Polish family foundation and the impact on inheritance law
Family foundation – general assumptions
A family foundation is intended to be an entity responsible for managing the assets of a family business and providing property security for a group of people designated by the founder – in practice, most often a family, enabling an effective process of succession of the family business.
The family foundation will have to have its seat in the territory of Poland and will have legal personality. In order to establish a foundation, it will be necessary for a notary to draw up either a foundation deed or a will, including a declaration on the establishment of a family foundation. A family foundation will only be able to be established by natural persons with full legal capacity or by several such persons who will jointly hold the status of a founder.
The family foundation will be registered in the register of family foundations.
Family foundation and inheritance law
The draft law on the family foundation also amends the inheritance law provisions on the right to legitim (i.e., the right of close relatives of the testator to demand payment of a certain amount from those who have acquired inheritance rights).
The family foundation will have inheritance capacity and will be able to be an heir.
The founder will be required to provide the foundation with assets, the value of which should not be less than PLN 100.000.
The property transferred or donated by the testator to the family foundation will be included in the basis for calculating the legitim.
Donations made to the family foundation more than 10 years before the opening of the inheritance will not be taken into account in calculating the legitim (they will not increase the basis for calculating the legitim). The family foundation, which receives donations from the founder, will be one of the obliged to meet the claims of those entitled to the founder’s inheritance.
Other planned changes concern the introduction of the possibility of waiving the legitim, spreading it in instalments, postponing its payment, or reducing its amount. These changes are intended to allow a family foundation to meet a claim for a legitim without having to liquidate the family foundation’s business.
In addition, the benefits received from the family foundation by the entitled recipient will reduce the value of the legitim.
The draft also includes the possibility for beneficiaries to waive their right to a legitim. Thanks to this solution, the future testator (the founder of the family foundation) will be able to conclude agreements with his or her closest family (children, spouse or parents) to waive the right to the reserved portion while he or she is still alive, so that the family foundation will not be exposed to claims for the legitim, which could negatively affect the integrity of the foundation’s assets. In addition, the waiver of the right to legitim by one of the members of the future testator’s closest family will not result in a proportional increase in the legitim of the other beneficiaries.
The family foundation will be able to be liable for obligations, including alimony, of the founder arising before the establishment of the family foundation (joint and several liability) and for alimony obligations arising also after the establishment of the family foundation, if enforcement from his assets is ineffective (subsidiary liability). According to the legislator, financial security for those to whom the founder has alimony obligations should follow first.
The draft law has currently been forwarded to the Senate, so even in the first quarter of this year it can be expected to come into effect. The family foundation is intended to allow the company to last and avoid disputes between heirs.
So far, there has been no such solution in Polish law.