Under Section 1378(1) of the German Civil Code (BGB), the statutory equalisation of accrued gains is generally settled by means of a cash payment. However, liquid funds are often in short supply, particularly where assets are tied up in real estate, investment portfolios or interests in companies. As a result, spouses may transfer the assets that are available. This is precisely where a problem can arise that many spouses only become aware of when they receive their tax assessment: the tax authorities may treat the transfer as a sale.
In its judgment of 18 June 2026 (case no. 8 K 901/23 E), the Münster Fiscal Court has now confirmed for the first time that this tax consequence can be avoided through carefully structured provisions in a marital agreement. At the same time, the Court ruled against a taxpayer who had only partially implemented this approach.
The Problem: A Transfer “in Lieu of Performance” Constitutes a Disposal
Under the German statutory matrimonial property regime of community of accrued gains, when the regime ends, whether as a result of divorce, death or a change to separation of property by marital agreement (often referred to as a “Güterstandsschaukel”), Section 1378(1) BGB gives rise to a monetary equalisation claim. If the spouse liable to make the equalisation instead transfers real estate, a securities portfolio or shares in a GmbH, this constitutes performance in lieu of fulfilment under German civil law (Section 364 BGB): an asset other than the one originally owed is transferred.
For tax purposes, according to established case law of the German Federal Fiscal Court (BFH), beginning with its judgment of 15 February 1977 (VIII R 175/74) and subsequently confirmed, inter alia, by its decision of 8 March 2006 (IX R 34/04), such a transfer constitutes a transaction for consideration. The transferring spouse is released from the obligation to make the cash payment, and this release constitutes the consideration received. The tax consequences can be significant:
- Real estate transferred within the ten-year holding period: private disposal transaction under Section 23 EStG (exception: owner-occupied residential property)
- Shareholdings of at least 1% in corporations: disposal under Section 17 EStG
- Securities: investment income tax under Section 20 EStG
- Business assets: potential withdrawal and disposal taxation
The fact that the transfer may be exempt from gift and inheritance tax under Section 5(2) ErbStG and from real estate transfer tax under Section 3 nos. 4 and 5 GrEStG does not alter this conclusion. Income tax is governed by its own criteria. The Münster Fiscal Court expressly confirmed this distinction.
The Solution: Asset-Specific Equalisation of Accrued Gains
The structuring concept, which has been developed in German legal literature for more than a decade (in particular Stein, DStR 2012, 1063; subsequently NZFam 2023, 918; Milatz, DStR 2021, 1437), takes effect at an earlier stage: rather than changing the manner in which an existing monetary claim is satisfied, the content of the claim itself is modified before the claim arises.
By means of a notarised marital agreement (Section 1408 BGB), the spouses agree that, upon termination of the matrimonial property regime, the equalisation of accrued gains is to be effected not by a cash payment but by transferring a specifically identified asset, such as an apartment building, a securities portfolio held with the spouses’ principal bank or an interest in the family-owned GmbH. When the equalisation claim subsequently arises, it is therefore directed at that specific asset from the outset. The transfer then constitutes ordinary performance of the obligation (Section 362 BGB), rather than performance in lieu of fulfilment. Since, according to the BFH, the entitlement to equalisation of accrued gains is acquired by operation of law and therefore without consideration for income tax purposes, there is no transaction for consideration and, consequently, no taxable disposal.
From a civil law perspective, this approach is well established. The German Federal Court of Justice (BGH) has long recognised that spouses may, by marital agreement, exclude the equalisation of accrued gains, modify the applicable proportions or agree on “a different form of division” (judgment of 16 December 1982, IX ZR 90/81). Section 1383 BGB itself also provides for the allocation of specific assets in lieu of a cash payment.
The Case Before the Münster Fiscal Court: The Right Idea, the Wrong Legal Instrument
The spouses were married under the statutory matrimonial property regime of community of accrued gains, without a marital agreement, and had acquired an apartment building and two condominiums in 2011/2012, each holding a 50% co-ownership interest. In 2016, the wife filed for divorce; proceedings concerning the equalisation of accrued gains, pension rights adjustment and separation maintenance were conducted in parallel. In July 2018, the spouses entered into a settlement before a conciliation judge. The husband transferred his co-ownership interests in all three properties to the wife, who assumed the outstanding loans. Both spouses mutually waived any further claims for equalisation of accrued gains, as well as claims relating to maintenance and pension rights adjustment. The divorce became final in October 2018, and the conveyance of title was notarised in December 2018.
The husband argued that a monetary claim had never arisen, as the settlement had been concluded before the divorce became final. Nevertheless, the tax authorities assessed income of approximately EUR 340,000 from private disposal transactions.
The Decision
The Münster Fiscal Court first confirmed the general principle: where an existing monetary claim is settled by transferring assets, the transaction is deemed to be made for consideration. The Court then made the key point for structuring purposes: the position is different if, while the matrimonial property regime is still in effect, the spouses agree by marital agreement that the future equalisation of accrued gains is to be satisfied by transferring a specific asset. This requires that the asset itself is owed irrespective of its value and is not merely credited, based on its value, against a monetary claim. In such a case, the transfer is made without consideration. The Court thus expressly endorsed the approach previously advocated in German legal literature.
