If donations are for the purpose of community protection, but are not gifts….
The Federal Court of Justice (BGH, ruling of 6 May 2014, file no. X ZR 135/11) decided that donations to non-marital partners with the purpose of securing the death of the donor are not gifts. If the cohabitation fails, such donations must be returned in a different way than gifts.
Gifts or donations to spouses and non-marital communities
If a transfer of assets is made for completely free disposal, it is a genuine gift. Not only between spouses, however, the transfer of assets will often be linked to the expectation that the community will endure and that both partners will continue to participate in the fruits of the assets transferred. Then the assets are not “freely disposable” or intended for consumption, but serve the “realization and arrangement, preservation or safeguarding” of the community, thus as a provision for subsistence (BGH, judgement of 09.07.2008, Az. XII ZR 179/05). If the partnership fails, the business basis for the hedging purpose – in this case in the event of the death of the donor – no longer applies, so that the grant must be returned.
Regardless of whether it concerns spouses or non-marital partners, in principle a gift tax is incurred for gifts in the same way as (again) for restitution. This can only be avoided by means of appropriate tax clauses to be laid down in advance by contract in writing, which even notaries rarely think about. This would not apply to spouses and registered civil partnerships, for example, the transfer of a family home used by the spouse as an unnamed benefit if it is the centre of their life and is located somewhere in the EU. In the event of recovery, however, the design is required. As a rule, notaries are not obliged to provide tax advice.
More difficult recovery of donations
In the case of gifts, the grounds for recovery are in principle serious misconduct against the donor or his relatives, as well as the case of impoverishment of the donor – and this only for a limited period of 10 years, §§ 528 ff. BGB. If the donor would be in need, the social security office could transfer the claim to itself and demand reimbursement of the state benefits from the donee to secure the minimum subsistence level.
Multifaceted funding purpose can be designed
A benefit, not for consumption or free disposal, can be considered in addition to or instead of the death of the donor, for example, as security in the event of insolvency or the need for care.
Life insurance policies could then also be built in. The life insurance or an annuity insurance, even with a current annuity – whereby here it would not be a question of protection in the event of death, but rather of the ongoing shaping of the cohabitation through this allowance – could be allocated as a whole, with an irrevocable subscription right in the event of death of the recipient. Or an irrevocable subscription right is set up for the recipient, but this is only directed at the existing life partner – i.e. in the event of a separation without the necessary revocation, this right is not applicable.
For some forms of gift and subscription rights, some insurers have appropriate forms available which are only sufficient in the simplest cases. Grants, on the other hand, regularly require an individual regulation as a tailor-made suit.
Protection through grants even in the event of insolvency?
The allowance is intended to finance living expenses if the donor dies or becomes insolvent and the partnership has existed until then. This means that there is no claim for recovery in the event of insolvency.
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on the other hand, the claim for repayment exists in the event of termination of the cohabitation, death of the recipient or insolvency of the recipient because the purpose is then no longer achieved.
The integration of a life insurance or even pension insurance, even via current pensions, would then have to be designed. The usual legally standardised methods: Revocable or irrevocable preferential treatment, donation, may not be the most appropriate. The allocation for a specific purpose with the possibility of recovery is not yet a standard – is therefore in need of explanation when this is brought to the attention of insurers. This provides an alternative to other methods of protecting a life insurance policy against seizure, which restrict availability much more.
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insolvency-proof protection of the life partner ?
It is hardly generally known how to set up an irrevocable subscription right not to a named person, but, for example, to the respective life partner. If the partnership changes, there is automatically no new subscription right, but only the beneficiary changes, for example as a payee. If there is no new partnership, the insurance would be available again to that extent.
In the case of an irrevocable subscription right – e.g. also to a pension – it is only indirectly possible to make another cancellation effective, e.g. that the subscription right is cancelled even if the beneficiary suffers a financial collapse. The insurer can only take note of the subscription rights, however they are structured, by receiving the corresponding declaration of intent from the policyholder, and must implement them in this way. According to case law, deterioration of assets, default, other breaches of contract on the part of the recipient of the grant can only entitle the donor to claim back the grant. Without a suitable design, however, the donor would have to comply with the insolvency administrator and would possibly only get back a quota.
Regulation for death or remarriage?
The case occurs again and again that the first wife had originally been favoured in the event of death, but after remarriage the last wife as a widow wants to claim the insurance benefit. The first wife named by name will win the race in case of doubt.
However, a person with irrevocable entitlement to benefits may also die before the death of the policyholder results in insurance benefits. If there is no regulation for this case, the insurance benefit will simply be included in the estate, which will moreover trigger unnecessary costs in the subsequent inheritance certificate procedure. Usual forms of the insurers do not regularly provide for a separate regulation in the event of the death of the beneficiary.
Tax savings model for non-marital partnerships or high severance payments
Finally, a donation with tax saving effects through a foundation is often a good option. If the tax allowances for gifts are low or exhausted, the effective tax can be reduced to a fraction or avoided completely. In the case of a charitable foundation with a life annuity reservation, an immediate tax advantage can even be achieved and at the same time an immediate or later life annuity can be agreed – the annuity to be calculated actuarially can also be paid for both, if necessary continuing to the survivor. More and more secure foundations with expert advice are using such offers as a form of fund raising to attract additional donors who have not previously thought about a foundation endowment. Such models are hardly known to bank advisors or insurance brokers – because they do not earn anything from them.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
published in “Der Komet, trade journal for showmen and market traders” 20.05.2017 (issue 5571, page 4)
and
www.network-karriere.com (published in issue 06/2017, page 30, under the heading: Donations: Often well-intentioned, but fraught with risks)
and
published in Haus & Grund, issue 06/2017, page 316 – 317 (under the heading:Grants can often be reclaimed)
and
published in “Innovation and Technology” (issue 06/2017), pages 42-43 under the heading Benefits to spouses and in the case of non-marital cohabitation are often recoverable) http://www.innovationundtechnik.de
and
www.experten.de (published on 06.06.2017 under the heading: Contributions to spouses and cohabitation are often recoverable)
and
www.handwerke.de (published in Computern im Handwerk, issue April/May 2017, page 6-7 under the heading: If donations serve as security, but are not gifts…)
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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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