Private Wealth Disputes 2026 Comparisons

Private wealth disputes are primarily handled by the general civil court system, which includes specialised chambers for inheritance matters. Additionally, the court system has probate, family, guardianship and tax courts. Probate matters are handled by probate courts, which are part of the local courts. Family-related private wealth matters are generally heard by family courts, while questions of mental capacity are generally decided by guardianship courts. There are no specialised trust courts, as the German legal system does not recognise trusts in the common law sense. Also, there are no courts specifically for family businesses.

Mediation is common and entirely voluntary for private wealth disputes. It may be conducted privately or with court support. German courts actively encourage mediation and other consensual dispute resolution methods.

Arbitration is also available for private wealth disputes, provided the parties have entered into a valid arbitration agreement, although it is less common in purely family or inheritance matters. Arbitral awards are generally binding and enforceable.

Both mediation settlements and arbitral awards can be declared enforceable by courts. Thus, an effective interaction between the alternative dispute resolution mechanism and state courts is ensured.

In general, the loser-pays principle applies, meaning the unsuccessful party must generally bear court costs and reimburse the statutory legal fees of the opposing party. Fees are largely determined by statutory schedules linked to the value in dispute, unless the parties have agreed on alternative fee arrangements. This cost regime allows parties to predict their financial risk with relative certainty.

Germany is generally considered an attractive jurisdiction due to the high level of predictability, professional judiciary, consistent case law and enforcement. However, the attractiveness of the jurisdiction could be impaired by sometimes lengthy proceedings.

Conflict-of-law rules are largely harmonised at the EU level. Accordingly, the EU Succession Regulation strongly influences forum choice. Also, mandatory inheritance rules affect litigation strategies.

In this context, it should also be noted that the legal regime governing the establishment of legal parentage may be relevant, particularly with regard to family-related private wealth matters.

• When a child is born out of wedlock, there are a number of potential legal conflicts. This applies in particular if the child’s mother is (still) married to someone else. In German law, a woman’s husband is regarded as the legal father of the child she has given birth to. This applies even where all parties are aware the husband is not the biological father of the child. In such cases, the biological father must register an acknowledgement of paternity (Anerkennung der Vaterschaft), and the paternity of the mother’s husband must be successfully contested.
• However, even where both parents are unmarried, disagreements are possible regarding paternity, joint custody, and the associated decision-making authority in the life of their child. To avoid this, the acknowledgement of paternity can be registered prior to the birth of the child. If this is done, the father’s name can be stated on the child’s birth certificate. This can be combined with a declaration by both parents that they wish to take joint custody of the child, giving the father the right to have a say in the child’s name, for example.

Litigation in private wealth disputes is generally led by judges, with no jury trials. Judges play an active role in court management. While parties are responsible for presenting facts and evidence, judges guide the proceedings, actively manage fact-finding, and identify legal issues.

The German legal system does not provide for a broad discovery comparable to common law jurisdictions. Instead, parties must specifically identify and submit the evidence on which they rely. Thus, evidence is limited to specific, pleaded facts. The court then decides whether the submitted evidence is relevant and admissible.

Evidence is generally developed and submitted by the parties directly to the court. It is primarily provided via documents, witnesses and experts, all of which must be clearly identified and relevant to the facts in dispute. The court actively oversees the evidence-gathering process and may question witnesses or experts itself.

The most relevant privilege is attorney-client privilege, which is strongly protected by statutory duties and procedural rules. It covers all activities of the attorney vis-à-vis their client. Attorney-client privilege may only be waived expressly by the client. Once waived, disclosed materials may be admitted as evidence, although such waivers are interpreted narrowly.

Similar confidentiality protections apply to notaries, tax advisers and auditors, each governed by their respective professional statutes as well as procedural rules.

Wills may be challenged for the following reasons:

• lack of testamentary capacity;
• formal defects, such as improper notarisation or handwriting; or
• fraud, mistake or undue influence

In all cases, the burden of proof lies on the respective challenger, who must provide sufficient factual and, if relevant, expert evidence to support the claim.

A will challenge must be filed with the probate court that has jurisdiction over the relevant estate. Thereby, strict limitation periods apply. Generally, a will challenge must be brought within one year from the date the challenger becomes aware of the grounds for contesting the will. Apart from that, the procedure essentially corresponds to a normal civil court proceeding. As part of its decision, the probate court may declare the will partially or entirely invalid. As a result, either earlier wills or statutory succession rules apply.

In German law, “no-contest clauses” (often In Terrorem clauses) aim to deter beneficiaries from challenging a will, disinheriting them if they do. However, such clauses primarily affect appointed heirs/legatees, not legal heirs (gesetzliche Erben), and require the beneficiary to have something valuable to lose, with effectiveness dependent on preventing malicious contests, not good-faith inquiries, under the German Civil Code (BGB) principles of testamentary freedom and fairness.

Powers of attorney are widely used to address potential capacity issues. The authority granted can include – eg, managing bank accounts, real estate, investments or signing contracts. It must be clearly documented and, in some cases (particularly regarding real estate), notarised to be fully effective. If a person becomes incapacitated without a power of attorney, the guardianship court may appoint a legal guardian to act on their behalf.

