Concept/Establishment of Charitable Foundations
When choosing the legal form for your charitable commitment, foundations play a role as does the (German) limited liability company (GmbH) which often operates as a foundation vis-à-vis third parties. Together with you we will develop a thematic concept for the activities of the foundation. Classic issues when establishing a foundation are the financial security of the founder and his family. Catchwords such as “reserved annuity” (vorbehaltene Renten) or “reserved usufruct” (vorbehaltener Nießbrauch) are increasingly gaining in importance as is the possibility in an emergency to be able to fall back on the foundation income for one’s livelihood.
Advising Foundations on a Day-to-Day Basis
We manage foundations on a day-to-day basis and we advise and support charitable foundations in selecting projects for promotion and in drafting the contracts with the individual project sponsors at the national and international level.
Charity Law Under Tax Aspects
In terms of complexity, charity tax law can be likened to corporate tax law. In recent years we have been able to contribute to resolving extraordinarily complicated processes in respect of charity tax law in close cooperation with the tax authorities.
In Germany, using foundations as a business succession model has a more than 100-year-long tradition. The use of this instrument, i.e., the foundation, does not necessarily entail the divestment of capital. Rather, the establishment of what is known as double foundation structure allows for a continued participation of the founder’s family in the enterprise, but at the same time to pool the influence under company-law aspects, to confer continuity on the enterprise and to secure the equity base beyond the dividend expectations of a community of heirs.
Ever since the German inheritance tax law was introduced more than 30 years ago,
the establishment of family foundations has shown a downward trend. We have advised and represented a well-known German family foundation in its litigation proceedings before the competent courts, including the Federal Fiscal Court, and developed strategies for reducing generation skipping transfer tax – which often erodes the asset base – in such a way as to preserve the foundation assets for the following generation.
Large family assets– not unlike the family members themselves – are often domiciled in more than one country, i.e., the considerations regarding a foundation are not limited by national boundaries. But even if the tax treatment abroad appears to be very attractive, it is still necessary to closely examine the tax consequences in Germany.