Trust funds in Germany

26 posts in this topic

Posted

Does anybody know if there are something similar to trusts in Germany. In the states my family has one so that the children can inherit what we have without paying high inheritance taxes. I don't know what the laws are in Germany regarding this. We have three small children and would like to setup something similar if it exists here due to tax implications. Thanks in advance.

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Posted

You trust me I trust you.

 

Naw seriously talk to starhollow.

 

http://www.toytowngermany.com/forum/index.php?showuser=8763

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Posted

You need legal advice for something like that. Maybe Starshollow or someone else can refer you to one.

 

BTW, once you have lived here for 10 years, your family will fall under German inheritance law.

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Posted

There are no trusts in Germany, if you are resident here you will fall under German laws, inheritance tax is cheaper (for vast sums) in the 1st degree, and it's quite an intricate problem that actually does require specialized help (we are seeking it ourselves this year).

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Posted

The problem is not that Americans resident here fall under German laws. Certainly that is the case for everyone. The problem is that the IRS doesn't give a damn and taxes US citizens on world wide income no matter where they are. The tax treaty doesn't cover everything either (AMT is a good example). So I think this applies for inheritances as well. What I am wondering is whether a US formed trust can be used as the beneficiary of a German life insurance policy.

 

Anyone know anything about it or have changed their German life insurance beneficiary to a US trust?

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Posted

I`ve never seen Stars stumped - wow!

I must say, it is also noticeable that none of the other Financial Advisors have come forward on this one...

I`d be interested in the rules for trust funds or their equivalent in Germany anyway, so maybe you can post everything you find that might be useful to others too Stars?

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Posted

I'd also be interested - I just realized that this is going to affect my family as well. Most likely quite a few years down the road, but it would still be nice to be prepared now.

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Posted

just as a I thought when reading the OPs intro... there is a market here for advice and therefore worth for me to invest time and effort to understand this better :P

General findings which have nothing to do with individual solutions will be posted later when found out.

 

Cheerio

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Posted

Found this article which seems to say on first read that it is possible and that one should form an irrevocable trust. My understanding of such a trust is that as the name implies, once you put an asset into it (like an insurance policy?) then you don't own it any longer and cannot resume ownership of it ever again. Apparently, you can also put other investments in it as well. I am more concerned about the beneficiary of insurance policies though.
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Posted

Starshollow, add me to the list of interested persons. So far, I've only checked with the Stadtsparkasse München, who had never heard of a trust and said it couldn't be done. Someone else said that a Notar is a safer bet that a bank, as they are somehow insured through the German government. Obviously, I just started gathering info on this a few days ago, so I have no idea what the best solution is. I'll give your business a call in the next few days to possibly set up an appointment. Thanks for your well-researched answers!

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Posted

I dont know much about US trust funds, but I did a little reading. Apparently their is no such thing in continental europe. Depending on the specifics, the german equivalents could be:

 

- Einsetzung eines Treuhänders

- Dauertestamentsvollstreckung

- Vor- und Nacherbschaft

- Familienstiftung

 

I always assumed that a family trust fund is the same as a "Familienstiftung". Seems I am not completely wrong. Stiftungen are regulated in §§80 ff BGB. Any legal form is possible (for example a GmbH).

 

The moment you put assets into a Stiftung, you have to pay inheritance tax. At first glance, I dont really see any tax advantages.

 

Familienstiftungen exist in germany (Bundesverband Deutscher Stiftungen estimates about 500 to 700), but as far as I know they are mostly used by the very rich and larger family businesses. They can afford to set up some special legal constructs, like Doppelstiftungen (a combination of family trust fund and charity trust fund), that dont make much sense for your average Joe Sixpack.

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Posted

I'm wondering if you had a chance to look into the subject further Starshallow? I have a CRUT (Charitable Remainder Uni-Trust) set up in the States for my children and would like to set up something similar here (if one exists) or if it's possible to simply place my assets in my existing trust? Can a U.S. trust own real estate in Germany fully or partial?

