Values with Continuance

There is no one-size-fits-all answer to whether one is better or worse. Your personal goals as a founder are key. A German foundation allows more influence, but results in an inheritance tax liability every 30 years. However, this can be planned for and managed due to the time horizon. A Liechtenstein foundation is highly tax-optimized in its target structure, but offers you only limited opportunities for influence once it is established. We have excellent contacts with various Liechtenstein trustees and will guide you through the structuring and implementation step by step.

In general, a foundation is an independent legal estate of assets—essentially a third party. You can transfer assets to a German or foreign foundation either as a gift or for consideration—in some cases, hybrid structures are also advisable.

In principle, a foundation is a corporation. Therefore, the foundation can take advantage of the same tax privileges as a corporate holding company. The same applies to distributions from the foundation—these are generally taxed as profit distributions. A key advantage of a foundation is that it is exempt from exit tax, meaning you can relinquish your unlimited tax liability in Germany without triggering exit tax. With a Liechtenstein foundation, German inheritance tax on capital gains within the foundation is also waived.

Asset protection refers to the safeguarding of accumulated assets. The need to protect assets increases as external conditions change, wealth grows, and across generations. The goal is often to preserve accumulated assets, protect the company from cash outflows, and avoid conflicts. Legally, asset protection is achieved primarily through the articles of association, the choice of corporate structure (e.g., a foundation), as well as prenuptial agreements and dispositions of property upon death (e.g., a contract of inheritance).