Powers of attorney are often combined with care directives, to also cover personal decisions.

Common structures to pass wealth and control from generation to generation include partnerships (KG, often structured as GmbH & Co KG), limited liability companies (GmbH), and family foundations. Furthermore, succession planning frequently involves lifetime transfer of shares or staggered gifting with retained control rights. Disputes typically arise over control, valuation and inheritance, often after a generational change. Such disputes may be resolved via contracts, mediation or court proceedings. In addition, disputes can arise with registries. Specifically, such disputes may concern the following issues.

Disputes in Connection with Holdings in Corporate Entities

Holdings in corporate entities can give rise to disputes if the shareholders or partners have diverging interests that are not reconciled. In the following, various dispute scenarios and ways to achieve legal protection for the individual shareholders (in the case of corporations) or partners (in the case of partnerships) will be presented.

Disputes relating to management activities

Management includes all activities carried out for the entity in the internal relationship and vis-à-vis third parties that aim to promote the purpose of the entity and do not concern matters that are fundamental to its existence and structure (Grundlagengeschäfte). The power of management defines the scope of permissible activity by the management in the internal relationship. In contrast to the doctrine of ultra vires in Anglo-American law, which describes acts of an entity and the persons acting on its behalf that exceed the scope of powers granted by the purpose of the corporation, German law does not restrict the power of representation – ie, the legal capacity in the external relationship. In general, to safeguard legal actions, declarations made to third parties by persons acting on behalf of the entity outside their legal capacity are therefore always legally effective in principle.

Partnerships (including the German legal forms of GbR, OHG and KG) are subject to the principle of sole management of a partnership by its partners (Selbstorganschaft); the same applies to representation. Management tasks may be assigned to third parties only by way of a legal act. In corporations (including the German legal forms of GmbH and AG), management activities may also be performed by non-shareholders.

Disputes often arise in the relationship between managing directors or managing partners and the shareholders or partners who are not involved in the day-to-day management of the entity. Typical for partnerships are disputes on the scope and enforcement of the limited partners’ rights of inspection and information, which are restricted by law. In contrast, shareholders’ rights of information and control vis-à-vis the managing directors of a GmbH are comprehensively regulated by law and any deviation from this is excluded. Shareholders also have a right to receive information from the management board at general meetings. Regardless of the entity’s legal form, disputes regularly centre around the refusal to provide information or the provision of incomplete information.

Non-managing partners of a partnership can enforce their right of information by bringing an action against the partnership.

Shareholders of a GmbH can likewise take legal action to enforce their right of information. In this case, a shareholder may contest the relevant shareholder resolution if the management withholds information that the shareholder needs to exercise their voting rights at the shareholder meeting. The same applies to the legal form of an AG.

Disputes relating to the appropriation of profits

In partnerships, profits are distributed to the partners in proportion to the interest held or in accordance with the profit distribution arrangement contained in the partnership agreement. In the event of unauthorised or excessive withdrawals, each managing partner may demand repayment to the partnership from the partner concerned in accordance with Sections 812 et seqq. BGB and, in the event of culpability, demand repayment of the amount received without legal basis, and enforce this claim by bringing an action for payment. If the managing partners do not act, the non-managing partners may also bring an action.

In corporations, profits are in principle distributed to the shareholders in proportion to the share held. Deviations from this regulation may be agreed. A flawed resolution on the appropriation of profits is null or voidable in accordance with general rules by way of an action against flawed resolutions. Distributions received by shareholders on the basis of an incorrect resolution on the appropriation of profits must be repaid to the corporation.

Disputes in connection with the termination of shareholder or partner status and the acquisition of shares

A person becomes a shareholder or partner either by admission to the corporation or partnership (usually through an increase in capital) or by transfer of the share or interest (assignment, inheritance).

In principle, the transfer of an interest in a partnership requires the consent of the other partners. Such consent may already be granted in the partnership agreement in general or for specific cases, such as for descendants or spouses of existing partners. The partners may in principle refuse to consent to the transfer. In exceptional cases, however, a duty of consent may arise from the partnership agreement or on the basis of fiduciary duty. This means that the acquirer or seller of the interest can sue the other partners for consent.

In the case of GmbHs and AGs, the transfer of shares does not require the consent of the shareholder meeting or the management according to the law. However, the articles of association may stipulate consent requirements.

Disputes with other shareholders or partners, dissatisfaction with management, a lack of opportunity to exert influence or a lack of voting power in decision-making are just some of the many reasons that can prompt a shareholder or partner to withdraw from the corporation or partnership.

In the case of partnerships, the law provides for an ordinary right of termination, allowing the partner to withdraw from the partnership at any time and without particular cause. The vast majority of partnership agreements restrict this right to the effect that it may be exercised for the first time only after a certain period (eg, 20 years), and after that only every five years.

The law does not provide for an ordinary right of withdrawal in the case of a GmbH. Ordinary termination is therefore possible only if the articles of association provide accordingly or for good cause.

The departing shareholder is entitled to a settlement, the amount of which is often the subject of dispute (see below).