 

 

The moment you put assets into a Stiftung, you have to pay inheritance tax. At first glance, I dont really see any tax advantages.

 

If the above statement is accurate, it would apply to a U.S. trust too correct?

 

Of course if it's possible to set up a CRUT I would be happy to hire you. I'd just like to know if it's possible and makes sense to do so before hand.

I've asked my husbands financial adviser the same questions and he looked at me as if I had a third eye. His expertise is suppose to be estate planning...sheeesh!

 

Thanks in advance for any information you can share with us.

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Posted

Can I suggest you search through the website of the society of trust and estate practitioners, which has specialist members listed in Germany?

 

Your issues with setting up US trusts as a long term German (civil law jurisdiction) resident are likely to include:

 

- fees fees fees

 

- while if you die owning property your relatives may be able to set off US and German estate taxes to avoid double taxation (check the double tax treaty, some do some don't) if you have placed it into a trust/stiftung/anstalt/foundation/family company/whatever you might well have a charge from one country on the way in and one on the way out (or on death) and not be able to set one tax off against the other.

 

- they may not achieve what you want for US tax purposes, or only at the cost of meaning you can't use the assets yourself.

 

- they may make tax worse in Germany and even if they don't it'll be painful explaining the structure to the Steueramt.

 

- if the trust invests in German situs assets with you as a German resident beneficiary and settlor it may be legally ineffective under German law (which may again affect your US tax treatment). There is howeve a Hague Convention on the Recognition of Trusts which may come to your aid.

 

- the 'living trust' beloved of US estate planners which you can dip into and out of without reference to other trustees or beneficiaries (a) doesn't do much for US taxes (B) is not recognised as a trust anywhere outside the US so will not be much use for holding non-US property and © I doubt it will help your German taxes as it is a 'nothing' in the eyes of the law most places.

 

- practical stuff, people change, you may need the spare cash you're thinking of putting in trust, if you are healthy and youngish consider term life insurance with your children as beneficiaries - you may get to keep your stuff and pay less in premiums for a policy (paying out enough to cover approx death duties) than you would do in fees for a trust/whatever to be set up

 

Disclaimer: I used to work in the field, and did the STEP exams in the UK, but have not dealt with trust assets in Germany. The above is mostly based on unravelling US structures when people settled in the UK.

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Posted

 

Can I suggest you search through the website of the society of trust and estate practitioners, which has specialist members listed in Germany?

Thanks for your input...I found the link to The Society of Trust and Estate Practitioners (STEP), it is a great resource but I would prefer to support a well trusted and active member of TT, if I can.

 

I agree with some of your points in regards to holding my assets in a regular "trust" or even "living trust" but it's my understanding that a "CRUT" (and the way I have it set up) is neither and therefor doesn't exactly fall under the same advice. After further research it looks like the "Doppelstiftungen" is close to what a "CRUT" is but I'm not a professional and don't know the intricate differences.

 

 

-practical stuff, people change, you may need the spare cash you're thinking of putting in trust, if you are healthy and youngish consider term life insurance with your children as beneficiaries - you may get to keep your stuff and pay less in premiums for a policy (paying out enough to cover approx death duties) than you would do in fees for a trust/whatever to be set up

IMHO life insurance is a must have if you have children. But, I don't feel that fees should stop someone from protecting ones existing assets (like real estate for example).

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Posted

still working on it, Florida Flower. If you have something of a dead line, do please let me know... bit of a back-log at the office right now

Cheerio

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Posted

No dead line at the moment, just inquiring. I'd like to have something in place by the end of May before I go back to the States. Take your time :)

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Posted

Anymore news on the trust front?

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Posted

I am planning to take the upcoming summer holidays in August for some out-of-the-ordinary research topics like this... will report results then later (I hope)

 

Cheerio♦

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Posted

I'm still thinking about this but getting no where on it. I've asked my insurance guy to get me a knowledgable contact at the insurance company's head office to see if they even ever have had an ILIT as a beneficiary.

 

Update: Insurance guy says no problem, write a letter to the company saying the trust name and address is the beneficiary of the policy.

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