In view of an upcoming revision of inheritance tax, the law firm Bottermann::Khorrami recommends that persons with business assets, real estate or larger assets do not postpone planned transfers. The background to this is that the Federal Constitutional Court has announced that it will clarify the question of whether the current structure of inheritance tax is compatible with the principle of equality of the Basic Law before the end of the year.
“Anyone who wants to bequeath or give away business assets should seek comprehensive advice now and carefully examine the existing options,” says Salma Louden, lawyer and notary at Bottermann::Khorrami. “This applies in particular to entrepreneurs who want to transfer their life’s work within the framework of an anticipated succession.”
Constitutional Court examines privilege of business assets
The Federal Constitutional Court is examining whether it is constitutionally permissible for private individuals to have to pay inheritance tax on a regular basis, while business assets are de facto largely exempt from taxation. If the court declares parts of the current regulation unconstitutional, the Bundestag will have to carry out a reform.
In January, the SPD had already presented a reform proposal that provides for a significantly higher tax burden on heirs of large business assets. The coalition partner CDU/CSU has so far rejected these plans. However, a ruling from Karlsruhe could create political pressure to act.
“Regardless of the specific outcome of the proceedings, many inheritance law and tax experts assume that the tax benefits in their current form will hardly last in the long term,” says Louden. “The regulations for the wealthy, entrepreneurs and possibly also property owners will probably not remain as favorable as they are at present.”
Many business handovers are pending
In addition, a large number of business handovers are due in the coming years for reasons of age. Especially in medium-sized companies, many owners are faced with the decision to transfer their company within the family or to third parties.
“The combination of demographic change and possible tax tightening makes the situation particularly urgent,” explains Louden. “Anyone who can transfer their company at a preferential rate should not let time pass unnecessarily.”
Even in the case of the transfer of the family home to the spouse or in the case of gifts by way of anticipated succession, it could make sense for some clients to still use the existing legal situation to forestall a possibly higher taxation, according to Louden.
Early planning creates legal certainty
The law firm Bottermann::Khorrami recommends planning asset succession in a structured manner and with sufficient lead time. In addition to tax aspects, family law, corporate law and economic aspects must always be taken into account.
“A forward-looking design not only creates tax advantages, but also legal certainty for all parties involved,” says Louden. “Especially in legally uncertain times, sound advice is more important than ever.”
