The National Socialist government created the legal basis for the direct sequestration of assets as early as 1933. It promulgated the law on the confiscation of assets of enemies of the people and the state (Gesetz über die Einziehung volks- und staatsfeindlichen Vermögens). It defined the conditions under which the state could deprive persons who had been declared enemies of the state of German citizenship. The property of these denaturalized persons was then confiscated by the state. In this way life insurance policies were also expropriated.
The authorities also applied these regulations in order to sequester the assets of Jewish citizens after they had emigrated. After emigration these people were denaturalized and any of their assets that remained in Germany confiscated.
Finally, in 1941, the regime decided to confiscate all Jewish assets once and for all. The 11th Verordnung zum Reichsbürgergesetz (ordinance on the Reich citizenship law) determined that the property of Jewish citizens who left Germany permanently fell to the state.
At this point in time almost all Jews who had not already emigrated were deported to concentration camps in Eastern Europe. According to Nazi logic they had therefore left Germany and forfeited their German citizenship. All their assets were then seized by the state.
Furthermore, the ordinance obliged all individuals, banks and insurance companies to notify the state of any assets of denaturalized persons they had in their custody. These assets then had to be paid over to the tax authorities.