What is a family foundation?

A family foundation is a special form of foundation that primarily serves the purpose of preserving and increasing a family’s assets in the long term. In contrast to charitable foundations, which are geared towards the common good, the family foundation is primarily concerned with private interests, namely the protection of family assets and the provision for family members.

Important features of a family foundation:

• Asset protection: the assets are transferred to the foundation and legally belong to the foundation, no longer to the founder or the heirs
• Long-term nature: A foundation is generally set up for an indefinite period and remains in existence for several generations
• Tax optimization: clever structuring can reduce gift and inheritance taxes as well as income taxes

Why set up a family foundation?

A family foundation offers numerous advantages, especially for wealthy families, entrepreneurs and property owners who want to protect and optimize their assets in the long term. Of course, real estate can be transferred to foundations. Here are the main reasons why you should consider a family foundation.

• Protection from inheritance disputes: Since the assets belong to the foundation and are not inherited directly, inheritance disputes can be avoided
• Tax advantages: Income generated within the foundation is usually subject to a lower tax burden. Inheritance and gift taxes can be saved
• Control over the assets: The founder can specify in the articles of association how the assets are managed and who benefits from them
• Avoidance of asset fragmentation: assets remain bundled and are not divided up by sale, inheritance or private disposal

Who establishes a family foundation?

For those who want to save taxes! Only 15% on rentals, protection against access and many other benefits, especially for your loved ones.

Now you could say, 15% on rent and protection against access, a GmbH holding company can do that too, right! But – and we’ll come to this in a moment in the functions – the transfer of assets in particular is one of the tools that families choose for foundations.

Typical founders of a family foundation are

• Entrepreneurial families: It is particularly common for entrepreneurial families to want to keep their company in the family for the long term
• Property owners: Families with large real estate assets who want to secure their property and optimize it for tax purposes
• Wealthy private individuals: Anyone who has considerable capital and wants to protect it from external risks (such as divorce or creditor access)

As a rule, it is worth setting up a family foundation with assets of at least 1 million euros. Above this threshold, the advantages associated with a foundation begin to outweigh the establishment costs and administrative expenses.

How does a family foundation work?

The process of setting up and managing a family foundation can be complex, so it is important to plan the steps carefully:

1. Advice and planning: You should first seek advice from experts – lawyers, tax advisors and foundation experts – to understand the legal and tax framework
2. Creation of a foundation charter: This charter is the “basic law” of the foundation. It defines the purpose, who is a beneficiary and how the assets are managed
3. Contribution of assets: The founder contributes his assets to the foundation. From this moment on, the assets legally belong to the foundation and no longer to the founder
4. Recognition by the foundation authorities: The foundation must be recognized by the responsible foundation authority and the tax office
5. Administration and ongoing support: The foundation’s Board of Directors manages the assets and ensures that the foundation’s purpose is fulfilled

Advantages of the family foundation at a glance

• Asset protection: No access by third parties (e.g. in the event of divorce or insolvency)
• Tax advantages: Reduction of inheritance, gift and income taxes
• Long-term wealth planning: protection and management of assets over generations
• Avoidance of inheritance disputes: Clear regulations through the foundation statutes
• Flexibility and control: The founder can customize the articles of association and thus retain control

How do you set up a family foundation?

If you are considering setting up a family foundation yourself, here is a brief overview of the necessary steps. A little tip, I have explained the whole thing in more detail here in Establishing a family foundation and here in Family foundation costs:

1. Advice from experts: get professional help from lawyers, tax advisors and foundation experts
2. Define the foundation’s purpose: What should the foundation achieve? Who should be the beneficiaries?
3. Create legal documents: The foundation statutes and other founding documents must be drawn up
4. Contribute foundation assets: Transfer real estate, capital or other assets to the foundation
5. Registration and recognition: The foundation must be recognized by the competent authorities
6. Managing a foundation: Regular review and adaptation to legal and tax changes

Conclusion: Is a family foundation right for you?

A family foundation can be a powerful tool to protect assets, plan for the long term and save taxes. However, it is not suitable for everyone and requires careful planning and advice. If you think a family foundation may be right for you or your family, get expert advice and make sure all aspects are well thought through.

You can now find out more about this on Steuern Sparen One – my experts for setting up foundations and tax optimization.