The forced exclusion of a shareholder or partner is particularly prone to disputes. Depending on the legal form and underlying contract, exclusion is affected by shareholder or partner resolution or by court decision. In principle, there must be good cause in the person of the shareholder or partner for the exclusion to be effective. Further grounds for exclusion may be agreed in the articles of association within certain limits.

The entitlement to a settlement is of the utmost economic importance for the departing shareholder. By law, the settlement must correspond to the market value of the share held. The amount is payable immediately and in full. In practice, the amount of the settlement and the payment terms are often contractually regulated. The effectiveness of the regulations can be reviewed by a court. An arbitrator clause is often agreed in the articles of association. In the event of the exclusion of a shareholder, a provision can be agreed to the effect that the misconduct leading to the exclusion reduces the value of the calculated settlement.

The departing shareholder can enforce their claim to payment of the settlement by way of an action for performance. Problems may arise with the quantification of the claim and the conclusive presentation of the amount of the settlement. If the departing shareholder disputes the value of the calculated settlement, they must substantiate on which points and on what grounds the calculation prepared by the remaining shareholders is incorrect.

Arbitration proceedings

Corporate law disputes are in principle fully arbitrable – ie, they can be brought before an arbitration tribunal and decided by it, in which case the public courts no longer have jurisdiction. As an exception to this, no arbitration agreements can be concluded for particularly important matters (disputes over flawed resolutions and disputes over valuation issues) at an AG.

For the other legal forms, the shareholders or partners must in principle conclude an arbitration agreement in order to establish the jurisdiction of an arbitration tribunal. Case law places high demands on the conclusion of an effective arbitration agreement. Where shareholders or partners decide in favour of an arbitration agreement, they often opt for the procedural rules of the German Arbitration Institute (DIS).

The main advantages of an arbitration agreement are that the parties can choose the arbitrators – ie, select particularly competent and suitable persons, and that arbitration proceedings are not conducted in public. The disadvantage is that it often takes a very long time for the arbitration tribunal to be constituted. Furthermore, the decision of the arbitration tribunal is final, so there is no review by another instance. Arbitration tribunals tend to be significantly more expensive than proceedings before public courts in disputes over flawed resolutions.

Disputes With Registries

Disputes between family businesses and registries can arise in relation to the commercial register, for example. The commercial register is a public register in which merchants and commercial entities are recorded and which discloses certain legal transactions to the outside world. Since October 2017, the regulations on the transparency register in accordance with the German Money Laundering Act (Geldwäschegesetz – GwG), which have since been amended several times, have also applied.

Disputes about registration obligation/correctness of entry

In connection with the provisions on the transparency register under the GwG, the type and scope of the beneficial owners of a foundation to be entered in the register within the meaning of Section 3(3) GwG are particularly prone to dispute. The interpretation of Section 3 GwG has not yet been conclusively clarified either by a clear position of the administration or by case law. Opinions in the literature diverge on several issues. The administrative opinion has also been amended several times in the regularly updated FAQs of the Federal Office of Administration (Bundesverwaltungsamt) (BVA-FAQ). Failure to fulfil the obligations for entries in the transparency register can result not only in fines, but also in reputational risks due to the inclusion of the foundation in an online list of final fine assessment notices. In the case of foundations, the discussion centres on whether the beneficiaries – in the case of family foundations typically the descendants of the founder – are to be designated only in abstract terms as a “group of natural persons for whose benefit the assets are to be managed or distributed” or whether they are to be regarded as “designated beneficiaries” and would therefore have to be registered individually.

In principle, there is a duty to register declaratory entries in the commercial register. If this obligation is not complied with, it can be enforced by the register court by means of a penalty payment in accordance with Section 14 of the German Commercial Code (Handelsgesetzbuch – HGB). In addition, there may be an obligation to submit certain documents to the competent registry court, such as the list of shareholders of a GmbH in the event of changes in the persons of the shareholders.

The correction and deletion of entries

The correction of commercial register entries is possible only to a limited extent. Since the entry in the commercial register in principle has a ”publicity effect” (Section 15 HGB), the entry cannot be contested by legal action. An exception applies to typographical errors and obvious inaccuracies that have no effect on confidence in the commercial register. However, if facts are not subject to Section 15 HGB, their correction can be applied for by way of a complaint. This concerns the correction of facts entered in the commercial register as well as the clarification of an entry. This legal remedy can be used, for example, to seek the correct announcement of legal relationships that have previously been registered.

If an entry in the commercial register is not to be corrected but deleted, the official deletion pursuant to the FamFG is relevant. This requires that the commercial register entry was inadmissible or has become inadmissible over the course of time. This is again the case if the entry is factually incorrect or was made without complying with the statutory requirements on register entries and if the defect is material. If a request for the initiation of official deletion proceedings is rejected by order, an appeal against this rejection is admissible in accordance with Section 58 FamFG.

Foundations are key asset-holding vehicles used to hold and protect private wealth. Their main strength lies in separating ownership and control from beneficiaries, which can provide a degree of protection against creditors and ensure continuity of wealth management. In addition, foundations can offer tax advantages. However, they are vulnerable to claw-back and abuse doctrines, and must comply with strict statutory and governance requirements. In detail, this means the following.

