Liechtenstein Family Foundation: formation, German tax classification and control.

Client benefit

Concrete client benefits.

• Family assets can be governed through a civil-law structure with long-term continuity.
• Control, council powers and beneficiary rights are tested before formation.
• Distributions can be classified before money is paid.
• German substitute inheritance tax can be avoided where the foreign foundation is not subject to the German regime, while other German taxes remain relevant.
• Banking and source-of-wealth documentation are built into the structure.

Tax classification.

For German-connected families, the analysis focuses on attribution under section 15 AStG, founder rights, beneficiary rights, entry taxation, distributions and gift tax exposure.

• Founder control and revocation rights.
• Attribution of income to German residents under section 15 AStG.
• Taxation of distributions, including potential section 20 para. 1 no. 9 EStG treatment.
• Gift tax on transfer into or distributions from the foundation.
• Substance, governance and foreign legal documentation.

Ongoing foundation administration.

The foundation needs council decisions, investment documentation, beneficiary files, banking records, accounts and tax analysis for each distribution.

• Annual council and governance records.
• Beneficiary and distribution decision file.
• Asset management and bank documentation.
• German tax reporting review for founders and beneficiaries.

Set-up and implementation process.

• Clarify family objectives and control requirements.
• Review German residence, beneficiaries and taxable nexus.
• Draft foundation instruments with Liechtenstein counsel.
• Prepare transfer, banking and tax file.
• Set up annual distribution and reporting process.

Typical mistakes.

• Founder keeps excessive control and triggers attribution.
• Beneficiaries receive payments without tax classification.
• Gift tax is ignored at transfer or distribution stage.
• Banking is attempted without source-of-wealth file.
• Foundation governance is not kept separate from family wishes.

What Meyers Advisory delivers.

• AStG and distribution tax memo.
• Control and governance analysis.
• Foundation formation roadmap with local counsel.
• Banking/KYC and source-of-wealth file.
• Distribution decision template.
• Annual reporting calendar.

Documents for the first review.

• Draft or existing foundation documents.
• Founder and beneficiary residence overview.
• Asset list and transfer plan.
• Existing wills, family agreements and companies.
• Bank and source-of-wealth documentation.
• Planned distribution policy.

Result of the initial consultation.

The first review ends with a documented decision file: target structure, tax assumptions, exclusion points, implementation sequence, document list and clear next steps.

• Decision matrix with recommended structure and rejected alternatives.
• Tax and compliance workstream with open points, deadlines and responsible parties.
• Implementation plan for entity formation, banking, governance and ongoing administration.

Legal position and limits.

No foundation result is promised without reviewing German attribution, gift tax, distribution taxation, anti-abuse, local law and banking requirements.

Frequently asked questions.

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