The German government's proposed legal change, which will give the benefit of the doubt to those unable to prove why they were in state institutions, comes in the year that marks the 30th anniversary of the fall of the Berlin Wall.
“This is an important signal, particularly coming in this year which is the 30th anniversary of the peaceful revolution” that brought the end of the communist regime, said a government statement.
Between 1949 and 1990, close to half a million children and youths were taken away from their relatives and brought up in homes in the former East Germany.
Some 135,000 of them were sent to special institutions commonly dubbed “kid's prisons” that carried out “re-education” to force them to fall in line with the socialist ideology.
Following the Soviet disciplinarian education axiom, children in these so-called Jugendwerkhöfe were subject to physical abuse including beatings, isolation cells and food deprivation.
Germany first offered former victims compensation in 2012, granting them a “victim-pension” of around €300 a month.
But many people failed to qualify, sometimes because they had lost, or never received, essential documents.
Under the new rules those who have been unable to find paperwork or proof explaining why they were taken into state care will be given the benefit of the doubt and treated as victims of the communist dictatorship.
A deadline for applications to seek compensation will also be scrapped.
Even though three decades have passed, Justice Minister Katarina Barley said, the work to help rehabilitate former victims is not over.
“It is our common responsibility to stand on the side of the victims,” she said.
“Even if financial support will not make up for the suffering of these victims, it is an important sign of recognition and justice.”