Establishment of Foundations

A German foundation with legal personality is generally established in perpetuity by a founder dedicating assets in the endowment transaction to the permanent and sustainable fulfilment of the purpose specified by the founder. The foundation law of the federal state in which the foundation has its place of incorporation applies in particular to the foundation supervision. This means that even after the reform of foundation law, considerable differences remain between the federal states. Ten of the 16 state foundation laws provide for limited foundation supervision for private-benefit foundations or family foundations. In many states, the supervision concerns only potential conflicts with the public interest.

Recognition of Foundations

A requirement for the establishment of a foundation in Germany is its recognition by the competent foundation supervising authority in the respective federal state. This requires an endowment transaction within the meaning and, secondly, that the permanent and sustainable fulfilment of the foundation’s purpose appears to be assured. In addition, the foundation must not jeopardise the common good. If the supervising authority finds that the requirements are not met, this is often the starting point for disputes. In the case of foundations established during the founder’s lifetime, co-ordination with the competent supervising authority is regularly close, in particular with regard to any necessary amendments and to peculiarities of state law.

Points of contention often concern the sufficiently precise formulation of the foundation’s purpose and its realisation, the endowment and management of assets and the structure of the foundation’s bodies. Since the reform of foundation law that took effect on 1 July 2023, there has also been an increased focus on the drafting of regulations governing amendments to statutes. In the case of foundations upon death, unclear or outdated testamentary instructions from the founder can lead to the need for co-ordination and to disputes with the supervising authority, at least if there are no clear provisions on possible adjustments for heirs or the executor of the will. This applies even though the supervising authority is obliged to promote the recognition of such foundations under Section 81(4) sentence 1 BGB.

Legal Enforcement

If the founder or the founder’s heirs or an executor cannot reach agreement with the supervising authority on the fulfilment of the requirements for recognition, the supervising authority will issue a rejection notice. This notice must be challenged by means of an action for the issuance of an administrative act before the competent administrative courts (Verwaltungsgerichte). It may also be necessary to conduct preliminary proceedings in accordance with Section 68 of the German Code of Administrative Court Procedure (Verwaltungsgerichtsordnung – VwGO) before filing an action. Whether this is the case depends on the federal state in which the competent foundation supervising authority is located. The right of action (Klagebefugnis) required in Germany to prevent popular actions must be affirmed for the founder, the executor or the heirs because they are entitled to have the foundation recognised. Beneficiaries, on the other hand, do not have a right of action. The administrative court then examines whether the requirements of Section 82 BGB are met. If this is the case, the court obliges the supervising authority to recognise the foundation.

Assertion of Defects in Resolutions

As a rule, the foundation makes its decisions by means of resolutions. However, if the resolutions violate the law or statutes, they are in principle null and void. An exception applies to pure procedural errors that affected neither the voting rights of the body members nor the result of the vote. Where it is suspected that a resolution may have violated the statutes or the law, disputes about the effectiveness of the resolution regularly arise. Disputes must be settled in the civil courts by means of an action for a declaratory judgment (acknowledgement by judicial ruling) pursuant to Section 256 ZPO. The prerequisite for admissibility is the “interest in a declaratory judgment” (Feststellungsinteresse). This requirement is fulfilled if the plaintiff’s right or legal position is threatened by a present danger or uncertainty that can be eliminated by the declaratory judgment. It is undisputed that the foundation itself has an interest in a such a judgment. Opinions vary as to whether this interest can also exist in the case of individual bodies, although case law tends to deny this, meaning that the bodies themselves cannot file an action. If the requirements for a judgment on the merits are met, the civil court decides on the validity or invalidity of the resolution by means of a declaratory judgment.

Foundation Tax Law Disputes

Transfers of assets to non-profit foundations are completely tax-exempt. However, gift tax or inheritance tax is in principle payable on the acquisition of assets by private-benefit foundations, in particular family foundations.

For inheritance and gift tax purposes, the enrichment of the foundation is deemed to be a taxable acquisition unless it is tax-exempt. Particularly relevant in this context is the preferential tax treatment of business assets, which makes it possible to transfer certain business assets largely tax-free.

As family foundations by their very nature cannot die, they are not subject to inheritance tax. In order to prevent the foundation assets from being transferred tax-free to the next generation over decades, the legislature has stipulated taxation by means of a substitute inheritance tax. This has the effect of simulating a death every 30 years and assumes that the total assets of the foundation are transferred to two children.

Disputes in the context of inheritance tax often concern the assessment of the tax by the tax authorities and thus the question of whether and to what extent a tax claim exists against the foundation. If the foundation believes that the tax assessment notice from the tax office is unlawful, it must first file an appeal with the tax office. If the appeal is not upheld, the foundation must file an action for annulment with the competent tax court. As a rule, the tax court then decides on the lawfulness of the tax assessment notice by means of a judgment.

Spouses may attack existing family wealth structures in divorce, if they seek to assert claims under matrimonial property, maintenance or inheritance law. Prenuptial and postnuptial agreements are generally recognised, though courts scrutinise them for fairness and voluntariness, particularly regarding the prospective spouse’s rights and financial protection. Similar disputes can also arise following the separation of unmarried couples. This means the following.

