Foundations offer a number of advantages that support your long-term asset structuring, succession planning and tax optimization. Any form of foundation – that German family foundation (“DF Foundation”) Liechtenstein family foundation (“LF Foundation”) and the German one non-profit foundation (“DG Foundation”) – brings specific added value.
Applies to: LF Foundation
Applies restricted to: DF Foundation
Not relevant for: DG Foundation
The DF Foundation can protect your assets from various civil law risks, such as liability and compulsory portion claims.
With targeted design, the LF Foundation also offers protection against unexpected political risks and risks of changes in tax policy in Germany, especially for liquid assets (e.g. stocks or bonds). Due to Liechtenstein's non-existent national debt and significantly lower international obligations, the tax risk is attractively low.
Example: Assume that Germany introduces a wealth tax or a one-off special levy for high wealth. Liquid assets that were contributed to a LF foundation would not be affected by this if the structure was targeted. In this way, the LF Foundation not only offers legal protection, but also effective shielding against potentially disadvantageous tax developments.
Applies to: LF Foundation, DF Foundation, DG Foundation
A foundation, whether in Germany or Liechtenstein, relieves the founder and his descendants of the often complex and time-consuming management of assets. This responsibility is transferred to professional foundation managers and asset managers who have the necessary specialist knowledge and experience to optimally manage large assets. This allows you and your family to focus on what's important: your life and your personal goals. This applies to both non-profit and private-benefit foundations.
Gerd Kommer Stiftungen takes care of all aspects of asset management: from the initial implementation of the chosen investment strategy to the efficient implementation of rebalancing to the ongoing optimization of the portfolio. This means that beneficiaries enjoy a high level of comfort and security without having to be involved in day-to-day affairs.
Example: You die and your children inherit your assets, which are distributed across various asset managers, real estate and GmbH shares. The personal interests of one's own descendants often do not correspond to one's own, so that sufficient knowledge and experience cannot always be assumed in the future management of the family assets. By setting up a family foundation, donors can relieve the administrative burden on their family and give family members the freedom to develop individually. At the same time, adverse decisions that could endanger assets can be addressed preventively. Last but not least, a family foundation can help maintain family peace.
Applies to: LF Foundation
Applies restricted to: DF Foundation, DG Foundation
DF Foundations offer opportunities for tax optimization at the level of family assets, in particular through lower ongoing taxation of capital gains within the DF Foundation compared to private assets, as well as the trade tax exemption of dividend income for purely asset-managing DF Foundations. However, DF foundations are subject to the inheritance tax, which assumes a fictitious inheritance every 30 years and can therefore cause a significant tax burden.
LF Foundations offer even more comprehensive tax advantages. An inheritance replacement tax, as known under German tax law, does not exist in Liechtenstein. Due to the modern and business-friendly tax system in Liechtenstein, the taxation of private foundation assets is lower than for a comparable family foundation in Germany. As with the asset protection issue, the same applies here: due to Liechtenstein's non-existent national debt and the significantly lower international obligations, the tax risk is attractively low.
In both cases, the lower taxation in combination with the associated higher compound interest effect leads to greater long-term growth in the family assets held by the foundation.
Example: While price gains and dividend income in private assets are compensated with the final withholding tax (25% plus solidarity contributions and, if applicable, church tax), the taxation in the context of an LF foundation can be reduced to “virtually 0%” in current taxation (apart from the minimum income tax of CHF 1,800).
Applies to: LF Foundation, DF Foundation, DG Foundation
With a foundation you gain considerably more flexibility in succession planning compared to the classic will. While a permanent will execution, which would come closest to setting up a foundation, usually ends after around 30 years, a foundation is fundamentally designed to last forever. This means that you can ensure that your assets are managed and used in your best interests for generations to come.
This applies to both your charitable and family causes. A DG foundation ensures that the part of your assets that you want to use for philanthropic purposes is also used for this purpose in the long term.
A family foundation enables you to precisely adjust your succession, possibly also deviating from the legal succession. You determine who receives a beneficiary benefit from the family foundation, at what time, in what amount and under what conditions. It also helps to minimize the risk that heirs will consume the family assets too quickly or make unwise investment decisions.
Example: From your point of view, one of your children makes problematic life decisions that you do not want to share with their inheritance. With a family foundation you have the opportunity to control beneficiary benefits and thus the inflow of assets to your descendants and, if necessary, to attach conditions to them.
Applies to: LF Foundation, DF Foundation
Not relevant for: DG Foundation
Asset protection in a marital context often represents a difficult balancing act between interpersonal trust and legal protection. With a family foundation, risks from a potential equalization of gains can be addressed in a legally secure manner in that the assets are removed from the founder's assets after certain deadlines and therefore generally do not become the subject of marital disputes. A combination of a prenuptial agreement and a family foundation enables donor couples to regulate financial aspects of their own partnership transparently and fairly in good times without the uncertainty of the viability of a prenuptial agreement alone in an emergency. It is not without reason that divorce is considered one of the greatest risks in asset protection - for both the wealthy and the less wealthy partner.
