Lump sum settlement for waiver of post-marital claims

A gift or generous donation pursuant to Section 7 (1) No. 1 of the German Inheritance Tax Act (ErbStG) is generally subject to gift tax, even between spouses. From an objective point of view, a generous donation requires that the benefit leads to an enrichment of the recipient at the expense of the donor and that the donation is objectively gratuitous. From a subjective point of view, the donor must be willing to make the gift gratuitously or generously; it is sufficient for this purpose if the donor is aware that the gift is gratuitous. In its decision of April 9, 2025 (case no. II R 48/21), the German Federal Fiscal Court (BFH) ruled on the gift tax liability of a lump-sum settlement for the waiver of post-marital claims that were not due at the time the marriage contract was concluded and whose reason and amount were uncertain.

The taxpayer and his future wife entered into a prenuptial agreement before the wedding. In it, they agreed on the marital property regime of community of accrued gains, which they excluded in all cases of termination of the marriage except his death. In return for waiving specific post-marital claims, the taxpayer undertook to pay a lump sum settlement to his future wife. To fulfill this obligation, the husband transferred a piece of real estate to his wife after the wedding, the value of which the spouses estimated at EUR 6 million. This value corresponded to the estimated value of the future post-marital claims. In the event that gift tax was assessed, the husband was also required to pay the tax. The tax office then assessed gift tax of around EUR 830,000 based on the value of the property and the tax payment assumed. The lawsuit filed after the unsuccessful appeal was unsuccessful.

The BFH considered the factual requirements for a generous gift to be fulfilled from both an objective and subjective point of view. In the opinion of the BFH, the fact that the wife had waived her post-marital claims before the marriage did not preclude the gift from being gratuitous, as this did not constitute consideration in the sense of gift tax law, in accordance with its earlier case law, including the decision of October 17, 2007 (case no. II R 53/05). The wife's waiver therefore does not constitute consideration that reduces the enrichment. Under civil law, too, claims for equalization of gains and other post-marital claims, such as the claim for post-marital maintenance and the division of household goods, only arise upon termination of the community of accrued gains.

The waiver of any future equalization of gains in exchange for a lump-sum settlement also fulfills the requirements of Section 7 (3) of ErbStG. According to this provision, consideration that cannot be sufficiently determined in monetary terms due to uncertainty is not taken into account. At the time of the waiver, both the basis and the amount of the wife's claims were uncertain. The wife thus received a valuable piece of real estate without any consideration and was enriched at the plaintiff's expense, so that this constitutes a generous gift.

The taxpayer's objection that the transfer of the property was necessary not only from his point of view but also on the advice of his lawyers to prevent the contested marriage contract from being declared null and void in the event of a divorce was also not upheld. This is because the validity check pursuant to Section 138 (1) of the German Civil Code (BGB) of marriage contracts concluded before the marriage does not in any case lead to a claim for payment at the beginning of the marriage, which argues in favor of the gratuity of the gift.


 

Notice: 

The decision follows an earlier BFH ruling of September 1, 2021 (case no. II R 40/19) on so-called needs-based settlement. If spouses agree on payments of a certain amount from one spouse in the event of the termination of their marriage, which - unlike in the judgment discussed above – are only to be made at the time of the divorce, this does not constitute a generous gift and therefore does not give rise to gift tax. 

Alternatively, in practice, in the case of a long-standing marriage and sufficient gains, it would be possible to agree on a so-called marital property regime swing (an option whereby assets can be transferred to the spouse entitled to equalization of gains without being subject to gift tax by changing the marital property regime during the lifetime of the spouses).