Small or large matrimonial property regime for asset protection *- concerning the ex-manager of a DAX company, a public prosecutor suspects tax evasion as a result of the use of a matrimonial property regime. The legal counsel of the person concerned will consider filing a criminal complaint for alleged violation of official and service secrets. Neither of these considerations affects the core of the problem.
For if the ex-manager were responsible for losses of millions or billions, there would be a threat of recourse and subsequent insolvency, as well as an accusation of bankruptcy, §§ 283 ff. StGB. This could turn intended asset protection into the opposite.
Since 05.04.2017 it has been possible to contest intentions in Switzerland for longer than in Switzerland
Whoever deliberately set aside parts of his assets – as well as the recipient of the pecuniary advantage – was threatened with the so-called Paulian challenge by insolvency administrators and creditors. In Switzerland this is possible with a period of five years (Art. 288 SchKG); in Germany it was 10 years – until the period was reduced to four years from 0504.2017 (§ 133 InsO).
If your own tax advisor, as a quasi-managing trustee, takes over the transfer of assets abroad – for example, Switzerland – he will usually not be able to produce either an official permit or liability cover for these activities.
Matrimonial property regime swing as an indication of criminal bankruptcy?
With the small matrimonial property regime, the spouses change from the statutory matrimonial property regime (community of gain) to the separation of property; the gain is compensated – it remains tax-free as a statutory legal claim (BFH, BStBl. II 2005, 843). Of course, it can be a sham transaction or a mixed, contestable gift if any amount is paid as compensation, without a court fixed calculation, e.g. by means of a valuation report and documentation.
Conversely, earlier gifts could also be made legally tax-free retroactively by including them in the compensation for the gain, § 29 I No.3 ErbStG.
An evasion of gift tax in addition to four years of contestable gift would therefore be avoided. It is often overlooked that a fiscal limitation period of up to seven years only begins with the death of the donor – but in the event of death the tax authorities can also take up all asset transfers of the last up to 30 years, § 170 V No.2 AO.
Double taxation – first at the time of the gift and later in the event of death – can be avoided by keeping the tax documents relating to the gift tax. In the case of evasion, the period of determination is 10 years, § 169 II 2 AO.
In the large matrimonial property regime, the spouses return to the statutory matrimonial property regime after a more or less short period of time – for example, in order to be able to compensate for further gains later. With this “extremely rare arrangement” (BGH, ruling of 01.07.2010, file no. IX ZR 58/09) of a contract between relatives against payment, the intention to discriminate against creditors is legally presumed, § 3 II AnfG, § 133 II InsO in conjunction with § section 138 I InsO. It is more than bad luck if the relevant two-year German deadline for contesting the contract had been replaced in this case by one more than twice as long abroad.
There is thus a good prospect of two insolvency proceedings – one in Germany and one auxiliary bankruptcy abroad. If one considers international insolvency and bankruptcy law (IPR), intergovernmental agreements – including those dating back to the 19th century – especially between cantons in Switzerland and “federal states” in Germany at that time, can frustrate almost all efforts at asset protection from the outset. Even though it may often take years – in the end, the Swiss bank transfers the assets to the German insolvency administrator; for example, for a subsequent distribution to the creditors. Here too, planning replaces chance with (legal) error.
Matrimonial property law – which matrimonial property law ?
Spouses often rub their eyes afterwards if they had married outside Germany – for example in Singapore. If both are Muslims, Islamic marriage law would have to be applied through competent Sharia courts – also through a German court – a matrimonial property regime would thus be ruled out. Alternatively, Hindu customary law or traditional Chinese law could be applicable. Or the unwritten common law would be applicable, with the question of permanent residence.
The legal effect may in fact be equivalent to a separation of property, or on the contrary, a kind of community of property in the case of marriage in places where Spanish is the national language. Then, in the case of a community of achievements, which by the way cannot be changed by notary after the marriage, every second atom belongs to the spouse in the picture anyway, speaking of additional acquisition. This is then also not a case for a Güterstand swing. If the probate court and tax authorities do not find out anything about second citizenship, marriage abroad or residences abroad, or hardly ask at all, they miss out on income – this field is more often dominated by bankers than by evasion consultants.
Contestable asset rescue by means of a matrimonial property regime swing?
Insofar as the intention to discriminate against current creditors was known to the other party – i.e. the spouse – the termination of the profit pool and its fulfilment can be contested, section 3 I AnfG, section 133 I InsO. Recently, a tax advisor said that now that the notarial contract has been concluded, one can calmly consider when which assets will be transferred – a mistake, because what matters is the legally sufficiently secured disposal, i.e. at best the change of ownership.
Only by future creditors the marriage contract is not contestable, because there is no claim to retention of the matrimonial property regime (BGH, judgement of 20.10.1971, Az. VIII ZR 212/69).
Modified profit pool as an obstacle to design
More often, one hears the advice from the “wealth management” of “private banking” on “asset protection” to rule out the possibility of compensation for gains during one’s lifetime. In this case, however, the gain can only occur after the death of one spouse – the matrimonial property regime is no longer an option. Well-intentioned advice turns out to be a boomerang. The same is the case where the self-employed person, usually believing in the joint liability of the spouse, agrees to a separation of property, including the exclusion of any gain for all time. An own goal when it comes to the matrimonial property regime swing, because joint liability of spouses is at best a possibility where it is particularly a question of replacement purchases for household appliances, §§ 1357, 1364 BGB.
