An Instrument for Asset Succession – The Family Pool

By Brigitte Jakoby, Jakoby Dr. Baumhof – Wirtschaftsprüfer Steuerberater Rechtsanwälte

The term “family pool” can not be found in any legal text. It is not a legal term. Basically, it defines a company, in which the family assets are collected, hold and handed over in an easy way to the fol-lowing generations. Purposes of these family companies can be the preservation of the family assets on the one hand, the fair treatment of heirs, an useful designed asset succession regarding tax law or the efficient management of the family assets. Depending on the respective family assets, the em-phasis on the aforementioned target parameters can be very different.

Instead of a family pool, the assets can also be transferred by using the standard instruments of the inheritance law. As a result of that, there are normally communities of heirs, which are vulnerable to disputes and which do not prevent the breaking up of the assets mostly not desired by the testator. By now, also foundations are often used, but these strongly restrain the families' possibilities for action.

A family pool requires a certain minimum amount of family assets, so that the costs related with it are legitimate. Beforehand, there has to be sorted out who shall take over the management of the family wealth or who gets a passive role as a family member participating only in assets and profit. Regard-ing the legal form, there has to be considered whether members of the family pool shall be personally liable or if a legal form with limited liability is preferred. Reasons for a family pool are the fair participation in the family assets and the protection of the family wealth for future generations. It is also significant, having the possibility not to grant access to the family wealth for certain relatives. Both target settings, meaning the deliberate participation in assets of rela-tives as well as the exclusion of certain relatives, can in general be achieved within a family pool with large legal security.

Basically, every kind of family assets is suitable for a family pool, but especially properties, security papers and company assets.

The future testator founds a family company with his successors/heirs, in which the family wealth is brought in during his lifetime. A family company can be every kind of fiscally transparent partnership or a corporation with limited liability as an independent legal entity. Considerations regarding the management and control of the family pool are enormously important. The person bringing in assets into the family company is able to make the right decisions during his lifetime with corresponding legal arrangements.

In contrast to natural persons, the family pool in general is immortal through its state under company law. Methodically, the family company is founded for eternity and is able to secure the preservation of the family assets over following family generations. A posterior breaking up of the assets can never be totally excluded but therefore the cooperation of all parties is needed.

In comparison to the single transfer of assets, the family pool offers the advantage, that the person handing over has further possibilities of control and influence regarding the assets. As an alternative to the family pool a family foundation would be imaginable, but in comparison to the family company this is less flexible, but more complex.

Brigitte Jakoby

Jakoby Dr. Baumhof - Wirtschaftsprüfer Steuerberater Rechtsanwälte, Rothenburg o.d.T., Germany
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Jakoby Dr Baumhof – Auditors Tax Consultants Lawyers – is a medium-sized interdisciplinary company located in the south of Germany, with offices in Rothenburg o.d. Tauber, located in Northern Bavaria, and Ebersberg, near Munich.

Brigitte Jakoby is a German Chartered Accountant and German Certified Tax Advisor. In 1987 Brigitte Jakoby started collaborating with her husband Eugen Jakoby, also a German Chartered Accountant and German Certified Tax Advisor. Since 1996 and still today, she is one of the senior partners at Jakoby Dr. Baumhof - Auditors Tax Consultants Lawyers.

Published: April 2019 l Photo: Uwe Rieder