By acting proactively, expensive legal disputes can be avoided, which ultimately cause considerable harm to both parties. Family foundations offer an elegant solution by creating a crystal-clear separation between personal relationships and the sphere of assets.
Example: You divorce your partner and a war of roses ensues. Since you have developed a viable concept together in the good times consisting of a family foundation and a marriage contract, you can save yourself tedious legal disputes and the problems of division, from which both parties benefit.
Applies to: LF Foundation
Applies restricted to: DF Foundation
Not relevant for: DG Foundation
Unlike, for example, an asset-managing GmbH, DF foundations do not have to disclose their balance sheets in the Federal Gazette. This ensures a certain level of discretion. At the same time, the disclosure obligations have been gradually expanded in recent years, particularly with regard to the beneficial owners, including the beneficiaries of the DF Foundations. They must now be mentioned by name and state their place of residence. Exceptions only exist for underage beneficiaries, as they are considered to be particularly worthy of protection.
This is where LF foundations have an advantage because they offer more comprehensive protection from prying eyes. Thanks to the legal framework in Liechtenstein, which is fully compliant with EU law, privacy is fully protected and only parties with a legitimate interest are granted access to the information. Information about the LF Foundation, its assets and its beneficiaries is safe and secure.
Example: To minimize covetousness among family and friends, set up an LF foundation with a generic name instead of using your family name. Due to this choice and the strict discretion of the Liechtenstein foundation legislation, it is difficult or impossible to determine the beneficial owners of unauthorized persons - it is difficult to draw any conclusions about your own family.
Applies to: LF Foundation
Applies restricted to: DF Foundation
Not relevant for: DG Foundation
DF foundations offer geomobility to some extent. While the assets in the foundation itself remain protected from the risks mentioned above, payouts to beneficiaries abroad are generally subject to German withholding tax - in addition to the potential taxation in the country of residence.
In comparison, a LF foundation offers the opportunity to cross borders without tax restrictions. You can freely choose your place of residence anywhere in the world without incurring any tax consequences on the Liechtenstein side. The assets within the foundation remain protected and are not affected by the tax regulations of your new country of residence. You can always influence the taxation of beneficiary benefits in your new country of residence through your choices.
Added to this is the flexibility of Liechtenstein corporate law. This enables the LF Foundation, provided this is regulated in the foundation documentation, to spin off parts or all of its assets into a Liechtenstein institution or a Liechtenstein trust, provided that this is appropriate for the beneficiaries, e.g. B. makes tax sense due to a permanent change of residence abroad.
Example: You set up a LF foundation through which your family members' businesses will be founded in the future. These are therefore the property of the LF Foundation and are not part of your private assets (or any other beneficiary). If you decide at a later date that you want to spend your retirement in another country, a foundation will protect your assets from German exit tax.
A family foundation primarily serves long-term care for family members and the systematic Backup and structuring of Family wealth across generations. It is managed collectively by the foundation and is thus protected from fragmentation.
Through tax advantages The assets within a family foundation usually grow faster than in private assets. Another growth driver is protection against civil law risks (liability risks, profit equalization risks and compulsory portion risks) and, in the case of the Liechtenstein family foundation, against Germany-specific political and tax risks. Risks that could otherwise quickly decimate the family assets.
From a tax perspective, the family foundation offers internationally mobile donors and their relatives an incomparable level of “Geomobility“.
The founder can also make it the task of his foundation to: Family peace to protect and promote in the long term.
A charitable foundation is the right choice if long-term social, social or cultural purposes should be promoted. It offers both non-material and tax advantages.
Transfers of assets to a charitable foundation are generally possible Gift and inheritance tax exempt, and the foundation itself also benefits from extensive tax exemptions during ongoing operations.
At the same time it creates one legally stable frameworkto provide long-term support for non-profit projects in areas such as education, the environment, research or culture.
Donors keep one high scope for design in the definition of purposes and use of funds. Professionally managed foundation assets also ensure predictable distributions and a lasting impact.
The tax advantages of a foundation depend largely on the chosen foundation variant away. Depending on the structure, there are different tax effects:
Liechtenstein Family Foundation (LF Foundation):
The current taxation is lower than for “German private assets” and than for a DF foundation. Assets that were contributed to a LF foundation are never again subject to German inheritance tax and - unless they are assets located in Germany, e.g. B. liquid assets at a Liechtenstein custodian bank – protected from German tax increases.
German Family Foundation (DF Foundation):
Current taxation is usually cheaper than on the private assets of a German taxpayer. However, the so-called inheritance replacement tax is due every 30 years, which regularly significantly reduces the size of foundation assets in particular (tax rates between 7% and 30%, depending on the amount of assets).
German non-profit foundation (DG Foundation):
Transfers are exempt from gift and inheritance tax, and the foundation itself is largely tax-exempt provided that its non-profit status is maintained.
Each foundation variant therefore offers clearly defined tax added value, depending on the purpose of the foundation.
