A family foundation is not just a tool for wealth management, but also an effective way to protect it. One of the key questions that entrepreneurs and high-net-worth individuals ask is: is the wealth placed in a foundation safe from creditors?
In this article, we explain how asset protection works in a family foundation and what its limitations are.
What is a family foundation?
A family foundation is a legal structure introduced to the Polish Civil Code in 2015. Unlike a traditional trust or holding company, a family foundation is a legal entity registered in the National Court Register.
Its purpose is to manage wealth in the interest of the family and beneficiaries, who may be designated in its statute.
The principle of asset separation in a foundation
A key feature of a family foundation is asset separation. The wealth placed in the foundation creates a separate asset pool that can be separated from the founder’s personal wealth. This means that:
- Creditors of the founder cannot reach the foundation’s assets
- If the foundation incurs debts for business purposes, only the foundation’s assets are liable
- Beneficiaries of the foundation are not responsible for the foundation’s liabilities (with certain exceptions)
Limitations of asset protection
However, protection is not absolute. There are situations where creditors may access foundation assets:
- Liabilities incurred by the foundation itself — if the foundation incurs debts on its own account, creditors can enforce them against the foundation’s assets.
- Fraudulent actions — if it can be shown that the founder intentionally transferred assets to the foundation to avoid paying obligations (so-called „preference of credibility”), the court may annul the transfer.
- Foundation maintenance costs — if the foundation fails to pay taxes or registration fees, the tax authority can recover the debt from the foundation’s assets.
Family foundation and business operations
If the foundation operates a business or holds shares in companies, the situation is more complex. Creditors can pursue company liabilities from the company’s assets, but not directly from the foundation. However, if the foundation guarantees company liabilities, the foundation becomes a personal debtor.
Practical tips – how to maximize protection
To ensure maximum asset protection, consider applying several practical solutions:
- Clear asset separation — place the assets you want to protect in the foundation and keep operational liabilities outside.
- Insurance — consider insuring foundation assets against business risks and personal liability.
- Multi-level structure — in complex situations, you may consider a structure with the foundation as the owner of a company, which adds another layer of protection.
- Regular legal consultation — make sure your foundation structure complies with proper legal interpretation.
Summary
A family foundation offers significant asset protection, but it is not a universal weapon.
Its effectiveness depends on proper asset structuring, clear operational rules, and consultation with a legal advisor. For entrepreneurs and high-net-worth individuals, a family foundation can be a key tool in a wealth management and protection strategy.
Michał Gawlak
attorney-at-law
***
Family Foundation & Taxes in Poland: What Will You Actually Pay? A Guide to Rates and Exemptions
The Polish family foundation is often described as a „tax-neutral” vehicle. That is an oversimplification – and one that can be costly. In reality, the family foundation operates within an elaborate system of exemptions and exceptions, with several traps that are easy to overlook at the planning stage.
In this article, we explain how much tax you will actually pay at each stage of a family foundation’s life – from the initial contribution of assets, through ongoing income, to distributions to beneficiaries [Read more…]
{ 0 komentarze… dodaj teraz swój }