Family foundation: At what point is it worthwhile?

Save taxes, optimize and design, but when is it worth it in a family foundation?

• From when is the foundation worthwhile? Only from 1 million equity capital, so that costs of the foundation and yield are really worthwhile
• Before preferring to work in a corporation (so-called Immobilien GmbH or vermögensverwaltende GmbH, GmbH und Co. KG, etc.), here you will find all legal forms in Germany

Overview: This is what you will learn in the guide

7 aspects to save taxes with the creation of a family foundation.

Take advantage of tax benefits: How you can benefit from a family foundation

You want to optimize your financial situation and save taxes? A family foundation could be the solution. But did you know that you benefit from tax advantages not just once, but several times over? In this article, we will show you how to take advantage of these benefits to reduce your tax burden and secure your assets for future generations.

Multiple tax benefits when establishing a family foundation

When you set up a family foundation, you can benefit from tax advantages in several ways. First of all, you can deduct the transferred capital as a special expense from your taxable income. Individuals have the opportunity to deduct up to 1 million euros within 10 years, while married couples can deduct up to 2 million euros. In addition, you can donate further assets to the foundation and also deduct these donations up to 20 percent of your income as a special expense.

Only 15% corporate income tax (rental income)

Once your assets are in your foundation, you can use and invest the assets you have.

Here’s the kicker. A foundation is subject to corporate income tax. So you pay only 15% corporate income tax instead of trade tax.

You only pay trade tax with a family foundation if it is commercial. However, the mere purchase, management and holding of real estate is not commercial. You are only putting your assets to work.

Even your rental income is now subject to corporate income tax at only 15%.

Real estate transfer to a foundation

Transferring real estate to a foundation also provides an effective asset protection mechanism. By transferring your real estate to a foundation, it is legally separated from your personal assets. This protects them from potential creditors or other financial risks. A family foundation can thus be a valuable security measure to protect your real estate assets from unforeseen events and ensure your family’s long-term financial stability.

• Transferring real estate to family foundation: transfer agreement

Inheritance and gift tax exemption

Another major advantage of a family foundation is that it is exempt from inheritance and gift taxes. By transferring your assets to the foundation, you can avoid these taxes. In addition, the income of charitable family foundations is tax-free, which means that the assets benefit the foundation’s purpose in full.

Taxation of the current income of the foundation

Foundations are normally subject to corporate income tax and, where applicable, trade tax. But tax-privileged family foundations are generally exempt from these taxes. This means that income from donations, asset management and economic activities in the service of charitable purposes are exempt from tax. However, taxes are incurred if income is generated through economic activities that do not serve the charitable purpose.

Tax advantages of the family foundation

The family foundation also offers tax advantages on the income tax side. With a corporate income tax of only 15 percent and the omission of a possible trade tax, you can significantly reduce your tax burden. Capital gains from real estate are treated similarly to an individual, and distributions to beneficiary family members are mostly subject to the 25 percent final withholding tax. If you want to use the family foundation for a holding structure or avoid exit taxation, even further tax advantages await you.

The non-charitable character of the family foundation

It is important to note that a family foundation does not benefit the general public, but rather, in accordance with the foundation’s purpose in the articles of incorporation, benefits you and your family exclusively. Therefore, the comprehensive tax exemptions of a charitable foundation do not apply. Nevertheless, family foundations offer many tax advantages for securing and preserving family assets.

Conclusion: Establish a foundation and save taxes

A family foundation can not only help you save taxes, but also help you secure your assets for future generations and support charitable causes. With multiple tax benefits upon formation, inheritance and gift tax exemption, and tax advantages on the income tax side, the family foundation offers an attractive way to optimize your financial situation. Remember that sound advice from a tax expert is recommended to take into account your individual tax and legal needs and to derive the best possible benefits from a family foundation.

With my experts you will establish your company safely and with all tax advantages.

• Establish a family foundation
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Of course, you can also transfer real estate to a foundation.

Transfer real estate: example including foundation

Transferring a property to a family foundation in Germany can be a complex process involving legal and tax aspects. It is advisable to seek advice from an experienced lawyer or tax advisor to ensure that all legal requirements are met.

Please note that this is only a general overview and the exact steps and requirements may vary depending on the individual situation and the applicable laws in Germany. Therefore, it is important to seek advice from foundation experts to ensure a smooth and legally sound transfer.

