The payment of a severance agreed upon in the marriage contract after divorce is not subject to gift tax according to a decision by the Federal Fiscal Court (Ref.: II ZR 40/19).
A marriage contract gives spouses the freedom to regulate many financial matters. For example, the matrimonial property regime of community of accrued gains can be excluded and separation of property can be agreed upon. Financial aspects can also be proactively regulated in the event of divorce, such as excluding the payment for an equalization of accrued gains and instead agreeing on the payment of a one-time severance. The Federal Fiscal Court ruled on September 1, 2021, that no gift tax is payable on such a severance, explains the commercial law firm MTR Rechtsanwälte.
In the case in question, the couple agreed on separation of property in the marriage contract and stipulated a payment claim for the wife in the event of a divorce. The woman thereby forfeits any claim to ongoing maintenance payments. 16 years later, the marriage was actually dissolved, and the man paid out the agreed contract to his ex-wife.
The tax office saw the payment to the woman as a gratuitous transfer and demanded gift tax. The Munich Tax Court confirmed this view. The husband’s payment was gratuitous without any consideration from the wife.
The Federal Fiscal Court, however, viewed this differently in the appeal proceedings and overturned the decision of the Tax Court and the gift tax assessment. The payment to the woman constituted a need-based severance, according to the BFH. This arises from the fact that the couple had already set extensive individual regulations in their marriage contract for the case of divorce. The payment serves to settle the financial claims the woman would have been entitled to in the event of divorce. Thus, it is not a gratuitous transfer, the BFH clarified. Furthermore, the corresponding provisions in the marriage contract clearly indicated that the spouses did not have the intention to make a gift, but rather to protect the man’s assets from unforeseeable consequences in the event of divorce.
By making proactive provisions in the marriage contract or with a postnuptial agreement, assets can be effectively protected and gift tax saved. Attorneys experienced in tax law provide advice.
