JUVE Law Firm of the year

Company Succession and Trusts

Internationalization forging ahead

The ongoing internationalization of ?tax law is not only affecting companies: high-net-worth individuals (HNWIs) and their advisors are having to keep track of the increasingly complex rules too. One reason for this is the changing lifestyle of many HNWIs: company shareholdings or real estate in various countries, children studying or even working overseas, where they may meet their future spouses – the tendency to have private connections all around the world is increasing.

And HNWIs from abroad are having to grapple with German law more and more: in its battle to combat tax evasion, the state is closing loopholes in the law, taking a firmer stand on gray areas and attempting to assert its position very aggressively. International HNWIs’ confrontation with German tax law is being fueled by the UK’s exit from the EU: many of the privileges that German law offers EU citizens may not apply in the future. It is not only about financial assets, securities, company shares and real estate: side issues like EU tax breaks for cultural assets are becoming the focus of clients and their advisors.

Trusts still popular

Meanwhile, to secure their wealth, HNWIs are once again turning to the popular trust model. In 2016, the Association of German Foundations counted 21,806 trusts across Germany. Although the increase, at 2.4 percent, is around the same as in previous years, the figure is nevertheless substantial: with the current low interest rates, only two thirds of the trusts expect yields above the annual rate of inflation, according to the Association of German Foundations.

Law firms too are profiting from the steady appeal of trusts. Beiten Burkhardt is especially well positioned, even creating a niche with its all-round advice on trusts. At S&P Söffing and Streck Mack Schwedhelm, the demand for trust advice received a further boost.

Tax compliance management system developed

As regards Brexit, on the other hand, it is mainly the large international firms like DLA Piper and Freshfields Bruckhaus Deringer providing advice. But not exclusively: Flick Gocke Schaumburg is also profiting from Brexit, largely thanks to its membership in the international Taxand alliance. The firm is going entirely its own way: with a digital subsidiary launched in fall 2017, FGS developed its own tax compliance management system for HNWIs. But smaller firms are also creating business models that could change the advisory market in the years to come.

When it comes to matters of company succession or the transfer of family wealth, they are focusing squarely on mediation, as family-managed companies in particular are seeking extrajudicial solutions and mediation strategies rather than drawn-out, high-publicity legal disputes. Among the firms devoting much attention to this field is Rittershaus, which developed its own “mediation-like company succession advice”.

 

Substantial private wealth often arises from succession planning in family businesses (incl. corporate sales) for owners who are high-net-worth individuals (HNWIs) or ultra-high-net-worth individuals (UHNWIs, with assets over €100m). These assets must be structured, reinvested, assured and passed on – often using trust solutions. Company succession teams at more and more firms are advising high-net-worth private clients (such as managers and athletes) concerning the professional environment; this is only mentioned in this chapter as an additional competence. ?Tax law (incl. tax litigation, operational and fiscal advice) remains essential, but so do ?corporate and transactions ( ?M&A, ?private equity), inheritance, family, art and trust law, as well as the execution of wills.


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