- Business in Poland -

Family foundation

What is a family foundation and why is it important?

A family foundation is a legal entity that allows for the long-term management of family assets, ensuring the continuity of family business and protecting the interests of the family across generations. It is presented in Polish law as a solution that enables the controlled succession of family assets, eliminating the risk of fragmentation or disputes between family members.

A family foundation is established by the decision of the founder, who transfers assets such as real estate, shares in companies, cash, or other valuable resources to it. The primary goal of the foundation is to protect the interests of its beneficiaries, who are usually the founder's family members. The foundation is not created for profit-making purposes, nor is it a charitable institution. Its role is to ensure effective management of the founder's assets during their lifetime and after their death, in accordance with the founder's wishes.

Asset management in a family foundation: Who is in control?

Once the foundation is established and assets are transferred to it, the founder may, but is not required to, manage those assets themselves, leaving daily decisions to the foundation's board. However, the founder retains the right to use the transferred assets throughout their lifetime. After the founder's death, the foundation takes full control of managing the assets, ensuring their growth and distributing benefits to the beneficiaries. The family foundation can operate across multiple generations, in line with the founder’s intentions outlined in the foundation’s charter.

How to establish a family foundation in Poland?

The family foundation is created by drafting a notarial deed that specifies its purpose, operating rules, and organizational structure. For the foundation to be registered, the founder must contribute assets worth at least PLN 100,000 to the initial fund. The registration requires entry into a special register of family foundations, maintained by the District Court in Piotrków Trybunalski, granting the foundation legal personality.

Family foundation structure: board, supervision, and governance

The family foundation operates through two main bodies: the board and, in some cases, the supervisory board. The board is responsible for managing the foundation's assets and achieving its objectives, while the supervisory board monitors the activities of the board. Beneficiaries of the foundation have an influence on key decisions regarding its operations, including the selection of board members and the approval of financial plans.

Can a family foundation conduct business activities?

Although a family foundation does not engage in business activities, it can be involved in operations related to asset management, such as trading company shares, leasing real estate, or providing loans to companies or beneficiaries. This means that the foundation can engage in investment activities, but its purpose is not profit generation or market activity.

Taxation of family foundations and inheritance planning

From a tax perspective, the family foundation is subject to obligations such as tax on income derived from its assets, as well as taxes on donations if the beneficiaries receive benefits exceeding a certain threshold. It is also important to address issues related to the forced heirship, which, if the foundation is properly structured, can be reduced or deferred to a later time.