The Matrimonial Property Regime

Couples wishing to marry each other may come into conflict before the wedding day due to the choice of matrimonial property regime. The matrimonial property regime regulates the question of how assets are distributed between spouses with regard to the assets existing before the marriage and those acquired during the marriage. Unless married couples reach a different agreement under matrimonial property law, the statutory matrimonial property regime of the “community of accrued gains” applies in Germany. This means that the assets of the spouses existing at the time of the marriage remain separate and the assets acquired during the marriage are also to be allocated solely to the respective acquirer. At the end of the marriage, the increase in value of each spouse’s assets during the marriage is determined. The spouse with the lower increase in value is entitled to half of the excess amount (“equalisation of accrued gains”).

For example, if both spouses started the marriage with assets of EUR100,000 and the husband generates assets of EUR600,000 during the marriage, while the wife generates assets of EUR400,000, the husband would be required to pay compensation of EUR100,000 to the wife.

The spouses may modify these arrangements. In particular, individual assets can be excluded from calculating the equalisation claim or a lump-sum equalisation of gains claim can be agreed (“modified community of accrued gains”).

In addition, there are other matrimonial property regimes that spouses can choose for their marriage, in particular the matrimonial property regime of community of property and the matrimonial property regime of separation of property. In the case of community of property, the spouses merge their assets existing at the time of marriage and the assets acquired later in full, with the effect that they acquire joint ownership of them. Individual assets that remain the sole property of the respective spouse can be excluded from this. The spouses can also opt for the matrimonial property regime of separation of property. In this case, the assets remain separate as in the case of a community of accrued gains; however, there is no compensation claim for the assets acquired during the marriage.

In order to make arrangements for the matrimonial property regime, the spouses must conclude a marriage contract. This must be notarised by a notary in Germany.

Marriage Contracts

In the event of divorce, the validity of the joint marriage contract is often challenged. There are two control mechanisms for the subsequent review of marriage contracts by the courts.

Initially, the question arises as to whether the contract was already invalid when it was concluded – and therefore from the outset (“monitoring of content”). This is assumed if the contract is strongly one-sided in favour of one party and the unequal provisions were an expression of an unequal negotiation situation when the contract was concluded. Such unequal negotiations can arise, for example, from the fact that one party has very limited language skills, has no professional training and is therefore very economically dependent, or became aware of the content of the marriage contract only when it was notarised and was therefore unable to examine it. Marriage contracts that are strongly influenced by foreign cultures – for example by Islamic family-law concepts – can also be judged to be invalid according to these standards. As a result, the contractual provision or – where it substantially shapes it – the contract as a whole, is to be regarded as invalid.

A further control mechanism results from the “procedural review”. This assesses whether the marriage contract was effective when concluded and whether subsequent changes in the spouses’ circumstances make it unreasonable to adhere to its original provisions. This may be the case, for example, if one spouse becomes permanently incapacitated for work during the marriage or is prevented from working due to caring for a disabled child. In such cases, the change in circumstances is taken into account by subsequently adjusting the contractual provisions.

Separation of Unmarried Couples

Disputes also often arise when unmarried couples separate after cohabiting for some time. For the most part, there is a lack of legal provisions that provide guidance for separations after couples have lived together.

Disputes often arise where one cohabitee accumulates substantial assets during the relationship (particularly as a result of founding a start-up). If the other cohabitee has supported them in building up the business (eg, by working in the company or predominantly caring for any children they share), calls for financial compensation may be made in the event of separation. The main issue here is whether the cohabitees have reached a relevant agreement (eg, an employment agreement has been entered into in respect of that co-operation) and thus created a basis for a compensation claim. If such an agreement does not exist, it is examined whether the basis on which the support was provided has ceased to exist as a result of the separation and whether it would therefore lead to unreasonable hardship if no compensation were to be awarded. This is not typically assumed in the case of everyday financial support to cover common living expenses. However, support going beyond this (eg, significant work contributing to the partner’s business) may mean compensation must be awarded.

The key strategy to defend against creditor claims is asset segregation. Due to possible insolvency proceedings (Insolvenzanfechtung) and deadlines that must be observed, timing is of crucial importance. Accordingly, insolvency avoidance rules are a key risk.

There is no trust law in the common law sense in Germany. Fiduciary duties arise in foundations and companies. Fiduciaries, such as foundation board members or directors, owe statutory and contractual duties of care, loyalty and proper management to the foundation or company. Accordingly, claims for breach of duty against fiduciaries are possible in the context of foundations and corporate entities. Regarding the enforcement of claims by a foundation against the foundation board members, it should be noted that this is primarily the responsibility of the body authorised to represent the foundation – ie, the board itself. Thus, beneficiaries cannot bring claims against fiduciaries for breaches of duty; they can only sue the foundation as such. In some cases, the supervisory authority of foundations (Stiftungsaufsicht) may initiate proceedings. This means the following.

Claims for Breach of Duty

Claims by the foundation against the board of directors or other members of a foundation body result from Section 280(1) BGB, the general liability provision in the German Civil Code. This provision requires a breach of duty for which the board of directors or the relevant body is responsible. With regard to foundation law, Section 280(1) BGB is also modified by Section 84a(2) sentence 1 BGB, which came into force in 2023. Accordingly, a member of a body must exercise the diligence of a prudent manager when managing the foundation’s business. This is the business judgment rule originating in the USA, which primarily determines the standard of care to be applied by the governing bodies. The burden of proof regarding the fulfilment of the requirements of the business judgment rule lies on the respective member of the body.