How do I transfer a property to a foundation?

Basically, there are several steps that should be followed when transferring a property to a family foundation:

The right setup of your foundation: preparation

If you don’t already own a family foundation, you need the right setup first.

Establishment of the family foundation

First, a family foundation must be established. This requires the creation of a foundation deed, which defines the purposes of the foundation, the beneficiaries and other relevant details.

• Establish a family foundation

Selection of the property

The property to be transferred to the family foundation must be selected. Make sure the transfer is compatible with the goals and purposes of the foundation. A family foundation often aims to preserve assets for generations. Therefore, the property selected should provide long-term stability. Factors such as location, sustainability of the real estate market, and potential performance are important to ensure the long-term preservation of the asset’s value.

Valuation of the property

The property should be appraised by an independent appraiser to determine the current market value. This is important for tax purposes and to ensure that the transfer is made on reasonable terms.

• Evaluate property

Transfer agreement – step 1

A transfer agreement must be drawn up between the previous owner and the family foundation. This contract regulates the transfer of the real estate and all associated conditions. In terms of its structure, it will certainly remind you of a typical contract of sale of a property.

Structure of the transfer agreement: example

The contract should begin with an introduction identifying the parties to the contract. Here, the previous owner (seller) and the family foundation (acquirer) are named.

1. Description of the property
2. Purchase price or transfer conditions
3. Delivery and transfer of ownership
4. Warranties and liability, other conditions
5. Consents and approvals
6. Place of jurisdiction and arbitration agreement

Description of the property

Describe the property accurately to avoid misunderstandings. This includes details such as address, land register number and a precise description of the premises.

Purchase price or transfer conditions

The contract should specify the purchase price or the conditions for the transfer of the property. This can be, for example, a fixed purchase price, a symbolic amount or other agreed consideration.

Delivery and transfer of ownership

The time and method of transfer of the property should be specified in the contract. This includes the transfer of title, handover of keys and all relevant documents.

Warranties and liability

The contract may contain provisions on warranties and liability. For example, the seller may provide warranties about the condition of the property or exclude certain defects. Limitations or exclusions of liability can also be agreed.

Other conditions

The contract may contain further conditions and provisions governing the rights and obligations of both parties. This may include, for example, provisions on ancillary costs, maintenance, rights of use or similar.

Consents and approvals

If certain consents or approvals are required for the transfer (e.g. consent of co-owners, consent of banks), these should be recorded in the contract. The contract may contain provisions for termination, e.g., in the event of non-fulfillment of the terms of the contract or other agreed circumstances.

Place of jurisdiction and arbitration agreement

The contract may contain a choice of court or arbitration agreement to determine which court or arbitration tribunal has jurisdiction in the event of a dispute.

The contract should be signed by both parties to ensure its validity. It may also be necessary for witnesses or notaries to certify the signatures.

Registration in the land register – step 2

The transfer of the property must be recorded in the local land register to legally document the change of ownership.

Check tax and legal aspects – Step 3

Transferring a property to a family foundation can have tax implications. A tax expert / foundation expert can help you develop the best tax strategies and file the necessary tax returns.

An attorney should oversee the entire transfer process to ensure that all legal requirements are met and that there are no legal risks.

With my experts you will establish your company safely and with all tax advantages.

• Establish a family foundation
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Successful real estate investing: Why Coaching?

The real estate market offers a variety of opportunities for investors to increase their wealth and build long-term financial stability. By acquiring expertise and applying proven strategies, real estate investors can be successful. In this article, I will show you what topics are commonly taught in good real estate investment coaching so that you will have a good real estate coaching experience. A comprehensive overview of the various aspects of real estate investing.

Investment Coaching at a glance

The first challenges

One of the first challenges is to take advantage of tax benefits and effectively build private assets. By converting loans into equity and assets, investors can legally pass on costs to the tax office.

Offmarket real estate acquisition

Another important step is offmarket real estate acquisition. This is about learning the most effective approaches to finding profitable real estate listings. Learn which strategies lead to success and which are a waste of time. By establishing contacts with multipliers and target group owners, investors can gain access to lucrative offers.

