Are you running a business and want to secure not only its future, but also your family’s well-being? Are you looking to reduce the risk of conflicts related to succession? Or maybe you’re simply someone who values fairness in how roles and assets are distributed – and you want to protect these matters for more than just one generation? If so, this solution might be exactly what you’re looking for!
What will you learn from the article?
What is a family foundation and what is its purpose?
A family foundation secures family wealth in the long term by managing assets such as real estate or company shares and providing for family members across generations.
What are the benefits of establishing a family foundation?
It protects assets from creditors, prevents fragmentation through inheritance, and enables tax-optimized succession planning for businesses or private individuals.
What legal steps are required to establish a family foundation?
The founder must draft statutes with clearly defined objectives and asset management rules, contribute assets, and apply for recognition by the competent foundation supervisory authority.
What tax aspects must be considered in a family foundation?
A family foundation is subject to inheritance and gift tax, with a substitute inheritance tax payable every 30 years, which requires careful tax planning.
Who should consider establishing a family foundation?
It is suitable for wealthy individuals and entrepreneurs who wish to secure their assets in the long term and plan an orderly succession for their family or business.
—————————————————————
1. What is a Family Foundation?
According to Article 2 (1) of the Polish Family Foundation Act, a family foundation is a legal entity established to accumulate assets, manage them in the interest of designated beneficiaries, and provide benefits to those beneficiaries.
In simpler terms, it is a tool designed to create a stable and lasting wealth management structure – one that ensures asset protection and continuity across generations, without requiring heirs to be personally involved in running the business.
What’s particularly important is that a family foundation allows for the formal separation of family assets from the founder’s personal property. Once the assets are transferred, they become the property of the foundation and are no longer part of the individual estates of family members.
2. Advantages and Disadvantages of a Family Foundation
A family foundation is becoming an increasingly popular solution among entrepreneurs and asset owners who are thinking about long-term protection of their life’s work.
Its main advantage lies in structured succession – assets can be passed on to the next generations without becoming fragmented. When setting up the foundation, the founder can define in detail who is entitled to receive benefits and under what conditions, significantly reducing the risk of family conflicts and unexpected claims.
Unlike traditional inheritance, a family foundation manages the assets as a whole, regardless of the number of heirs or beneficiaries. This centralized approach allows for greater control over investments and helps avoid complications arising from individual decisions made by family members.
Another key benefit is asset protection. The foundation’s assets are legally separated from the personal property of the founder and beneficiaries. This can help safeguard wealth from enforcement proceedings, divorce claims, or mismanagement by heirs – within the limits set by the legal regulations on fraudulent conveyance.
The family foundation also gives the founder considerable flexibility in defining how it operates. The founder can determine who is entitled to payments and when, appoint and remove board members, reserve veto or supervisory rights, and ensure that the foundation continues to operate in accordance with their wishes even after their death.
At the same time, it’s important to be aware that establishing and operating a family foundation comes with certain obligations. The founding process requires a notarized deed, registration in the special register, and reporting the foundation to the Central Register of Beneficial Owners (CRBR). Additionally, a minimum initial endowment of PLN 100,000 is required. Notably, the only court currently competent to register a family foundation is located in Piotrków Trybunalski, which may affect the timing and logistics of the process.
The costs do not end at registration. The foundation is required to maintain full accounting records, file annual financial statements, and manage tax documentation. In practice, this usually means hiring an accounting office or tax advisor.
It’s also worth noting that once the assets are transferred to the foundation, the founder loses direct access to them – the assets become the legal property of the foundation. This means they can no longer be freely reclaimed or managed as private property.
One final consideration is transparency. The family foundation is listed in the public KRS register, and information about the board and the foundation’s articles is publicly available. Beneficiaries must also be identified in internal documents such as the benefits plan and reports, and their data may be shared with public authorities, including the National Tax Administration and the courts.
In summary, the family foundation is a powerful tool for succession planning, asset protection, and long-term wealth management. However, it requires careful preparation, a solid understanding of legal and administrative obligations, and a well-thought-out legal and tax structure.
3. Who Can Be the Founder of a Family Foundation?
A family foundation may only be established by a natural person with full legal capacity who declares its establishment in a notarized deed of incorporation or in a will.
Both Polish citizens and foreign nationals may establish a family foundation — regardless of their place of residence or tax residency.
IMPORTANT: A family foundation may have more than one founder, but only if it is established by a deed of incorporation.
If the foundation is established by will, there may be only one founder, due to the strictly personal nature of a testamentary disposition as a legal act.
4. Who Can Be a Beneficiary of a Family Foundation?
A beneficiary of a family foundation may be:
– a natural person, regardless of their relationship to the founder,
– a non-governmental organization engaged in public benefit activities.
In practice, beneficiaries are most often the founder’s family members (e.g. children, grandchildren, spouse), but nothing prevents the inclusion of third parties – such as a friend, life partner, or organizations supporting specific social causes.
What about pets?According to the law, only a human or an organization may be designated as a beneficiary. However, if the founder wishes to secure the future of a beloved pet, they may appoint a specific person as the beneficiary and indicate in the foundation’s statute or benefits plan that the funds are to be used for the animal’s care – including veterinary treatment and daily living expenses.
5. How to establish a Family Foundation?
A family foundation can be established in one of two ways:
– by a deed of incorporation executed before a notary public,
– or through a will that includes a declaration of its establishment.
The founder may be one natural person or several acting jointly – but only if the foundation is created by deed of incorporation. In the case of a foundation established by will, the law requires that there be only one founder, due to the strictly personal nature of testamentary dispositions.
When establishing a family foundation, the founder is obliged to endow it with assets of at least PLN 100,000. This amount is required both at the time of incorporation and throughout the foundation’s operation – as the minimum level of assets necessary for its continued existence.
6. Who Manages a Family Foundation?
A family foundation operates through a Management Board, which is its mandatory executive body. The Management Board is responsible for the day-to-day operations of the foundation, representing it externally, managing its assets, and carrying out benefits for the beneficiaries. The Management Board may be subject to internal supervision by the Supervisory Board. The beneficiaries designated by the founder form a Beneficiaries’ Assembly, which convenes in specific situations – for example, to approve financial statements or appoint new members to the foundation’s bodies. This structure ensures that the family retains real influence over the most important matters concerning the foundation’s operations over the long term.
7. The Impact of Family Foundation Benefits on the Right to a Reserved Portion (Zachowek)
A person entitled to a reserved portion (zachowek) may, under the law, waive their right – either by entering into an agreement with the future testator or by renouncing the claim after the testator’s death.
The law also allows for the reserved portion to be paid in installments, for payment deadlines to be deferred, and – in justified cases – for the amount to be reduced.
However, if a beneficiary of the family foundation is also entitled to a reserved portion, they may receive only one of these benefits – not both.
8. Tax Benefits of a Family Foundation
From a tax perspective, a family foundation offers attractive conditions. It is exempt from corporate income tax (CIT) until the moment benefits are distributed. Additionally, benefits paid to close family members – such as a spouse, children, or grandchildren – are exempt from personal income tax. Importantly, transferring assets to the foundation does not create a tax obligation for the founder. There is no civil law transaction tax (PCC) or personal income tax (PIT) due at the time of the transfer.
We invite you to follow our profile – we’ll soon be publishing an article that outlines, step by step, how the process of contributing and withdrawing assets from a family foundation works. It’s a practical guide for anyone interested in efficiently managing a foundation structure.
Do you want to protect your family’s wealth and secure the interests of your loved ones? Consider setting up a family foundation – and take advantage of our knowledge and experience in this area. We invite you to get in touch with our law firm.