In the case at hand, however, this did not assist the claimant. The settlement concluded before the conciliation judge did not constitute a marital agreement, but rather a divorce settlement agreement pursuant to Section 1378(3), sentence 2 BGB. It had been entered into solely in contemplation of the specifically anticipated divorce and would have ceased to have effect had the divorce not taken place. The spouses had therefore not replaced the statutory equalisation regime with a contractual arrangement. The Court also relied on the wording of the settlement, under which the parties waived any “further” claims for equalisation of accrued gains. Such a waiver would not have been necessary if the equalisation claim had been directed at the properties from the outset. The consideration received by the husband therefore consisted of the wife’s waiver of her monetary claims. As no specific amount had been determined, the Court estimated the disposal proceeds on the basis of the market value appraisals attached to the settlement.
An appeal on points of law has been admitted and is currently pending before the German Federal Fiscal Court (BFH) under case no. IX R 10/26.
Second Warning from Lower Saxony: Crediting the Asset’s Value Constitutes Consideration
In parallel, the Lower Saxony Fiscal Court (judgment of 16 March 2026, 9 K 170/24; appeal pending under case no. IX R 4/26) ruled on a case in which the husband transferred real estate “in advance” as part of a partial court settlement, with the parties agreeing that the value of the properties would be credited against the future equalisation claim. Although the equalisation claim had not yet arisen at the time of the transfer, the Court held that the transaction was made for consideration. The message is the same: where an asset is merely credited at its value against a monetary claim, the transfer constitutes a transaction for consideration.
Criticism of the Decision and Its Practical Implications
Legal commentators (Ferrenberg/Klamet, RFamU 2026, 449) have welcomed the Court’s recognition of the underlying principle, but consider the formal distinction between a marital agreement and a divorce settlement agreement to be unconvincing. From an economic perspective, both instruments address the same subject matter, the dividing line between them is fluid, and, following the Court’s own reasoning, an identical arrangement structured as a marital agreement could have achieved a tax-free result even shortly before the divorce. Whether the German Federal Fiscal Court (BFH) will take this criticism into account remains to be seen. For current advisory practice, however, the implication is clear: until further notice, the tax authorities are unlikely to accept an asset-specific equalisation arrangement contained in a divorce settlement agreement. The more reliable approach is to structure the arrangement by means of a marital agreement.
What Does This Mean in Practice?
Plan ahead rather than waiting for a dispute. An asset-specific equalisation of accrued gains should be incorporated into a marital agreement governing the spouses’ matrimonial property arrangements generally and independently of any specific intention to divorce. Section 1408 BGB does not prescribe a minimum period before the matrimonial property regime may be terminated. However, the greater the time between the agreement and the termination of the regime, the lower the potential for disputes with the tax authorities.
Make the specific asset itself the subject of the obligation, irrespective of its value. The marital agreement should identify the asset with sufficient legal certainty, for example by reference to land register details, securities account number or specific company shares, and make that asset itself the subject of the equalisation claim. Wording that presupposes a monetary claim should be avoided, such as “crediting the value”, “in settlement of” or “waiver of any further equalisation claims”. Where appropriate, substitute assets should also be covered.
Combine cash-equivalent assets and other assets. Those seeking greater flexibility can designate several specific assets rather than a fixed monetary amount, for example a property together with a specified bank or securities account. The overall economic value can then be adjusted through deposits and withdrawals without making a monetary amount the subject of the equalisation claim.
Keep gift tax implications in mind. The value of the allocated asset should not exceed the amount of the statutory equalisation claim as calculated under the applicable rules. Otherwise, the excess may constitute a taxable gift. A comparative calculation should therefore form part of the planning process.
Obtain a binding ruling from the tax authorities. Until the BFH has ruled on the pending appeals, the proposed structure should be secured by obtaining a binding ruling pursuant to Section 89(2) of the German Fiscal Code (AO). Experience indicates that tax offices regularly issue such rulings for asset-specific equalisation arrangements agreed in a marital agreement.
Also applicable to a change of matrimonial property regime and in the event of death. This structure is not limited to divorce. Where spouses switch to the separation of property regime in order to transfer assets free of gift tax under Section 5(2) ErbStG, it can prevent the satisfaction of the equalisation claim from triggering income tax. In the event of death, it can also operate in a manner comparable to a legacy, allowing specific assets to pass to the surviving spouse without losing the tax exemption applicable to the equalisation of accrued gains.
Keep pending tax proceedings open. Anyone who has already received a corresponding tax assessment should consider filing an objection, referring to the pending BFH proceedings IX R 10/26 and IX R 4/26, and applying for the proceedings to be suspended pending the outcome of those cases.
The Three Scenarios at a Glance
| Structuring Approach | Tax Treatment |
| Property is transferred in settlement of the statutory monetary equalisation claim | For consideration – Section 23 EStG (or Sections 17, 20 EStG) applies |
| The value of the property is credited against an existing or future monetary claim, including before the claim arises and also under a divorce settlement agreement | For consideration (Lower Saxony Fiscal Court, appeal IX R 4/26; Münster Fiscal Court, appeal IX R 10/26) |
| A marital agreement designates the property, irrespective of its value, as the specific asset to be transferred in satisfaction of the equalisation claim | Without consideration – no taxable disposal transaction (Münster Fiscal Court, para. 30) |
We Are Here to Advise You
Would you like to structure your matrimonial property regime so that real estate, securities portfolios or company interests can be transferred to your spouse without triggering income tax if the need arises? Or are you planning a change of matrimonial property regime and want to ensure that the equalisation claim is settled in a tax-efficient manner? Together with you and your tax adviser, we will develop a marital agreement tailored to your individual circumstances, precisely drafted, aligned with your asset structure and taking current case law into account. Please feel free to contact us. Appointments with the notaries at Gänsemarkt can also be arranged at short notice.
