10. December, 2020
Any regulation of succession within a family must take the provisions of matrimonial property and inheritance law into account. Compliance with the statutory entitlement is particularly difficult if there are only a limited number of other assets apart from the company. However, due to the freedom of contract, the legal options available may be expanded by a marriage contract or inheritance agreement.
In order to ensure that payments of statutory entitlements and divorces do not impact a company detrimentally or reduce the chances of a successful succession, some other questions need to be answered first:
The focus here is on the question of how marriage contracts and inheritance arrangements can be used in connection with succession planning. We see the focus as being the most common situation involving a married couple with children in common.
This establishes, transforms or modifies a marital property regime that governs the legal ownership of assets between spouses. In the case of married testators but also registered partnerships, marital property is always divided before the division of the inheritance.
Spouses who own companies have few options when it comes to choosing a marital property regime. Community of property is not recommended except in certain, highly specific situations. The only alternative to participation in acquired property is therefore the separation of property, which does not provide for any claims under marital property law and therefore cannot give rise to any problems for succession planning.
In practice, the details of participation in acquired property are much more important than opting for a different marital property regime. This is above all used to benefit the surviving spouse, which is achieved by changing the participation in the surplus in order to assign the entire surplus from acquired property to the surviving spouse.
The other spouse’s claims under marital property law can be reduced by declaring acquired assets that are intended for the practice of a profession or operation of a company to be individual property. This allows the company as it was acquired to be excluded from the division of the surplus.
An inheritance agreement governs the succession of assets with a spouse and descendants in the event of death with binding effect. In it, the testator can undertake to bequeath their inheritance, or parts thereof, to their spouse, descendants or third parties. It is also possible to conclude agreements regarding the inheritance with all of the inheritors, whether in relation to the division of the inheritance, the amendment of claims to the statutory entitlement, inheritance renunciation or buyout contracts, vote binding, rights of first refusal in favour of descendants, etc.
A lot of options are available when it comes to marriage contracts and inheritance agreements, but they all require a consensus among all contracting parties. The relationship between pension entitlements and inheritance law also needs to be taken into consideration. In the event of death, occupational pension benefits do not form part of the insured person’s inheritance and are not to be taken into consideration in the processing under marital property law. In the case of Pillar 3a, beneficiaries may be chosen at will and tied life insurance policies also do not form part of the inheritance. However, inheritances in the field of tied pension provision must take the inheritors’ statutory entitlements into consideration.
Potential measures in the event that the spouse is the successor
Under marital property law, the spouse is entitled to the total amount of the surpluses
Descendants are allotted the statutory entitlement
Beneficial use of the inheritance accruing to the descendants
Potential measures in the event that a descendant is the successor
Company is declared individual property
Spouse’s entitlement under inheritance law is reduced to less than the statutory entitlement
The available share is allotted to the successor, while the other descendants are allotted the statutory entitlement
Potential measures in the event that the spouse is the successor
Under marital property law, the spouse is entitled to the total amount of the surpluses
Descendants are allotted the statutory entitlement
Beneficial use of the inheritance accruing to the descendants
Potential measures in the event that a descendant is the successor
Company is declared individual property
Spouse’s entitlement under inheritance law is reduced to less than the statutory entitlement
The available share is allotted to the successor, while the other descendants are allotted the statutory entitlement
Allotting the statutory entitlement means
… bequeathing certain inheritors the minimum share of the inheritance. The statutory entitlement is a proportion of the statutory inheritance. If a spouse and descendants inherit, the statutory entitlement amounts to half of the statutory inheritance for the spouse and three-quarters of the statutory inheritance for descendants.
Individual property
Individual property includes personal items as well as assets brought into the marriage or acquired through inheritance/endowment. Upon the dissolution of the marital property regime, individual property remains the sole property of the owner. Income from individual property falls under acquired property unless otherwise agreed.
Acquired property
Includes employment income, pensions and other insurance benefits, and income from a spouse’s individual property.
Surplus
The total value of acquired property. Each spouse is entitled to half of the other spouse’s surplus. The smaller surplus is deducted from the larger and the difference is split.
The benefit of community of property
There are situations in which community of property allows for a greater benefit to the surviving spouse than participation in acquired property. This depends on whether the common property of the predeceased spouse consists primarily of.