Legal Enforcement

Claims for compensation against the members of foundation bodies must be asserted in court by the board of directors of the foundation as the legal representative of the foundation. However, such claims are often directed against the board of directors itself. In this case, the board member concerned is excluded from representing the foundation in court and asserting the respective claims. This is particularly problematic if the board of directors consists of only one person or if the claim concerns all members of the board. In such cases, the supervising authority must make an emergency appointment of a board member in accordance with Section 84c BGB. In this respect, there are certain weaknesses in the enforcement of claims of compensation. To address those weaknesses, the literature demands a legal provision that grants individual members of foundation bodies the right to assert claims against the board of directors in their own name. However, the legislature has not yet responded to these demands.

D&O Insurance

In practice, D&O insurance can be taken out to cover the liability of the foundation bodies. Whether the foundation may also waive claims for compensation against the bodies is disputed. This is generally considered permissible if the disadvantages of enforcing the law would outweigh the advantages.

Legal Status of the Beneficiaries

Those who are to receive benefits from a foundation are called (destinary) beneficiaries (Destinäre). Unlike the board of directors, for example, they do not constitute a body of the foundation. Legal disputes in connection with beneficiaries arise primarily with regard to foundation benefits and amendments to the statutes.

The enforceability of foundation benefits in court by way of an action for performance presupposes that the beneficiaries have their own claim. The requirement for this is that the foundation statutes define the beneficiaries by name or, according to objective criteria, so precisely that the foundation bodies themselves have no room for discretion when selecting the beneficiaries. If these requirements are not fulfilled, an action filed by the beneficiaries for foundation benefits is ruled out. A claim against the foundation supervising authority to intervene against the unlawful refusal of foundation benefits is also generally out of the question, as the beneficiaries do not have the necessary right of action (Klagebefugnis) before an administrative court.

In the event of unfavourable changes to the statutes, beneficiaries are also often barred from taking legal action. Action against the foundation due to unlawful amendments to the statutes can be considered in civil proceedings only if the statutes expressly grant the beneficiaries such a right. However, such a right exists in exceptional cases only.

Third parties may sue fiduciaries for tortious conduct, for example in cases of breach of trust or misappropriation of assets (strafrechtlicher Untreuetatbestand).

In general, fiduciaries cannot be held liable for the liabilities of a foundation or company. However, piercing the veil is possible in cases of abuse. Fiduciaries may use exculpation clauses to protect themselves from liabilities, although such clauses are only allowed within certain limits.

Mandatory forced heirship rules apply for children, spouses and parents. However, such claims are monetary, not proprietary. The mandatory portion can only be withdrawn under very strict conditions (Pflichtteilsentzug). The beneficiary may waive the mandatory portion by means of a notarised declaration. This means the following.

Right to a Compulsory Portion

Under German inheritance law, a testator is free to both appoint their own heirs and to disinherit statutory heirs – ie, exclude them from the succession. The freedom of exclusion is limited by the right to a compulsory portion (Sections 2303 et seqq. BGB), which guarantees the testator’s next of kin a minimum share in the estate that is in principle irrevocable and independent of need. Under Section 2303 BGB, only the descendants, parents and spouse of the testator are entitled to a compulsory portion insofar as they are excluded from the succession. This is not only the case when they are disinherited in full. The right to a compulsory portion already applies if the persons entitled to a compulsory portion are appointed as heirs, but their inheritance share falls short of the compulsory portion to which they are entitled. However, if the relatives are fully excluded from the succession, they do not assume the status of an heir through their right to a compulsory portion – ie, in particular they do not become part of any community of heirs.

Calculation of the Compulsory Portion

The compulsory portion is a purely monetary claim against the heirs. It is equal to half the value of the statutory share of the estate and is calculated on the basis of the actual estate. Under certain conditions, a claim to a supplementary compulsory portion may also arise against the heirs. This is calculated on the basis of the notional estate, which results from adding back the donations subject to supplementation to the actual estate. The compulsory portion is in principle due at the time of the testator’s death but must be actively claimed and expires within three years of becoming aware of the inheritance and the disinheritance. The claim to a compulsory portion becomes subject to inheritance tax at the time it is asserted. It is also only deductible as an estate liability from this date.

Waiver of the Compulsory Portion

In order to give the testator as much freedom as possible and to avoid disputes, the parties may enter into a waiver of the compulsory portion in which the testator promises an appropriate settlement in return for the waiver. This is usually concluded for a fee. The waiver agreement must be notarised.

Succession disputes typically arise when settling the estate or the compulsory portion.

