The prohibition of retrocession provides that a retrocession of the trust to the settlor is in principle excluded and that it can only be carried out in exceptional cases in return for recovery/over-protection or reimbursement of payments already made to beneficiaries to the settlor. The case was filed by a former executive of the insolvent company X. X, who had entered into a contractual trust agreement for his senior executives and who deposited part of their annual income into an account with a bank (the agent) to pay it only after retirement (deferred compensation). The purpose of this structure was to save taxes and benefit from a lower income tax rate, given that a retiree`s annual income is generally much lower than during employment. To guarantee the rights of senior managers (beneficiaries), X signed a trust agreement with the agent. A contractual trust agreement is a structure often used by German companies to set up tax-efficient retirement provision to protect pension rights in the event of the employer`s insolvency. Although two trusts are generally structured in this way, the judgment underlines the importance of all these elements and makes it clear that a derogation from this standard may jeopardize the interests of beneficiaries in the guarantee. It is clear from the decision that, in order to maintain a contractual trust agreement in the event of the insolvency of the Settlors, it is essential to correctly transpose all the elements of the double trust into the underlying trust agreement and that it is not sufficient to agree solely that the purpose of the trust is to protect the beneficiaries in the event of insolvency. The underlying trust agreement must therefore ensure that: to achieve this in the case of dual administration, it is not enough for a single administrative trust to be agreed between trustee and trustee, as this does not sufficiently separate the assets from those of the receiver. In an administrative trust, the settlors` assets are managed by the agent in the name and for the benefit of the Settlors.
Such a trust will no longer exist in the insolvency of the Settlors under the law. In order to sufficiently separate the assets of the trust from the assets of the trust, it is necessary to create, in addition to this administrative trust, a security trust between the trust and the beneficiary of the trust.. . . .