Identify potential megadeals

The ability to identify potential megadeals is critical. There are proven methods to filter deals and identify promising investment opportunities. Experienced investors know when to say “no” and when it is worth investing in promising leads.

In addition to property acquisition, it is important in good real estate coaching to know additional tactics to make successful investments. From legal aspects to network building to team building to identifying and avoiding risks, a comprehensive knowledge in these areas is essential.

Real estate financing

Real estate financing is another important aspect that investors should master. From the basics of financing to advanced techniques and expert strategies, a sound knowledge of the various financing options enables a solid foundation for successful real estate investments.

Corporate form and holding structure

Choosing the right corporate forms and holding structures can have a significant impact on the success of real estate investments. Investors should familiarize themselves with the various options and weigh the benefits and risks of each.

Asset protection through foundation

Asset protection also plays an important role. By setting up foundations or other hedging mechanisms, investors can protect their assets from creditors, banks and other risks.

Buy and rent

After acquiring a property, it is crucial to increase its value through leasing and targeted value creation measures. By adopting the right leasing strategy and avoiding typical pitfalls, investors can derive maximum benefit from their properties.

Renovation and refurbishment

Property renovation and expansion are also important aspects to increase value. Investors should familiarize themselves with the basics of renovation and upgrading and know the best strategies to maximize value appreciation in a cost-effective and stress-free manner.

Real estate acquisition

Building a strong team and the ability to network effectively are also critical to success as a real estate investor. By working with competent partners and making valuable contacts(real estate acquisition), investors can increase their chances of profitable growth.

Identifying and avoiding risks is the be-all and end-all. By knowing the deadliest risks and applying appropriate preventive measures, investors can improve their chances of success.

Real estate sale

Selling real estate and commercial real estate trading are other aspects that must be mastered in order to achieve the maximum profit from real estate investments. From acquisition to negotiation to successful sale, effective strategies are required.

Overall, real estate investing offers great potential for financial stability and growth. By learning the key insights from various modules, investors can expand their knowledge and skills and successfuly enter the real estate market.

Real Estate Investment Coaching

Whether it’s a seminar, workshop, online or 1:1 coaching. If you already have a basic understanding of real estate investing, real estate coaching can help you learn much more and develop your skills. It gives you the opportunity to go deeper into different topics and learn expert strategies to succeed in the real estate market.

A coaching for all areas

Comprehensive real estate coaching covers a variety of topics, including taking advantage of tax benefits, offmarket real estate acquisition, identifying potential megadeals, and asset protection through trusts. You’ll also learn about important aspects such as real estate financing, corporate forms and holding structures, buying and leasing, renovation and redevelopment, building a strong team, and risk identification and avoidance.

Furthermore, the sale of real estate and commercial real estate trading are also covered in order to achieve the maximum profit from your investments. In-depth knowledge in all these areas will enable you to make informed decisions and improve your chances of success.

Learning from experience: that’s what it’s all about

Through real estate coaching, you can expand your knowledge, gain valuable insights and benefit from the experiences of experienced investors. It’s an investment in your personal and professional development as a real estate investor. Take this opportunity to realize your full potential and successfuly enter the real estate market.

These articles might also help you:

• Real Estate Coaching Experience
• Real Estate Coach

Tip. Learn the basics with my real estate app:

• Real Estate Coaching App

Why set up a family foundation?

When a foundation is established, the founder transfers assets to the foundation. The assets can be invested in the form of cash, real estate, businesses, stocks, and time deposits to meet the foundation’s long-term funding needs. In the case of a family foundation, the purpose is to transfer the assets to future generations, to protect assets from being accessed and to save taxes.

3 good reasons for establishing a family foundation.

1. Transfer assets to the next generation
2. Protect assets from access (prenuptial agreement, children, company insolvency, etc.)
3. Save tax, pay only 15% tax

The costs of establishing a foundation consist largely of the invested assets. These costs also cover the administration costs. To ensure that the amount available for the foundation’s purpose remains as high as possible, it is advisable to keep administrative costs as low as possible. Additional costs arise from consulting services, for example from lawyers.

The most important facts about the foundation: Overview

Here’s what we discuss in this guide.

Consultant yes or no?

Expert advice is important in this context, especially on tax aspects and transfers, as the establishment of a foundation is a complex and unique process that involves planning asset succession, optimizing tax implications and considering legal aspects in order to achieve long-term financial benefits and minimize potential risks.

