For several months now, the Ministry of Finance has been announcing revolutionary legal changes that will protect family assets from irresponsible or insufficiently committed descendants of business owners. The law will introduce family foundations, which in the long run are expected to become a fundamental tool for succession.
About the foundation
As is commonly known, a foundation is an entity with legal personality. It holds assets donated by the founder, who can be any natural person (regardless of their place of residence and citizenship) or legal entities (based in Poland or abroad). Upon donating assets, the founder is obligated to define the foundation's purpose. They can also define the principles, form, and scope of the foundation's activities, as well as the composition, appointment, and organization of its board. Furthermore, the foundation's statute can specify provisions regarding the conduct of its business activities. This leads to the conclusion that the owner of a business can, during their lifetime, regulate the manner and principles that will guide those taking over its management.
By establishing a foundation, the founder has the option of appointing beneficiaries who will benefit from the operation of the business. In this way, the business owner can protect their descendants without obligating them to run the business.
It's worth noting that transferring assets to a foundation excludes them from the estate. This means that business assets cannot be divided to satisfy the claims of the testator's immediate family.
The purpose of family foundations
Beyond the advantages mentioned above, the most important benefit seems to be the ability to control assets and protect them after the death of the person who created them. The family will no longer be able to decide how the family business is run, which in many cases will protect them from losing assets.
In addition, descendants will not be able to decide to sell the business in order to obtain a one-off cash flow.
The company is in the hands of the foundation
When a business is transferred to a foundation, its management is assumed by a body established to manage the foundation on an ongoing basis. It is clear that the founder influences its composition.
The foundation's management board conducts its activities in accordance with the founder's instructions, as set out in the statute. At the same time, it strives to achieve the goals set by the founder.
Summary
Family foundations will certainly allow businesses to be maintained under efficient management. This solution provides the entrepreneur's immediate family with the means to support themselves and secure the family's accumulated assets. This raises the question: will this method of succession comprehensively satisfy the interests of the owner and descendants? It's difficult to say at this point. We don't have information on whether and how such a foundation will be taxed, how the funds transferred to beneficiaries will be taxed, and how inheritance law (including the institution of compulsory portion) relates to this method.
