C3 Liability of the Liechtenstein Foundation vis-à-vis beneficiaries of compulsory portions
If a German founder dedicates assets to a Liechtenstein foundation as an original foundation transaction or as an after-foundation, the German personal and inheritance law, including the law on compulsory portions, applies before German courts.
For a non-binding inquiry, contact us by phone or e-mail or use the contact form at the bottom of this page.
Claims for supplementary compulsory portions against the Liechtenstein foundation can be asserted before the German courts within a ten-year period in accordance with the amortization model (10% per year), whereby the point in time at which the founder is completely detached from his assets is to be regarded as the beginning of the period.
It should be noted that the assets of the German deceased must first be used to satisfy the claims to the compulsory portion or compulsory portion supplement. The Liechtenstein foundation can only be used on a subsidiary basis.
Any German court rulings are neither recognised nor enforceable in Liechtenstein, as there are no international agreements with Liechtenstein.
However, assets of the foundation located in Germany can be enforced.
However, the beneficiaries of the founder’s compulsory portion may also assert claims for German compulsory portion supplementation against foundations domiciled in Liechtenstein before the Regional Court in Liechtenstein.
In Liechtenstein, gifts for charitable purposes are in principle excluded from being offset against the compulsory portion.
It is essential that under Liechtenstein law the German ten-year period with regard to a „reduction action“ is only two years. The Liechtenstein Foundation’s asset protection is thus already strengthened beyond the general time limits of the law on compulsory portions. The Liechtenstein courts assume that the two-year obligation begins with the complete detachment of the founder from his or her assets.
Any rights to information of a beneficiary of a compulsory portion vis-à-vis the Liechtenstein foundation are also subject to the two-year obligation to provide information, which is relevant since in the case of merely „deposited foundations“ there is only limited publicly accessible information between the connection between the testator and the foundation.
Further design variant of the protective effect of Liechtenstein foundations Compulsory portion claims:
If the initial endowment of the foundation is of a symbolic nature and the major part of the assets is transferred as an additional or subsequent endowment, the law applicable to this gift – according to Liechtenstein law – is freely selectable and could be subject to a legal system which does not know any compulsory portion law.
A German testator could thus escape claims to a compulsory portion without having to change his or her place of residence or acquire a new nationality.
Asset protection in the case of rights to a compulsory portion in DE, AT
DE: Against the original foundation transaction (operated in Germany): Compulsory portion rights in the amount of 50% of the total share of the inheritance, 10-year time limit (meltdown model)
Against post-foundations (operated in Germany): Rights to compulsory portions amounting to 50% of the total share of the estate, 10-year time limit (meltdown model)
Enforceability of the action under compulsory portions law pursued in Germany in the country of domicile of the foundation: given
Against the original foundation transaction (pursued in the country of domicile of the foundation): given
Against the post-foundation (operated in the country of domicile of the foundation): given
AT: Against the original foundation transaction (operated in Germany): Compulsory portion rights in the amount of 50% of the total inheritance portion, 10-year time limit (amortization model)
Against post-foundation (operated in Germany): Rights to compulsory portions amounting to 50% of the total share of the inheritance, 10-year time limit (meltdown model)
Enforceability of the action under compulsory portions law pursued in Germany in the country of domicile of the foundation: given
Against the original foundation transaction (pursued in the country of domicile of the foundation): Compulsory portion rights in the amount of 50% of the entire share of the inheritance, 10-year time limit (amortization model)
Against the post-foundation transaction (operated in the country of domicile of the foundation): Rights to a compulsory portion amounting to 50% of the total share of the estate, 10-year time limit (deferral model).
