One of the key applications of the household foundation is its function in the process of succession. Thanks to the foundation, the funder can defend the assets against the risks associated with the division as a consequence of the inheritance. The household foundation besides allows precise rules for the usage of the property by beneficiaries, preventing conflicts among heirs.
Planning succession is 1 of the most crucial challenges facing property owners and household businesses. In the face of changing economical realities, expanding competition and expanding legal requirements, ensuring continuity and efficient asset management requires not only imagination but besides appropriate tools. The key question is: how can we safe the accomplishment of life and let its smooth transfer to future generations?
In the article “Strategy alternatively of Chaos: Succession in the Company by the eye of a lawyer. Part one" I stressed that succession should be an integral part of a business strategy, not an action taken in the face of the crisis. The introduction of the household foundation into the Polish legal strategy in 2023 opened a fresh chapter in this field, offering a tool that combines the benefits of managing assets, planning succession and protecting capital against the risks associated with its division.
The household foundation in Poland, modelled on akin solutions operating in another European countries, specified as Germany and Austria, aims to enable property owners to effectively manage their property in a multigenerational perspective. However, its application involves not only possible benefits but besides crucial challenges, both legal and tax.
What is simply a household foundation?
Family foundation is simply a circumstantial legal vehicle that allows the collection, protection and management of assets for designated beneficiaries. In the Polish legal order, a household foundation may be established only by a natural individual with the full capacity for legal activities. This is simply a crucial difference compared to another countries where companies or another entities may besides be the founder.
The assets transferred to the foundation must come from the private resources of the funder, which means that economical operators cannot straight participate in the creation of the foundation. After registration in the registry of household foundations conducted by the court in Piotrków Trybunalski, the foundation acquires legal personality, becoming an independent legal entity. The Funder shall specify the assets which it brings to the Foundation as well as the principles of its operation, including the management of the assets, statutory objectives and the rights and obligations of the beneficiaries.
Family Foundation as a tool of succession
One of the key applications of the household foundation is its function in the process of succession. Thanks to the foundation, the funder can defend the assets against the risks associated with the division as a consequence of the inheritance. The household foundation besides allows precise rules for the usage of assets by beneficiaries, preventing conflicts among heirs. Moreover, the property accumulated in the foundation is protected from 3rd organization claims, which is an crucial part of the protection of household capital.
A household foundation may act as a mechanics for the "everlasting management" of property. Unlike the classical transfer of assets to heirs, which frequently leads to its disintegration, the foundation allows the property to be maintained in its entirety and to meet certain objectives in the long term. This is peculiarly crucial for household businesses, which frequently require a coherent management and reinvestment strategy to last generational changes.
Investments as a key component of the Foundation’s activities
A household foundation may not only store and manage property, but besides actively multiply it. The investment activity of the Foundation may cover a wide scope of assets specified as real estate, securities, shares in companies or another financial instruments. The Foundation may besides act as a partner or shareholder in companies, so that the profits generated by them go straight to the Foundation and can then be reinvested.
However, in order to be effective in managing the assets, it is essential to make an investment policy and a strategy that will specify the objectives and limits of the Foundation's investment activities. This policy should take into account both the long-term objectives of the Foundation and the individual needs of the beneficiaries, which allows for a harmonious link between the interests of all parties.
Selected taxation aspects
Despite many benefits, the household foundation is not free of taxation risks. A key issue here is the explanation of taxation rules in relation to the activities of the Foundation. In 2024, the Head of the National taxation Administration (KAS) issued a hedging opinion on the sale of assets transferred to the foundation. That opinion pointed out that the sale of assets and the reinvesting of funds in real property may comply with the rules provided that these activities have economical justification and that the intent of the foundation is not to avoid taxation.
In practice, the increasing popularity of household foundations has made them the subject of peculiar attention from taxation authorities. For example, in October 2024 the first alleged anti-tax avoidance clause procedure was initiated. 1 of the foundations was abandoned with aggressive taxation optimization. This case has shown that the work of the foundation, although based on sound legal bases, must be transparent and consistent with the spirit of the rules in order to avoid possible disputes with taxation authorities.
Potential and challenges of household foundations
The household foundation is an highly comprehensive tool that can play a key function in managing wealth, planning succession and protecting household capital. However, the effective usage of this mechanics requires not only cognition of the rules, but besides a thoughtful approach to governance and investment. Cases of intervention by taxation authorities show that funders must be peculiarly careful to guarantee that the Foundation's activities are economically justified and comply with the applicable rules.
Through an appropriate approach, the household foundation can become an effective tool for the protection of assets and the accomplishment of the long-term objectives of the family. Nevertheless, in order to make full usage of its potential, it is essential to carefully plan the structure of the Foundation, its objectives and the principles of action, which will let for minimisation of risks and maximisation of benefits for both the Funder and beneficiaries.
