Provision

A protection against risks

The planning of asset succession and the provision for a sudden loss as an entrepreneur or private individual is a very important task – even indispensable for young people and their relatives. However, many people who are otherwise active and successful in life shy away from making decisions for themselves about the risks of death and illness. On the one hand, this is due to an uneasiness to think about these issues and to make decisions, on the other hand, however, it is also due to the fact that the tasks appear complex and difficult to manage.However, structured planning and implementation are crucial to finding and implementing the right solutions. The LifeBook concept includes all necessary instruments and documents for your emergency case.

 

The LifeBook ConceptThe Succession Check-up

As a first step, everyone should take stock. What rules already exist? Wills, contracts of inheritance, gifts? Which assets should be allocated to which persons in the event of an unforeseen death? This requires a complete statement of assets and liabilities, preferably in the form of a private balance sheet. And the most important question for entrepreneurs and self-employed persons is: who will be the successor?

 

Private Balance Sheet and Asset Succession Plan

The best way to structure a complete statement of assets and liabilities is in the form of a private balance sheet. This systematically classifies the assets for each family member and assigns any debts to them, such as current loans for real estate.The asset succession plan then shows in a movements balance for the entire family which assets are to be passed on to whom and controls the plans with several tests:

  • inheritance quota test
  • compulsory portion test
  • inheritance tax test
  • solvency test

 

The Emergency Plan

An emergency plan should then describe who is to be informed in the event of the death of the testator and what measures are to be taken. The private emergency plan concerns the sick or deceased person and their relatives, the company emergency plan is a risk management measure and is intended to ensure the best possible continuation of business operations. This plan must be drawn up together with the company’s executives and implemented by them in the event of an emergency.

 

Documents and Directories

You will then have to provide your relatives with all the necessary information, in particular bank accounts and insurance policies. And passwords and access codes. It is not unusual for financial assets abroad to become abandoned because only the deceased, but not his relatives, knew of their existence and access.

 

Insurances

An orderly overview of all existing insurance policies is extremely helpful for surviving dependants, especially life insurance policies. The list should also indicate the location of the policies; it is best to include a copy of the policies in the LifeBook. The list should include all existing insurance policies with their essential details. The list should be updated regularly. The current dated status must be documented.

Powers of Attorney for Business and Private Assets

In the event of death, heirs or relatives cannot act immediately on behalf of the deceased – they must first prove their entitlement by means of a certificate of inheritance or a notarial will.  However, this can take up valuable time. Therefore, the testator should issue powers of attorney to suitable persons.

The same applies in the event that a person is no longer capable of business or action, for example in a coma situation.

If an entrepreneur is not able to act as managing director, others must be able to act on his behalf. If no procurations or powers of attorney have been granted, business powers of attorney or general powers of attorney should in any case be available. This also applies to the shareholder level: as long as the heir cannot show a certificate of inheritance or a public will, he is not formally entitled and therefore cannot submit any shareholder resolutions to the commercial register – such as the resolution in which he has appointed himself as the new managing director.

 

Precautionary Power of Attorney and Living Will

For their very personal situation due to serious illness or legal incapacity, everyone provides decision-making aids as far as possible, such as a living will and a durable power of attorney for health care. And in the event that both parents of minor children die, a custody declaration is recommended, i.e. the designation of persons who are to exercise custody – or not at all. The family court will use this as a basis.

In principle, these personal dispositions do not belong in a will, because otherwise they only become known when the will is opened and thus sometimes too late. Separate declarations are therefore more practicable; in certain cases, a notarial authentication is also recommended here.

The same also applies to dispositions and wishes for one’s own funeral. Special wishes, for example regarding the type of burial, should be found in a separate funeral decree.

 

Wills and Contracts of Inheritance

The will or an inheritance contract regularly form the basis for succession planning. If the testator has not yet drawn up a will, he must do so immediately if the legal succession would lead to unwanted or unfavourable results in his case. In any case, the inheritance of business assets to minors without execution of a will should be avoided. The inheritance of shares in family businesses to the wife of a partner should also often be excluded. Since the development and drafting of a far-reaching will takes time, it may be necessary to draw up a provisional immediate will which contains the most important succession regulations and at least channels the estate to the desired persons. According to German law, wills can be drawn up by notary or private writing, both forms are of equal value. In not just one case, a short but formal decree on a notepad helped to arrange the estate correctly in the most important points in good time.

 

Letters to Relatives and Companies

Frequently, the testator formulates instructions, wishes and greetings to his surviving dependants, but also to the company management. It is also better to include these explanations in one’s own letters and not to include them in the will. In any case, the author must avoid the risk of reading out testamentary orders and conditions that undermine the actual will.

 

The Emergency Kit (Notfallkoffer)

Putting together an emergency kit takes less time than is often assumed – but it does require consistent handling. The result helps the family and relatives and saves them some worries at least at this point.

Round Table

We rightly talk about these topics in our Round Table meetings. The Round Table is an action of Herfurth & Partner and serves to clarify and secure wishes and decisions in the family in connection with assets, provision and succession.

The next dates can be found in the Round Table section (welcome homepage).

Publications

Further information on many topics can be found in the Publications section (welcome homepage).

Your counsellor

Angelika Herfurth

Attorney at law and specialist lawyer for family law

Learn more under ABOUT US

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