Definition and Legal Foundations of Financial Assets
Financial assets are a central concept in economic, tax, and budget law, referring to all financial resources and claims available to legal entities under public law, companies, and private individuals. In the legal context, financial assets primarily include monetary claims, participations in companies, securities, and other financial asset items, clearly distinguishing them from tangible assets. The precise definition and demarcation of financial assets vary depending on the legal field and are subject to specific statutory regulations.
Financial Assets in Public Law
Financial assets play a significant role in public law, particularly in budget law. For legal entities under public law such as the federal government, states, and municipalities, financial assets are regulated by the respective budget regulations (e.g., §§ 90 et seq. Federal Budget Code – BHO, §§ 104 et seq. Municipal Budget Code – GemHVO).
Definition According to Budget Law
According to § 90 (1) BHO, financial assets include the value of all participations in companies, claims outside the public sector, cash holdings, and the sum of cash resources, accounts, or other financial investments. Administrative assets (assets related to the fulfillment of public tasks, e.g., real estate, roads, technical installations) are expressly to be distinguished from these.
Classification of Public Financial Assets
Public financial assets are divided into various categories, including:
- Participations in Companies
This includes shares in affiliated or associated companies (e.g., municipal utilities).
- Claims
This includes interest-bearing and non-interest-bearing loans, bonds, and other monetary claims.
- Other Financial Investments
Short- and medium-term investments, overnight deposits, and liquidity reserves also fall under this category.
Significance for Budget Balancing
Financial assets represent a potential source of financing for legal entities under public law. They are legally relevant for assessing budget balancing and debt limits, for example according to the debt rules in the German Constitution (Articles 109 et seq. GG) and state-specific regulations.
Financial Assets in Civil Law and Accounting Law
Accounting Recognition in Companies
In accounting law, the German Commercial Code (HGB) distinguishes between financial assets (§§ 266, 340c HGB) and other assets. Financial fixed assets are reported as part of fixed assets and include:
- Securities (e.g., shares, bonds)
- Interests in affiliated companies
- Long-term loans
By contrast, financial instruments held for the short term are allocated to current assets (§ 266 paragraph 2 B. HGB).
Distinction from Tangible Assets
Whereas tangible assets include physical assets such as land, buildings, machinery, and vehicles, financial assets comprise exclusively intangible financial values and claims without an underlying tangible value.
Tax Law Aspects
In tax law, the treatment of financial assets is crucial for annual financial statement preparation, determination of corporate income tax, and trade tax. The same applies to the deductibility of impairments and the recognition of book profits or losses.
Financial Assets in Private Law
Significance for Private Individuals
For private individuals, financial assets consist of all liquid funds, shareholdings, savings, securities, and claims against third parties. The legal framework for this derives primarily from the German Civil Code (BGB) as well as relevant tax regulations.
Consideration in Asset Statements
Preparation of a statement of financial assets is significant in the context of inheritance disputes, maintenance calculations, or in the course of marital property adjustment proceedings in divorce cases (§§ 1372 et seq. BGB). All financial resources and claims to which the affected person is entitled are valued and accounted for.
Valuation and Accounting
The valuation of financial assets depends on the respective area of law and the function of the asset item.
Public Budgets
Here, the current market value or nominal value is typically decisive. Special valuation rules are set out in the budgetary regulations of the federal, state, and local governments.
Companies and Private Individuals
In accounting law, either the amortized acquisition cost or the current value at the balance sheet date must be used. The relevant principles are those of proper accounting (§ 252 HGB).
Financial Assets and Insolvency Law
In insolvency law, all claims and financial assets of an insolvent person or company are part of the insolvency estate (§§ 35, 36 Insolvency Ordinance – InsO). The financial assets are liquidated and used to satisfy creditors.
Financial Assets in Financial Statistics and National Accounts
Statistical offices and central banks collect data on the financial assets of sectors such as private households, companies, and the state in order to depict the asset structure of an economy. This becomes legally relevant, for example, in the context of data reporting requirements and regulatory reserve provisions.
Summary
Financial assets are a concept comprehensively regulated by law and include all monetary rights, claims, and participations, regardless of whether they are held by public entities, companies, or individuals. The exact definition, valuation, and handling of financial assets vary according to the legal field and purpose, and play a central role in economic, tax, accounting, budget, and insolvency law. A clear distinction from tangible assets is essential for numerous legal applications.
Frequently Asked Questions
Who is the legal owner of financial assets when several people jointly hold an account?
Legally, ownership of financial assets held in a joint account primarily depends on the type of account chosen. A distinction is made between an ‘or’ account (joint account with individual authority) and an ‘and’ account (joint account requiring joint authority). In the case of an ‘or’ account, it is generally presumed by law that all account holders are entitled to equal portions of the balance unless otherwise agreed. However, this allocation is only effective externally towards the bank; internally—i.e., among account holders—different arrangements can be made, for example by contract. In the event of death or attachment, it is decisive who is economically attributable for the contributed assets. For example, if all assets are deposited by person A, they generally remain the beneficial owner. For tax purposes, attribution of financial assets can be especially relevant in the case of gifts, as a transfer to other account holders may trigger gift tax obligations.
