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Q. When my ancesters from Germany (1700-1850) were named, they took their first names and many times their middle names from their
godparents. Were these persons related to the parents? Were they just friends from the neighborhood or the church? Or were they business friends of the father? Is there any rule that was used when naming the children after the godparents?
A: Every one of the possibilities you mention does occur within German naming.
German Christian names were given at baptism (christening or Taufe) at least sometimes according to all of the patterns you mention. Godfather and godmother respectively are called Taufzeuge/Taufzeugin (literally, baptismal witnesses or sponsors), Pate/Patin, Göttel/Götin, or one of a host of regional variants. Most often the child's grandparents or aunts and uncles were honored by bestowing their name(s) on the child. In some regions, such as near the Dutch border, there was sometimes a local custom of naming the first male child for the father's father or the first female for the mother's mother, with other relatives in a particular order, but this varied by region and was by no means universal. Another custom is to name the child for a deceased ancestor. If there were two or three godparents, those two or three names were generally but not always used in the naming of the child.
Cousins also served as godparents. Sometimes neighbors were chosen as godparents. Fellow members of the same craft may also have been chosen.
The best rule is to look at the customs that prevailed in the local church and the local area in the time period of your ancestors' baptisms. Were there generally one name or several names derived from the godparents? Do the names generally come from grandparents? (Keep in mind that a deceased grandparent may be the source of a name.) Do the godparents have the same surname as the child's father or mother? (A sister may have married, so the surname is not obvious unless maiden names are mentioned.) Or does there seem to be a pattern of sponsoring a child within a group of millers, tailors or glassmakers? If you do that kind of a survey of the records, you will not only uncover relationships, but also get more closely acquainted with the particular village.