one-time severance payment can be advantageous for both spouses. The wealthier partner can protect his assets and possibly also business assets, while the financially weaker partner quickly gains access to a larger sum. However, it must be noted that the tax authorities could demand their share and levy gift tax on the severance payment. Nevertheless, the Federal Fiscal Court has clarified that no gift tax is payable on a needs-based severance payment (Case No.: II R 40/19).
In the underlying case, the couple agreed on the separation of property in a notarized prenuptial agreement and excluded the statutory pension equalization. It was agreed that the woman would receive a one-time severance payment in the event of divorce and in return would waive ongoing maintenance payments. When the marriage was actually divorced after several years, the man paid the contractually agreed severance payment. The tax office then assessed gift tax, arguing that the severance payment amounted to a charitable financial gift subject to tax.
However, the Federal Fiscal Court did not follow the tax office’s reasoning. The former spouses had merely regulated their rights and obligations in the event of a divorce individually in the prenuptial agreement. There could be no talk of a charitable gift in the case of the severance payment, as it is integrated into an overall package in which the family law claims are regulated for the case of need, namely the divorce of the marriage. Furthermore, the severance payment is associated with a consideration, namely the waiver of maintenance payments, according to the Federal Fiscal Court.
For the creation of a prenuptial agreement and other questions of family law, MTR Legal provides you with an attorney experienced in family law.
