{"id":3407,"date":"2026-08-27T22:42:09","date_gmt":"2026-08-27T22:42:09","guid":{"rendered":"https:\/\/urbanthier.de\/?p=3407"},"modified":"2026-08-30T10:18:52","modified_gmt":"2026-08-30T10:18:52","slug":"taxation-of-a-trust-in-germany","status":"publish","type":"post","link":"https:\/\/urbanthier.de\/en\/besteuerung-eines-trusts-in-deutschland\/","title":{"rendered":"Taxation of a trust in Germany"},"content":{"rendered":"
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Taxation of a trust in Germany<\/h1><\/div><\/div>\n\n
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Image source: NINENII<\/p>\n<\/div><\/div>\n<\/div>\n\n

When planning international estates, the question regularly arises as to whether a US American trust<\/a> whether a so-called offshore trust is suitable for structuring and the long-term transfer of assets. This primarily concerns clients who, in addition to assets in Germany, also Real estate<\/strong>, Corporate investments<\/strong>, Securities accounts<\/strong> or other assets<\/strong> in the United States<\/strong> hold.<\/p>\n

A trust can be a valuable tool in such cases. However, it is not suitable as a blanket standard solution and should under no circumstances be established solely with the expectation of automatically avoiding German taxes. Whether the structure is actually sensible depends on its specific design, the individuals involved, the location of the assets, and the client's personal goals.<\/p>\n

A reliable structure therefore always requires a coordinated review under both German and US law.<\/p>\n<\/div><\/div>\n\n

Taxation of a trust in Germany<\/h2><\/div><\/div>\n\n

The trust is a classic structuring instrument of Anglo-American law. It regularly arises through a contractual or testamentary agreement, the so-called trust agreement.<\/p>\n

In the process, a person, referred to as a grantor, settlor, or trustor depending on the legal system, transfers assets to a trustee. The trustee receives legal ownership and administrative authority over the trust assets. However, the trustee may not use these assets at their own discretion, but must adhere to the provisions of the trust agreement and the fiduciary duties applicable to them.
Other persons, the so-called beneficiaries, are frequently favored. Depending on the structure, these can receive ongoing distributions, access the assets at a later date, or become beneficiaries only after certain conditions are met.
The trust thus typically separates formal ownership or legal administrative power from the economic beneficiary interest.<\/p>\n<\/div><\/div>\n\n

No direct counterpart in German law<\/h2><\/div><\/div>\n\n

For initial classification, a trust is often compared to a German foundation. This comparison can illustrate the economic principle, but is only legally viable to a limited extent.<\/p>\n

A German incorporated foundation is a legal entity with its own assets. By contrast, a trust is generally not a legal entity, but rather a legal relationship shaped by the respective foreign law between the settlor, the trustee, and the beneficiaries.<\/p>\n

German civil law does not provide its own legal form of a \u201etrust\u201c. However, it does not follow from this that a trust validly established under foreign law is completely ignored in Germany. Rather, German authorities and courts must examine how the specific structure is to be classified under German civil and tax law.<\/p>\n

This classification is not based solely on the designation \u201eTrust.\u201c The decisive factors are the actual rights and obligations of the parties involved and the question of whether the assets have been legally and economically removed from the settlor's control effectively.<\/p>\n<\/div><\/div>\n\n

Revocable and irrevocable trusts<\/h2><\/div><\/div>\n\n

Of central importance is the distinction between revocable and irrevocable trusts.
In a revocable trust, the grantor retains the right to amend the trust, withdraw assets, or completely dissolve the structure. The settlor often remains largely in economic control of the assets. Such trusts are widely used in the US to facilitate asset management and avoid a subsequent probate proceeding.
In contrast, an irrevocable trust can no longer be unilaterally revoked or arbitrarily modified by the grantor. The transferred assets are removed from their possession to a significantly greater degree. This separation can be significant for estate planning, asset protection, and certain U.S. tax objectives. However, it also entails a substantial loss of control.
Simply labeling something as \u201erevocable\u201c or \u201eirrevocable\u201c is not sufficient for the German legal assessment. The decisive factor is always which rights the grantor has actually reserved and what claims the beneficiaries are entitled to.<\/p>\n<\/div><\/div>\n\n

Typical areas of application for a trust<\/h2><\/div><\/div>\n\n

Trusts are used for very different purposes. In international estate planning, they frequently serve to, Managing wealth over the long term<\/strong> and clear afterwards established rules <\/strong>to pass on to relatives or other beneficiaries.<\/p>\n<\/div><\/div>\n\n

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A trust can be used, for example, to:<\/h4><\/div><\/div>\n\n