Settlement of the Estate

Community of heirs and their obligations

If a deceased person leaves two or more heirs, they form a community of heirs within the meaning of Section 2032 BGB. The co-heirs are then jointly responsible for the administration of the estate. They may dispose of individual items of the estate jointly, but not individually. This configuration is highly prone to disputes, particularly regarding the administration and disposal of real estate left by the deceased. A settlement of the estate aims to terminate the community of heirs and transfer the items in the estate to the individual ownership of the heirs. In principle, priority is given to a free partitioning of the estate on the basis of agreements between the co-heirs. If no such agreement can be reached, the estate is settled in accordance with the settlement rules stipulated by the deceased – or, in their absence, in accordance with the statutory settlement rules. Under the statutory rules, the obligations of the estate must be discharged first. The estate must be converted into money for this purpose, if necessary. Any surplus remaining after the discharge of obligations is due to the heirs in proportion to their shares of the inheritance. Otherwise, the estate is partitioned. Where partitioning is not possible in nature, the estate is likewise converted into money and the proceeds distributed in proportion to each heir’s share. This is particularly relevant for real estate property. If the property cannot be partitioned or sold amicably, each co-heir has the right to sell the property by way of a forced partition auction. It is not uncommon for one heir to make a threat of this kind in order to exert pressure on co-heirs who wish to block the partition.

Partition plan and legal enforcement

Each heir is entitled to a settlement in accordance with the statutory provisions unless a different agreement has been negotiated and the deceased did not leave any instructions. They can exercise this right by bringing an action for settlement against the co-heirs who are causing the obstruction. In such situations, the claimant seeks the approval of a partition plan that they submit. The partition plan must cover the entire estate and be acceptable as the result of a settlement. The action is justified insofar as the presented partition plan complies with the partition regulations mentioned above. The judgment allowing the action replaces the consent of the other co-heirs to the partition plan. However, this initially concerns only the conclusion of a settlement agreement. The execution of the settlement by way of transfer of the estate items to the co-heirs is governed by the rules generally applicable to dispositions. If the co-heirs cause an obstruction here too, an action must be brought for the submission of the necessary declarations in rem.

Ways of Preventing Disputes

Contract of inheritance

A contract of inheritance can be concluded to prevent disputes between heirs. This is a bilateral legal transaction in which one or both contracting parties can make testamentary dispositions. The contract must be concluded in the presence of a notary with the simultaneous presence of both parties. Representation of the testator is excluded, and the testator must have unlimited legal capacity. The contracting parties must each be at least 18 years old. The contractual obligation is established immediately upon conclusion of the contract, but the rights and obligations of the beneficiaries arise only upon the death of the testator. In contrast to a unilateral will, which may be revoked at any time, a contract of inheritance may be rescinded or reversed only under special conditions, namely through the conclusion of a cancellation agreement between the contracting parties, the exercise of a contractually reserved right of rescission or such a right due to serious misconduct on the part of the contractual beneficiary, and the possibility for the testator to contest the contract. A contract of inheritance concluded between spouses may also be cancelled by a joint will (see below) of the spouses.

Executorship

The instrument of executorship enables the testator to appoint a person to enforce their last will and duly administer the estate. A special relationship of trust between the testator and the executor is customary, but not obligatory. In principle, any person can be appointed, unless there are impeding circumstances such as legal incapacity at the time of taking office. As a rule, the testator appoints the executor or executors in a will. However, they can also leave the appointment of the executor to a third party or direct in their will that the probate court appoint one. The executorship begins when the appointee accepts the office. From this point in time, the executor must carry out the testator’s testamentary dispositions. To this end, they have extensive powers of administration and disposal that generally deprive the heir from the ability in law and in fact to dispose of the estate. On the other hand, the executor must ensure proper administration and in principle comply with the testator’s instructions.

The standard case is the settlement executorship (Abwicklungsvollstreckung), which is governed by Sections 2203 to 2207 BGB. In this case, the executor orders and distributes the estate, settles any debts, fulfils legacies and carries out the testator’s instructions. Generally, settlement executorships are not prone to disputes.

A special case is the permanent execution of a will regulated in Section 2209 BGB, which permits the testator to exclude the heir or heirs from the administration and disposal of the estate for a period of up to 30 years. If the execution of the will extends to all of the co-heirs, any settlement is generally excluded for the duration of the administration by the executor.

Due in particular to its usually long duration and its effect of excluding the heir, the permanent execution of a will can represent a heavy burden and is therefore particularly prone to disputes. Where a permanent execution has been ordered, it is not uncommon for the inheritance to be disclaimed. As a rule, the scope and limits of the powers of administration are particularly contentious, especially with regard to the maintenance and growth of the managed assets. To gain an insight into the permanent executor’s activities, the heirs have a comprehensive right to information and disclosure, which may also include an annual statement of accounts. In general, the permanent executor’s obligations include, but are not limited to, the proper administration of the estate. If the executor is at fault for the breach of an obligation, they must provide compensation for the resulting damage. In the event of a gross breach of duty, a request can be made to the probate court to dismiss the executor.

The execution as a whole ends upon the completion of all tasks – ie, usually with the final settlement of the estate. The specific office of the executor ends upon the executor’s death, the occurrence of the executor’s incapacity, the resignation of the executor or the dismissal of the executor by the probate court.

