– Why life insurance is only protected for a subsistence level in old age? –
There is absolutely no apparent reason for the legislator to pursue income protection in old age above the level of basic income support as a political goal. The state’s sole aim is to ensure that, as a result of the seizure and realisation of saved assets, social assistance does not end up being equal to or having to step in as a supplement in old age (subsidiarity principle). However, a creditor should be able to access all of the debtor’s assets which do not later serve to provide a necessary old-age pension at the basic security level – on the other hand, the debtor must retain those assets which prevent him from drawing social assistance or basic security. Maintaining the previous standard of living in old age is not a state objective worthy of recognition.
Riester assets that have already been subsidised are not to be realised in the case of legal aid (PKH)
The Cologne Regional Labour Court (order of: 19.02.2013, ref. 5 Ta 368/12) casually states that the so-called Riester pension is not to be used for legal aid purposes. However, the assets accumulated in a Riester contract may well be attachable (Amtsgericht München, judgment of 12.12.2011, file no. 273 C 8790/11). This follows from the clear wording of § 97 EStG, which clearly does not speak of
eligible
but only of
subsidised
contributions. This applies, for example, to overpayments that were ineligible from the outset and to all contributions for which a subsidy has not actually been paid at the time of attachment. To this extent, the insolvency administrator and creditors can access these assets. Ultimately, however, this will also apply to legal aid – the LAG Cologne did not specifically decide on such a case, but only refers to the same statutory provisions as the AG Munich for its reasoning.
Other life insurance policies are to be used regularly in legal aid cases
If other life insurance policies are not specially protected, they are to be realised for the costs of the proceedings – insofar as their realisable value through termination, sale or mortgaging does not exceed the protected assets pursuant to § 90 (1). 2 No. 9 SGB XII in conjunction with § 1 para. 1 sentence 1 no. 1 lit. b of the Ordinance to Section 90 para. 2 No. 9 SGB XII. Insolvency administrators and creditors also have access to other life insurance policies, unless it is the case of a self-employed person who has structured his private life insurance policy in accordance with § 851c of the German Code of Civil Procedure (ZPO) up to the amount for a seizure-protected small pension. In the case of people who are even further away from retirement, it must be taken into account that they can still build up an adequate old-age pension – at the basic security level.
Only exceptionally no realisation of other life insurance policies
The use of other life insurance in PKH can mean a so-called hardship if it is needed for basic provision in old age or for maintenance obligations. In individual cases, this will require not only an application to the court but also an actuarial appraisal. “Hardship” may also prevent access to these assets in the event of insolvency as well as attachment by creditors. However, in the case of PKH, a contractual arrangement is required for the life insurance to be recognised for old-age provision. The foreseeable need for social benefits at a later date therefore prevents on the one hand the realisation for the purpose of litigation and can also make access by the insolvency administrator and creditors impossible on application. This is different with today’s entitlement to social welfare or Hartz IV/ALG II – here the state can, for understandable reasons, first demand the realisation of assets in order not to have to make payments today, even if this entails the risk of having to make payments (only) later in old age.
No debt relief through social welfare or basic security pensions
Those assets which are foreseeably destined and necessary not to become a burden on the state will not, as a rule, have to be liquidated, because this would mean a “hardship”. It can be much more favourable to invest or secure the old-age pension better protected against execution, for example by (also voluntary) payment into the German Pension Insurance Federation (DRV). For example, foreign life insurance policies are suitable for this purpose, but not those offered by a domestic or foreign insurance broker. A side effect is an up to approx.
20 % higher pension for men, because no unfavourable unisex tariffs are prescribed without an intermediary in the case of direct conclusion outside the EEA – as in Switzerland. In many cases, real estate in Germany and abroad can also be fully or partially protected against execution – however, this is regularly only possible in good times, so that later challenges in Germany and abroad can still be avoided in the best possible way.
Does moonlighting as an undercover cop help?
The Bundestag printed matter (No. 17/12470 of 26.02.2013) can be taken from the fact that a secondary income can certainly be disregarded when receiving basic security or social benefits only if the duty of confidentiality towards other state agencies as well as any creditor is ranked higher than any legal duty of disclosure. However, a court is not bound by such pronouncements, especially since income can be disclosed without indicating the source.
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About the author
Dr. Johannes FialaPhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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