Czech Republic

Trust funds – a solution for your family and your family property

Passing family wealth on to the next generation is a remarkable phenomenon affecting the life of all family members and later the life of the generations to come. In principle, it is the biggest deal you make as the founder. As a result, it is crucial to carefully and patiently plan all aspects of the deal, that is its tax, accounting and legal aspects. The intergenerational transfer of assets is a novelty in our region. We bring you know-how from countries where succession planning has been part of family thinking for many generations.

Today, trusts have become an important topic with the increasing concerns and worries of parents about the transfer of their accumulated wealth to the next generation. Our many years of experience show that family property can be an excellent servant but a very dangerous master and can pose a threat to the harmony and healthy development of the family in the future.

What is a trust fund?

Although introduced into Czech law only recently (Sections 1448 to 1474 of the Civil Code), trusts offer several interesting solutions for succession planning.

A trust is a set of assets without legal personality that enables families to efficiently administer the assets as a whole, preserve its value and impact on the community.

Each trust has a trustee or trustees that are responsible for the trust’s activities. In administering the trust, the trustee relies on the constitution which is something like the trust’s birth certificate. The other party is the beneficiary, an individual or legal entity, who benefits from the trust’s assets and income.

Why choose a trust for asset management?

A trust is one of the potential solutions for succession planning. Its greatest benefit is in eliminating the inheritance process, which is a common cause of disputes in families. At the same time, the trust defines rules according to which the family will administer their assets in the future.

ZSettlors must be aware and it is critically important that the terms and rules of administering and developing the fund in the future should be defined correctly. As outlined above, the constitution is the crucial element of each trust. The constitution should be drafted not only to reflect the ideas of the settlors but also to be enforceable and to eliminate any potential for harmful interpretation by future generations.