A couple can agree in a marriage contract that in the event of divorce, a compensation payment will be made instead of ongoing maintenance payments. Potential gift tax must be considered in this context.
German family law provides that a married couple lives in a regime of community of accrued gains. However, different regulations can be made in a marriage contract, and separation of property can be agreed upon. It can also be agreed upon that instead of ongoing maintenance payments, only a one-time compensation is to be paid for possible spousal maintenance after the divorce, explains the law firm MTR Rechtsanwälte, which also focuses on family law.
Such arrangements for the payment of a one-time compensation can have advantages for both spouses. The wealthier partner can protect their assets and possibly also business assets, while the financially weaker partner quickly receives a large sum. However, it must be noted that the tax office might have a claim and demand gift tax on the compensation payment. The Federal Fiscal Court has clarified, however, that no gift tax is due for a needs-based compensation (Ref.: II R 40/19).
In the underlying case, the couple had agreed on separation of property in the notarized marriage contract and excluded the statutory pension adjustment. It was agreed that the wife would receive a one-time compensation in the event of divorce and, in return, would waive ongoing maintenance payments. When the marriage was actually dissolved after several years, the man paid the contractually agreed compensation. The tax office subsequently assessed gift tax, justifying it as a gratuitous monetary donation subject to tax.
However, the Federal Fiscal Court did not follow the reasoning of the tax office. The former spouses had merely regulated their rights and obligations in the event of a divorce individually in the marriage contract. There can be no talk of a gratuitous donation in the case of the compensation, as it is integrated into a comprehensive package in which family law claims are regulated, namely in the event of divorce. In addition, the compensation is associated with a consideration, namely the waiver of maintenance payments, according to the BFH.
To draft a marriage contract and for other questions of family law, MTR Rechtsanwälte provides you with a lawyer experienced in family law.