More about that in a moment.

First of all, let’s talk about the minimum capital.

Minimum capital of a family foundation

The German Civil Code (BGB) does not specify a specific minimum capital requirement for the establishment of a foundation. However, the capital must be sufficient to ensure “the permanent and sustainable fulfillment of the foundation’s purpose” (§80 BGB).

The competent authorities that check the recognition of the foundation’s formation usually set their own minimum amounts. These are usually at least 25,000 euros. However, many authorities only recognize foundations with assets of at least 50,000 euros. It is assumed that long-term fulfillment of the foundation’s purpose is not possible with an amount less than 50,000 euros less administrative costs.

Some authorities even require minimum assets of 100,000 euros. This often depends on the purpose that the foundation is to pursue.

The assets invested in the foundation may not be reduced in order to ensure that the foundation’s work is continuously financed and that the income can be used to fulfill the foundation’s purpose. Another advantage of foundations when we talk about annual allowances to beneficiaries.

Important: These regulations do not apply to the special form of dependent family foundations. These so-called trust foundations are not legally independent foundations, but rather a contract between a founder and a trustee. The assets are transferred as special assets to the trustee, who has the task of realizing the foundation’s purpose with the income.

In summary:

• BGB: No minimum capital requirement, but sufficient capital needed for long-term foundation purpose
• Authorities: At least 25,000-50,000 euros required for foundation recognition, sometimes 100,000 euros.
• Assets: May not be reduced to ensure continued funding and fulfillment of purpose

Tax disadvantages as a cost factor

The same applies to the founder of a family foundation. In most cases, the founder’s priority will be to optimize the tax implications of the foundation. In other words, for the founder it is much more important to transfer his assets worth millions to the foundation as tax-efficiently as possible or even tax-free than to worry about the formation costs of around 20,000 euros for consulting services.

Establishing family foundations with strategy

My experts can help you set up a family foundation:

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Consulting costs

If someone is unsure about setting up a foundation, they can seek advice from an expert, for example. Foundation law is not uniformly regulated throughout Germany, so the help of a specialist can be useful.

Depending on the foundation’s assets, tax advice may also be beneficial. Although this initially incurs costs, good tax advantages may ultimately result.

The minimum amount of assets required, administrative costs, tax consultancy fees and legal fees vary depending on the individual case. Charitable foundations that are endowed with a sum of money are generally “less expensive.” Foundations that own real estate assets, on the other hand, are more expensive. This is due, among other things, to the fact that dealing with authorities is easier in the case of monetary assets.

In some cases, a simple start-up can be covered with as little as 15,000 euros. For more complicated situations, such as the transfer of a company, there is no upper cost limit.

Not all consultants are the same

Last but not least, not every consultant is the same. Establishing a foundation is usually a one-time and non-reversible process. For example, if you want to sell your car to a private buyer, you can certainly use a template for the contract – the risk is limited. However, if a founder’s succession planning concerns providing for his three children and spouse, ensuring that his 300-employee business can continue, avoiding inheritance disputes over compulsory share rights within the family, and saving a seven-figure amount in taxes, this is not something that can be done with the click of a mouse.

No consultant with only theoretical knowledge of foundations is suitable for such a project. A reputable consultant without the relevant experience would never accept such a mandate for liability reasons. In such cases, advice from genuine experts with many years of experience in theory and practice is required. As a rule, a founder is also well advised to call on the expertise of a team of specialists (foundation law, tax law, corporate law, inheritance law, etc.).

• Foundation formation requires sound and experienced consulting experts.
• Experience in foundation law, tax law, corporate law, inheritance law is important.
• Serious consultant with practical knowledge and many years of experience required.

Establish a family foundation in Germany

A family foundation offers an excellent opportunity to secure assets for future generations, optimize taxes and make orderly succession arrangements. However, establishing a foundation requires comprehensive planning and strategic decisions. Cost factors such as the invested assets and administrative costs play a role.

In case of doubt, professional advice from experts with experience in the areas of foundation law, tax law and asset planning is of great importance. By setting up a family foundation, it is not only possible to take advantage of tax benefits, but also to create clear structures for succession planning. This makes it possible to protect and preserve family assets in the long term.

Foundation questions

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