The post ’89 shift toward open market economy combined with the famous entrepreneurial spirit brought about in Poland many prosperous businesses, including robust family enterprises. Over the past decades, the Polish business class caught up with the rest of the developed world and started accumulating private wealth. Now Polish individuals are seeking effective ways of managing and protecting their legacy and passing this over to the next generations.
The Malta private foundation has taken a lead in Europe as an efficient and safe legal tool for asset protection, wealth management and succession planning. Consequently, the Malta private foundation has become in recent years one of the most popular solutions among Polish individuals and businesses.
Asset protection and wealth management
A Malta private foundation is set up for the benefit of named person(s) or a class of persons called beneficiaries. It has a separate legal personality and thus can be a legal owner of assets endowed on it by the founder or other persons. The assets owned by a Malta private foundation are administered for the benefit of existing and/or future beneficiaries by specially designated persons called administrators.
The legal personality of a Malta private foundation allows for a creation of a different patrimony and complete segregation of assets from the private wealth of the founder. This means that assets endowed into the foundation are placed outside of the reach of potential future creditors. Consequently, Malta private foundation can effectively ring fence any assets that the founder wishes to protect from her or his potential liabilities.
At the same time, careful oversight over the foundation assets by its administrators ensures that they are in safe keeping for the future. Moreover, the statute of the foundation can grant its founder solid supervisory powers over the foundation and its administrators. The founder can rest assured that her or his wishes concerning the management of the assets shall be duly followed.
Succession planning
A Malta private foundation is also one of the most efficient tools to allocate and distribute wealth between beneficiaries – usually the heirs after the founder’s demise or at any time set by the founder. As described above, upon endowment into the foundation, the assets no longer form part of the founder’s estate and thus are not subject to obligatory legitim (“zachowek”) under inheritance laws. Instead, the founder can precisely distribute the foundation assets between beneficiaries who may but do not have to form part of her or his immediate family.
More importantly, using Malta private foundation can prevent the splitting up of estates. This has proven to be particularly important for owners of family businesses who want to suppress any potential legal disputes between heirs. In such circumstances, it is crucial to guarantee a smooth process of post-mortem transition that does not paralyze the company’s operations and adversely affect the goodwill carefully built over the years.
A viable alternative to a trust
While trusts are well grounded in common law, they have never been present in the legislation of many civil law countries of continental Europe, such as Poland. Consequently, Polish wealthy individuals and businesses often prefer to use legal entities recognized under Polish laws and thus consider structures alternative to trusts.
In view of the above, a Malta private foundation presents itself as an ideal and solution for effective and compliant wealth management and succession planning. Although Polish laws cater only for non-profit foundations, they recognize all foundations, including foreign private foundations as entities with separate legal personality and patrimony, that can have own rights and obligations, sue and be sued. Thus, a Polish client choosing a Malta private foundation over a trust shall benefit from a higher level of legal certainty.
Polish clients frequently look for structures that allow them to retain a measure of control over their assets. While in the case of a trust, once the settlor settles the property on trust he no longer has control over such property, Malta laws allow the founder to reserve significant control prerogatives.