How can financial assets be legally transferred and what formal requirements must be observed?
The transfer of financial assets varies legally depending on the asset type. For bank balances, issuing a transfer instruction or—where passbooks are involved—physical delivery and a corresponding agreement between the seller and buyer is usually sufficient. Securities may be transferred via endorsement (for bearer papers) or depot transfer (for book-entry securities). For donations of financial assets, particular attention must be paid to the formal requirement of § 518 BGB: If a notarial certification of a promise of donation is lacking, it becomes legally effective if the donor actually performs the donation (execution of donation). Transfer of GmbH shares strictly requires notarization (§ 15 GmbHG). For tax purposes, notification of transfers within exemption thresholds must be submitted to the competent tax office.
What legal restrictions exist on access to financial assets in the event of insolvency?
In the context of private or company insolvency, all assets of the debtor, including financial assets, fall into the insolvency estate (§ 35 InsO). Only the insolvency administrator is allowed to dispose of these assets. Any act of disposal by the debtor after initiation of insolvency proceedings regarding their financial assets is invalid (§ 81 InsO). Exempt from this are non-attachable amounts according to § 850c ZPO (attachment exemption limits) as well as accounts subject to garnishment protection (P-Konto). Intentional or abusive transfers of financial assets prior to the opening of insolvency proceedings can be challenged and reversed by the insolvency administrator under §§ 129 et seq. InsO.
How are financial assets legally treated in the case of inheritance?
In the event of death, all financial assets are automatically transferred to the heir(s) via universal succession according to § 1922 BGB. Account restrictions by banks prevent access to the account balance by heirs until a certificate of inheritance or other suitable proof is provided. Heirs are generally liable for tax obligations or outstanding debts of the decedent related to financial assets. Joint accounts remain problematic: it must be clarified which share was attributable to the deceased account holder. For inheritance tax purposes, the value of the financial assets is recorded as part of the estate and assessed according to the Inheritance and Gift Tax Act.
What reporting obligations to authorities exist regarding financial assets?
Various reporting obligations apply depending on the situation. Under the Money Laundering Act (GwG), banks are obligated to comprehensive identity verification during account opening and ongoing operations. In tax returns, individuals and legal entities must disclose financial assets in various ways, particularly investment income (§ 20 EStG). For foreign relations, special notification requirements apply under AIA (Automatic Information Exchange), so foreign financial institutions automatically report accounts of German taxpayers to the competent tax authority. Non-profit organizations may also have to report certain funds to the transparency register. If certain thresholds are exceeded in the context of gifts or inheritances, there is an obligation to notify the tax office (e.g. pursuant to § 30 ErbStG).
What impact does the legal ownership of financial assets have in the event of divorce?
In divorce cases, the legal allocation of financial assets is decisive for the marital property equalization (§§ 1373 et seq. BGB). The key factor is whose name the assets are held under, while facts such as joint account management or deposits by each spouse must also be considered. In the case of marital property equalization, assets acquired during the marriage are divided, regardless of whose name the account is in. Gifts or inheritances to one spouse are generally excluded unless expressly allocated to the other spouse. Both partners are obliged to disclose financial assets; concealed or shifted assets can subsequently be added to the equalization process (§ 1375 BGB: asset transfers in the ten years prior to divorce).
In what cases can legal access to financial assets be restricted or suspended?
Legal restrictions on access to financial assets may arise in particular from court seizures and attachment orders (§§ 803 et seq. ZPO). There are also restrictions in minor’s law: for example, a minor’s account may only be accessed with the express approval of the family court if substantial assets are involved (§§ 1643, 1822 BGB). Criminal or administrative fine proceedings may also lead to confiscation or freezing of financial assets (§ 111c StPO). In the context of foreign legal assistance requests (e.g., money laundering offenses), financial assets may be frozen. Insolvency and probate proceedings generally entail a comprehensive prohibition on disposal.
Are there any legal specifics when pledging or transferring ownership of financial assets as security?
The pledging of financial assets, especially bank balances and securities, is legally permissible and is mostly done by concluding a pledge agreement under § 1204 BGB. The pledge arises through agreement and delivery, or by notification to the bank as so-called third-party debtor (§ 1280 BGB). For deposited securities, the pledge is established by delivery of the security certificate or registration in the central securities depository. The transfer of ownership for security purposes is possible via special security agreements, but is predominantly used for tangible assets. In insolvency, the pledgee has a right to separate satisfaction under §§ 50, 51 InsO. Prohibitions on sale in banks’ general terms and conditions may restrict the validity of a pledge in individual cases.