Joint will

A joint will is a form of testamentary disposition that is available only to spouses or registered civil partners. Its reciprocal dispositions are binding. This can similarly serve to avoid disputes, but not with regard to persons entitled to a compulsory portion. The term “reciprocal dispositions” refers to dispositions which it can be assumed would not have been made without the disposition of the other party. If the joint will has been validly drawn up and contains such dispositions, these can be revoked by one spouse only during the lifetime of both spouses and in notarised form. A unilateral revocation by means of a new disposition of property upon death is not sufficient to revoke the disposition. Revocation is no longer possible after the death of the other spouse or partner. From this point onwards, the surviving spouse or partner has only the option – within narrow limits – of contesting the reciprocal disposition. However, the disposition may also become groundless, which means that it is no longer binding. This can occur in particular in the event of the death of the beneficiary of the disposition, as well as through disclaiming, a waiver of inheritance or ineligibility to inherit. The joint will itself must be written and signed by hand. In this respect, the handwritten signature of one spouse and the signature of both spouses under the same deed are sufficient for the deed to be valid.

Compulsory Portion

Succession disputes often concern disclosure, the calculation of the mandatory share, the valuation of assets, or attempts to reduce the estate through asset transfers.

Disclosure, calculation and valuation

The existence of the claim as such is rarely in dispute, as this is usually undisputed on the merits. Where disputes arise, they usually concern the valuation of the estate on which the calculation of the compulsory portion is based. Thereby, the value of the estate at the time of the testator’s death is decisive. Any subsequent increases or decreases in value are not taken into account. The individual items of the estate are valued at fair market value. If the heirs are unco-operative at this stage, the person entitled to the compulsory portion, if they are not an heir, may demand information about the contents of the estate and a separate valuation. The right to a valuation enables the person entitled to the compulsory portion to obtain a comprehensive picture of the estate and their entitlement. It is generally assumed that the person will consent to having the valuation performed by an expert. The right to a valuation covers both the actual and the notional estate.

Asset transfers

Disputes often concern attempts to reduce the estate through asset transfers. Courts closely scrutinise such transfers, as certain transfers made within ten years prior to death may be clawed back into the estate for forced heirship calculations. These disputes are handled by the probate and civil courts with a strong emphasis on asset transparency.

Avoiding forced heirship by relocating assets to other jurisdictions is generally difficult and offers, at best, limited practical protection. Conflict-of-law rules, particularly the EU Succession Regulation, often preserve forced heirship, regardless of where the assets are located. Conflicts may arise where foreign legal systems do not recognise forced heirship, but German courts may still enforce claims through valuation and claw-back mechanisms. Exposure may be mitigated by early lifetime gifts, careful succession planning and, in some cases, forced heirship waivers.

Tax authorities play a central and highly active role. Enforcement relies on comprehensive reporting obligations and extensive information-exchange mechanisms. Tax evasion is pursued through administrative penalties and criminal proceedings, with voluntary disclosure (Selbstanzeige) available under strict circumstances. In recent years, advisers have been increasingly targeted by enforcement, particularly where they are suspected of facilitating tax evasion. As a result, compliance expectations for advisers involved in private wealth planning and structuring have been increasing.

Criminal law and its enforcement play a significant role in private wealth disputes. Tax evasion and money laundering are particularly relevant. In this regard, gatekeepers may also face prosecution.

In German law there is only a limited scope for private criminal prosecution in general (Privatklageverfahren, Nebenklage). That limited scope is hardly relevant for private wealth.

In Germany, there is strong international cooperation in cross-jurisdictional disputes. Cross-border private wealth disputes are primarily handled through EU regulations, international treaties, and domestic conflict-of-laws rules. Within the EU, regulations such as the Brussels I Regulation or the EU Succession Regulation determine jurisdiction, applicable law and recognition of judgments in civil and succession proceedings. Tax enforcement for multi-jurisdictional individuals relies on extensive information-exchange frameworks – eg, EU administrative directives, as well as double taxation treaties.

However, the system also has its flaws – eg, the German legal system has problems dealing with foreign trusts as it does not recognise trusts in the common law sense.

German law does not allow a general “reformation” or rectification of wills. However, courts may interpret or partially invalidate a will to reflect the testator’s true intention if it was expressed incorrectly. Furthermore, under certain circumstances, mistakes may justify annulment of a will. This typically occurs where there is clear evidence of an error, such as a mistake in wording, identity or motive.

Estate administration is generally carried out by the heirs themselves, but the court may appoint an estate administrator if the heirs are unknown, incapacitated or if the estate is insolvent. Such matters are handled by the probate courts.

German law does not recognise an equivalent to the Hasting-Bass rule. Courts do not generally set aside dispositions solely because the fiduciaries exercised discretion poorly or produced unintended outcomes. Unintended consequences may be addressed through interpretation in line with the parties’ true intentions and the principle of good faith. Under certain circumstances, acts may be challenged due to mistakes (Anfechtung), provided the statutory requirements are met. Other than that, relief is only possible for breach of duty. Overall, German courts generally tend to favour legal certainty over broad judicial discretion to correct outcomes retrospectively.

Germany has a strong family-protection culture. Accordingly, there is limited acceptance of asset shielding. This is evident, for example, in the judicial review of prenuptial and postnuptial agreements.

There has been an increase in cross-border succession disputes, which is expected to continue.