60th UIA Congress, Budapest Session of the International Estate Planning Group Sunday, October 30,2016 “Typical Client Situations” Andreas Otto Kühne Lawyer / specialised in inheritance law BKL Fischer Kühne Lang Rechtsanwälte Steuerberater Partnerschaft mbB Contact Bonn Contact Munich Rheinwerkallee 6 Pettenkoferstraße 37 53227 Bonn 80336 München Tel.: +49 228 945 945-0 Tel.: +49 89 2441 688-0 Fax: +49 228 945 945-55 Fax: +49 89 2441 688-88 info@bkl-law.de / www.bkl-law.de info@bkl-law.de / www.bkl-law.de

Last will of a divorced person having children with his ex-spouse The testator is free to appoint any person as his heir Interest of the testator: Joint children should inherit without the ex-spouse profiting from the inheritance Divorced spouses do not have a succession claim nor a compulsory portion claim Important: In case of a divorce, the former spouses should revoke their joint will

Last will of a divorced person having children with his ex-spouse Option 1: The testator can impose restrictions on his children by appointing them as prior heirs (Vorerben) and someone other than the ex-spouse as subsequent heir (Nacherbe). In that case, the ex-spouse will not profit from the inheritance at all In addition, the last will should stipulate that in case of the ex-spouse‘s death the appointment of the children as proir heirs will lapse; instead they have all rights of an unrestricted heir (Vollerbe)

Last will of a divorced person having children with his ex-spouse Option 2: Testamentary contract with the children, in which they appoint their descendants/siblings as their heirs. Downside: The contract remains binding on the children after the testator‘s death. Note: If the children die childless, as a parent the divorced spouse still has the right to a compulsory portion, which cannot be excluded.

Last will of parents having one „problem child“ Interest of a testator being a parent of a child that is expected to live of social security: To avoid recourse of the social welfare authorities against the child a child having psychological / drug problems: To prevent the child from spending the inheritance e.g. on drugs

Last will of parents having one „problem child“ Solution: To appoint the child as prior heir (= not allowed to freely dispose of the inheritance) and the appointment of a permanent executor (Dauertestamentsvollstrecker) instructed to only pay out those emoluments to the child that the social welfare authorities cannot access instructed to only pay out a certain amount periodically

Last will and marital contract of an entrepreneur Interests: Long-term influence on the company Wealth preservation Company succession planning Profit from inheritance tax benefits (if any) Succession according to asset class (private assets to the family / business assets to the company) Lifetime measures: Build up private assets separate from business assets Waivers of compulsory portions by non-successors Adjust the Articles of Association General power of attorney for the successor

Last will and marital contract of an entrepreneur Option 1: Successor is appointed as sole heir; (other) family members are made beneficiaries of bequests regarding private assets. Option 2: Successor receives the company / a certain percentage of stakes as a bequest. Example: Spouse and descendants become joint heirs; they receive instructions for the apportioning of the estate, the successor being the beneficiary of the company. Example: Establishment of a foundation mortis causa.

Last will and marital contract of an entrepreneur Specific interests in a marital contract: Avoid splitting up the family business in case of a divorce Solutions: Exclude business assets from community of accrued gain in case of divorce Matrimonial property scheme of separation of property (instead of community of accrued gain) and excluding pension adjustment Waiver of compulsory portion

Last will of a patchwork family with children derived from different relationships Interests: Avoid claims of stepchildren against the spouse Support the testator’s own children Exclude “external” parent from succession

Last will of a patchwork family with children derived from different relationships Option 1: Appoint biological children and stepchildren as heirs (with executor) and make the spouse beneficiary of a bequest Option 2: Appoint spouse as exempt prior heir (befreiter Vorerbe) and appoint children as subsequent heirs as well as beneficiaries of additional bequests Note: Stepchildren should be excluded as subsequent heirs if claiming a compulsory portion in case of decease of their biological parent

Typical lifetime and „mortis causa“ provisions for very wealthy individuals incorporation of a company in the hands of the family to manage funds and real estate Allows the UHNWI to give his successors progressive access to the family’s wealth; parents can keep strong influence by privileged voting rights Guarantees proper wealth administration and cohesion In some cases allows the heir to profit from inheritance tax benefits The company as such can be appointed as heir

Typical lifetime and „mortis causa“ provisions for very wealthy individuals Transfer assets to a family foundation: Family foundations are not privileged with regard to the inheritance / gift tax. The revenues of the foundation being distributed to the beneficiaries are subject to a flat rate withholding tax instead of an income tax Note: A family foundation is subject to a substitutional inheritance and gift tax every 30 years.

Typical provisions to avoid spoiling children Appointment of an executor of the last will Appointed by the testator or by a third person / a probate court Strictly personal function Transacting execution (aiming on the partition of the estate)/ permanent execution (Dauertestamentsvollstreckung)) Note: A permanent administrative execution is most likely to match the testator’s interests; the execution may end on a fixed date (e.g. until the age of 30 of the heir) or can last until the decease of the (spoiled) heir

Typical provisions to avoid spoiling children Appointment of an executor of the last will Obligation to provide optimal asset management Wage is payed from the estate Recommendation: Appoint a substitutional executor Note: The child, underlying the execution, is entitled to waive the succession and to demand its compulsory portion

Last will of registered partnerships Registered partnerships = same sex relationships In the field of inheritance law, registered partnerships are treated in the same way as marriages Therefore, the explanations concerning spouses are applicable to registered partnerships as well, e.g. inheritance rights dependant on the matrimonial property scheme right to a compulsory portion same tax benefits as spouses

Thank you for your kind attention!