Attachment of future gains prevents a swing in the marital status
According to the wording of § 852 II ZPO, claims for compensation for gain are only attachable if they have either been contractually recognised or have become legally enforceable by filing an action, § 261 I ZPO.
However, § 852 ZPO does not prevent the actual seizure under §§ 829, 835 ZPO in execution, but merely postpones the “transfer for collection” or realisation (BGH, judgement of 08.07.1993, Az. IX ZR 16/92, BGH of 06.05.1997, Az. IX ZR 147/96), as is also provided for in § 852 I ZPO in the case of the right to a compulsory portion (BGH, judgement of 26.02.2009, Az. VII ZB 30/08). This means that the attachment is possible even before the creditor (spouse other than the holder of the right to gain) asserts his claim. After the seizure, the gain is legally blocked – and there is no room left for the matrimonial property regime.
The subsequent failure to assert claims within the meaning of section 852 of the German Code of Civil Procedure (ZPO) is (contrary to the wording of section 129 II InsO) neither contestable nor does it lead to a liability for damages on the part of the creditor (BGH, ruling of 6 May 1997, file no. IX ZR 147/96).
However, if the ex-DAX manager later falls victim to social assistance, the social assistance provider may (even against the will of the beneficiary, i.e. the holder of an entitlement to gain) transfer the entitlement to gain – in case of need of maintenance – to himself and assert it.
Tax liability following gratuitous transfer of assets to spouses
If tax debts still exist with an impoverished spouse, the tax distribution (on request, by the tax office) among the spouses does not help, because the tax authorities get it from the other spouse, § 278 AO.
Securing assets against the background of unpaid taxes is unlikely to be successful, as long as the executing agency is familiar with the case law of the Federal Court of Finance and international law. The latter seems questionable to the extent that the tax liability of the shareholders of foreign corporations (for profits in the “camouflage construct”) has not even been seen since the “Panama Papers”.
Now one could come up with the idea of ceding the gain “in advance” – which would of course be contestable. Moreover, the gain only legally arises when the matrimonial property regime ends – which means that the advance assignment is null and void anyway (BGH, ruling of 8 May 2008, file no. IX ZR 160/06).
Family home swing as an alternative?
The so-called family home swing often comes into question as an alternative: In this case, the wealthier spouse transfers a property (in the EU – not in Switzerland, jointly owned by the spouses, with predominant residential use) tax-free (independent of the matrimonial property regime, as often as desired, without value limit), § 13 I No.4a ErbStG. If the period of residence is only short, however, an abuse of form would come into question. Years later, a resale – also tax-free between spouses – could take place; again with the need to take into account the possibilities of rescission for old and new creditors.
How do ex-managers become tax evaders by means of a matrimonial property regime swing?
Assuming that there is an increase in assets only in the person of the ex-manager, not with his spouse, in the amount of €100 million – one could think that paying €50 million to the spouse by means of a matrimonial property regime swing would be legal and tax-free. Here it becomes apparent that the matrimonial property regime could at best save “half” – for the rest it is necessary to find other ways; which often lie in other legal systems and are not controlled by bank(st)er – because the alleged specialists prove to be half-knowing in practice.
If the ex-manager is liable for more than €100 million, the gain is “zero”. This means that any gain compensation becomes a gift that can be contested by creditors. The tax consultant would have to use his or her wits even moderately to recognize the consequences of a gift tax liability – so that the suspicion of evasion is avoided. Only if the ex-manager is also inclined to act, his tax evasion advisor is potentially no longer liable to him – for example for fines and defence lawyer costs; and also for gift tax, if there had been a more favourable arrangement.
Transfer of assets for compensation of compulsory portions or against life annuity?
The purchase of an annuity (of equal value, possibly deferred) would also not be a viable option if the ex-manager had already learned of his liability (perhaps only from the newspaper). This is because the asset value of the ex-manager is indirectly reduced because this delays, hampers or thwarts access for creditors to the debtor’s assets (BGH, ruling of 22.12.2005, file no. IX ZR 190/02).
A compulsory portion compensation is also ruled out, because in the case of over-indebtedness there is no compulsory portion – but at best a later expected inheritance payment.
How long do over-indebted ex-managers sit in the electric chair?
Even more effective than the challenge by creditors and insolvency administrators can be the liability in tort in connection with criminal law, § 823 II BGB. After all, the absolute statute of limitations only comes into effect after 10 years. Recently, an ex-manager publicly confessed that he was without assets and had carried out legal “asset protection” – the admission of his intent; “now the public prosecutor is investigating and the insolvency administrator is taking legal action” commented a journalist.
The ex-manager is, as it were, sitting on burning coals until his insolvency is opened, because only then is the bankruptcy offence over and the criminal statute of limitations of five years begins. From the opening of the main criminal proceedings, the limitation period is suspended for a further five years in serious cases, § 78 b IV StGB. The statute of limitations is also interrupted, for example, by the announcement of the initiation of preliminary proceedings, a search warrant, or the filing of charges (BGH, ruling of 10 November 2016, ref. 4 StR 86/16). Perhaps the ex-manager will later consider whether he would have received more judicial benevolence after moving to the Balkans?
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.handwerkernachrichten.com (published in August 2018)
and
www.pt-magazin.de (published on 27.03.2019)
Link: https://www.pt-magazin.de/de/wirtschaft/finanzen/kleine-oder-grosse-g%C3%BCterstand-swing-to-swing-span class=”term” data-original-term=”JUMzJQ==”>C3B6ge_jtpxhxz6.html
and
www.experten.de (published on 30.08.2018 under the heading Matrimonial property regime for asset protection legal or tax evasion deluxe?)
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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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