Family foundation or will? The expert explains the key differences

A year of waiting for entry

How to set up a family foundation? The regulations of a family foundation were created in the same way as foreign trusts. To create such a foundation, it is necessary to sign notarial deeds – the founding act and the adoption of the statute, as well as entry in the register of family foundationsrun by the District Court in Piotrków Trybunalski. A family foundation may also be established in a will. The minimum assets necessary to cover the founding fund are PLN 100,000. zloty.

Before entry occurs, a family foundation does not have legal personality, but operates as a family foundation in the organization. Currently, the waiting time for entry is up to a year. The popularity of the institution has exceeded the expectations of the legislator and the procedures created to support it, which are concentrated in one court for the entire country. Due to this, the waiting time for an extract from the register, which is the “legitimacy” for the foundation in trading, is significantly extended, which may hinder the functioning of the foundation in trading, especially compared to companies operating within the efficient system of the National Court Register.

In the face of many months of waiting for entry, notarial deeds – the founding deed and the statute – become the most important document for the founder, beneficiaries and other trading participants during the transition period.. Notarial activities are performed on an ongoing basis, providing the parties with legal effect (as far as possible before entry) and certainty as to the content of the activities performed.

The founder's vision is the basis of the statute

At the stage of creating the foundation and drafting its statute, it is desirable to coordinate the founder, a tax advisor or lawyer and a notary documenting notarial activities related to the establishment and further operation of the foundation. In addition to the above-mentioned initial activities, these include minutes of beneficiary meetings, donations providing the foundation with additional assets and other activities related to its functioning in trade. The role of a notary goes far beyond the formal preparation of a deed. The notary ultimately puts the founder's vision into the legal and editorial framework of the document; his task is to translate the founder's often complicated personal situation. and business arrangements into precise legal language.

Not only a relative is a beneficiary of the foundation

Who is this solution for? This institution is most suitable for owners of family businesses, as it ensures their smooth continuation of operations, while fully respecting the founder's vision. The statute precisely defines the terms and conditions of use of the property, ensuring that beneficiaries are financed for their basic needs, such as education and health, as well as other provided benefits.

The Act contains largely dispositive regulations, which means that the founder has great flexibility in shaping its bodies and operating procedures. This means that the regulations allow for the formation of an entity tailored to the needs of a given estate, as well as the personal circumstances of a specific family.

At this point family is broadly understood, not only as people related by blood or affinity, but also as a circle of friends, co-workers, or informal partnerswho may become persons performing functions in its bodies and receiving benefits. Even though the Act regulates its tasks as a legal person established to collect property, manage it in the interests of the beneficiaries and provide benefits to the beneficiaries, in practice the possibilities of achieving this goal are very wide.

Read also: A family foundation is a safe for the family business and assets. When to put it on and when to let it go?

A proposal for patchwork families

Unlike a gift or a will, a foundation is not based on the distribution of property, but assumes its safe growth, while maintaining the founder's control over the property even after his death. It allows you to strengthen the family's image and good name.

At the same time, it can comprehensively regulate the legal situation not only in the event of inheritance, but also the division of property, and even loss of legal capacity, or control of further generations in the event of addiction or other risky life situations. It meets the needs not only of married people and those with children, but can also be ideal for protecting members of the so-called patchwork families, informal relationships, including same-sex relationships, and guaranteeing support for single people.

The educational and upbringing value of a family foundation is not obvious, but also underestimated. Instead of equipping the next generations with resources and property that will give them an easy start in adult life, requires them to use the proverbial “fishing rod” responsibly. The founder may make the level of benefits they are entitled to, as well as their decision-making power in bodies, dependent on the completion of a certain age, education, or otherwise condition, for example, the election of members of the management board of such an institution from among children and grandchildren who provide the highest guarantee of professionalism.

Foundation statute, will and succession

The introduction of a family foundation into the legal order also changed the regulations regarding legitime. Therefore, an extremely important competence of a notary is the ability to look at the founder's assets comprehensively. Establishing a family foundation, as part of the succession structure, requires the revision of wills and other documents, such as a waiver of inheritanceto avoid future conflicts. A properly established family foundation, along with other properly planned notarial activities, is crucial in the entire succession planning process.

The doctrine considers the effects of benefits in relation to the applicable property regime, and the possibility of excluding benefits to minor beneficiaries from the management of their parents. Although the institution of a family foundation still raises questions that require years of operation to answer, we can already see the need for it to be a stable, lasting institution that provides development opportunities for Polish families and entrepreneurs.

Notaries encounter it more and more often in everyday practice, understanding the needs of citizens and constantly developing their knowledge and experience in serving them. They are not just officials who prepare the document, but also trustees of the family's legal security. The notary quickly adapted to the new regulations, ensuring stability and certainty of transactions where the regulations are ambiguous.

Why family foundations at all?

Finally, it is worth recalling that the institution of a family foundation, although relatively young, introduced at the end of May 2023, has raised many doubts and emotions since its inception. Mainly due to the unfair labeling of it as an elitist tool, intended primarily for tax optimization of “large” estates.

In reality, however, even if we perceive this institution through the prism of tax breaks (unfair), we cannot forget about its general social purpose – building a strong economy based on retaining Polish capital in the country.

Author: Anna Szmigiera-Wyrzykowska, notary from the Warsaw Chamber of Notaries