• 24.07.2026
• Specialist topic
• David-Michal Benner

Why is early succession planning so important?

Shape your succession - don’t leave it to chance

 Clarifying family objectives

Many succession plans fail not because of a lack of legal options, but because family members have differing expectations. Particularly in family-owned businesses, difficult questions frequently arise: Should each child receive an equal share? Who should assume responsibility for the business in the future? How should family members who are not actively involved in the business be taken into account?

What may appear fair at first glance may not necessarily be appropriate in the long term. An equal distribution may result in several individuals with differing views having to make joint decisions about the business. Conversely, an unequal distribution may be perceived as unfair unless it is clearly explained and appropriately balanced.

Effective succession planning therefore begins not with individual agreements, but with a careful assessment of the circumstances: What objectives do the asset owners wish to achieve? What expectations exist within the family? Where can potential areas of conflict already be identified? The earlier these issues are addressed openly, the greater the prospect of developing a solution that is not only legally effective but also sustainable for the family in the long term.

Establishing and coordinating legal arrangements

Succession planning is not limited to making a will. Rather, a number of different areas must be considered and coordinated. In addition to testamentary dispositions, the key legal instruments include, in particular, lasting powers of attorney, marital agreements and partnership or shareholder agreements.

In the absence of a will or inheritance agreement, the statutory rules of succession apply. Where there is more than one heir, a community of heirs is formed. As a general rule, key decisions can then be taken only jointly. This often gives rise to practical difficulties, particularly in relation to real estate and shareholdings in businesses. A testamentary disposition can determine who is to inherit, who is to receive specific assets and whether an executor should be appointed to administer or distribute the estate. The most appropriate arrangement will depend on the family structure, the nature of the assets and the desired degree of flexibility.

Equally important is the question of who may act on behalf of the asset owner if, as a result of an accident or serious illness, they are no longer able to do so themselves. In the absence of adequate powers of attorney, it may be necessary for the court to appoint a legal guardian, which can restrict the ability to act and delay necessary decisions.

Matrimonial property law is often underestimated in succession planning. In the event of divorce or death, substantial equalisation claims may arise, which can place considerable strain on liquidity, particularly where business assets are involved. A marital agreement can help to limit these risks. However, it should never be considered in isolation. Poorly conceived provisions can quickly have adverse consequences for the spouse’s position under inheritance law or for the tax treatment of the succession. Any arrangement must therefore strike an appropriate balance between protecting the business and providing adequate financial security for the spouse.

In the case of business interests, inheritance law alone does not determine who succeeds to the position of shareholder or partner. The provisions of the company’s constitutional documents are often decisive. Missing or outdated agreements may result in the interest not passing to the intended person. Instead, compensation claims may arise, potentially placing a significant financial burden on the business. Unclear provisions governing voting rights, transfers of interests and the withdrawal or exit of shareholders or partners may also give rise to conflict.

The will, marital agreement and partnership or shareholder agreement must therefore be carefully aligned. This is particularly important where only certain family members are intended to continue the business.

Considering the tax implications

Tax considerations should not be the sole determining factor in succession planning. However, nor should they be addressed only as an afterthought.

Whether inheritance or gift tax arises depends in particular on the relationship between the parties, the nature and value of the assets and the timing of the transfer. Personal tax allowances can generally be used more than once. Early and gradual transfers may therefore be advantageous. However, it should always be ensured that the donor remains adequately protected. Depending on the circumstances, suitable safeguards may include rights of usufruct or contractual rights to reclaim the transferred assets.

Special tax reliefs are available for family homes and business assets. However, these reliefs are subject to specific requirements and, in some cases, lengthy holding periods. If these requirements are overlooked or subsequently breached, relief that was initially granted will generally be withdrawn with retroactive effect. In the case of business assets, it is also necessary to determine which components of the assets qualify for relief at all. Substantial securities portfolios or a high proportion of properties let to third parties may restrict the available tax relief or even disqualify the assets from relief altogether.

Cross-border matters generally require particular care. Where family members live abroad, assets include foreign real estate or shares in a business are to be transferred across national borders, additional legal and tax considerations will usually need to be taken into account. In addition to German inheritance and gift tax, foreign taxes, differing succession laws and income tax liabilities may also arise.

Conclusion

A coherent wealth succession plan cannot be achieved through individual agreements considered in isolation. It requires family objectives, legal arrangements and tax implications to be carefully aligned. Those who plan at an early stage can identify risks, preserve flexibility and create the conditions necessary not only to transfer assets, but also to preserve them for the long term. As personal circumstances, asset structures and the legal framework may change, any succession plan should be reviewed and updated regularly.