The Family Foundation as a Succession Tool

Today, family-owned businesses represent an essential pillar of the economy, passing down not only material wealth but also values and traditions from generation to generation. However, the succession process in such enterprises often faces numerous challenges, especially concerning asset management and the protection of family interests. In response to these needs, on February 6th of this year, the President of Poland signed a law introducing the institution of the family foundation into the Polish legal system.

The family foundation is designed to facilitate the succession process in family enterprises by enabling effective asset management and protecting the interests of the family. It is an innovative tool that allows for the smooth transfer of business ownership while maintaining operational continuity and preserving family values.

According to the provisions of the law, a family foundation may be established by one or more individuals with full legal capacity. The foundation must be formed by a notarial deed or will that includes a declaration of intent to create the family foundation. It is also essential to define the group of beneficiaries and the scope of their rights, which is the exclusive prerogative of the founder.

One of the key aspects of a family foundation’s operation is the management of the family business’s assets. The law limits the foundation’s ability to conduct business activities to minimize the risks associated with asset management and to preserve asset integrity. However, the foundation may engage in certain economic activities, such as disposing of assets, granting loans, or participating in commercial companies.

Taxation is another crucial aspect. Income received by the founder and beneficiaries from the foundation is not subject to inheritance or gift tax. However, the acquisition of benefits or property following the dissolution of the foundation is subject to personal income tax. It is important to note that family foundations are exempt from corporate income tax under a special legal status.

The Family Foundation Act also introduces significant amendments to inheritance law, particularly in relation to compulsory shares and the foundation’s liability for the founder’s alimony obligations. A family foundation can serve as an important financial safeguard for individuals entitled to alimony from the founder, protecting their interests in the event of enforcement proceedings against the founder’s personal assets.