What is a family foundation and how does it work?
A family foundation is a legal structure introduced in Poland by the Family Foundation Act of January 26, 2023. Its main purpose is to protect assets and ensure the continuity of a family business. A family foundation allows business owners to transfer assets to subsequent generations in an orderly manner, without having to divide the business among heirs. The foundation is established by the founder – usually the business owner – who sets out the rules for managing the foundation's assets and making disbursements to beneficiaries (e.g., family members). In practice, the foundation can own companies, real estate, shares, or investments, and the income from these assets goes to selected individuals according to the founder's wishes. In 2024, over 2,300 family foundations were registered in Poland, demonstrating how quickly entrepreneurs recognized the potential of this solution. A family foundation is established based on the founder's founding act or will and a statute, which defines its operating principles and disbursements to beneficiaries. The conditions are an asset contribution of at least PLN 100,000 and registration of the foundation in the Register of Family Foundations maintained by the National Court Register. After registration, the foundation acquires legal personality and can pursue the goals indicated by the founder.
Family foundation principles: founder, beneficiary, and financial goals
A family foundation is established by a founder – usually a business or asset owner who wants to organize their financial and family affairs for the future. When establishing a family foundation, it is determined who will be the beneficiary, i.e., who will receive payments from the family foundation. This could be, for example, a spouse, children, grandchildren, or another close person. All rules – who gets what, and when – are recorded in the foundation's statute. The foundation can also support specific goals, such as children's education, care for the elderly, or financing family investments. The foundation's board oversees everything, responsible for assets and achieving the stated goals. This allows the founder to be sure that their vision will be preserved even after their passing.
The financial goals of a family foundation may include asset protection, disbursements to loved ones, and long-term capital management – e.g., investing for future generations. The foundation can pay beneficiaries regular amounts, finance their education, or support selected ventures, according to the founder's wishes. Importantly, disbursements from a family foundation to close relatives are tax-exempt if the beneficiary is a person from the so-called "zero tax group" (e.g., children, grandchildren, spouse).
Advantages of a family foundation from the perspective of the company and owner
More and more family business owners in Poland are considering establishing a family foundation – not only as a succession solution but as a strategic tool that allows them to maintain control over assets, organize family relations, and ensure a stable future for the company. The new legal institution, introduced in 2023, opens up completely new possibilities – especially for entrepreneurs who want to withdraw from operational management but still have influence over key decisions.
From the perspective of the owner and the company, a family foundation offers a number of practical benefits:
Asset protection against division – the foundation collects assets in one place, preventing their fragmentation among heirs.
Maintaining influence – the founder can determine the foundation's operating principles, disbursement methods, and investment policy, even after stepping down from daily management.
Smooth transition to a new management model – the owner can gradually reduce their activity without destabilizing the organization.
Clear rules for the family – the foundation's statute specifies who is a beneficiary and what benefits they can receive, which reduces the risk of conflicts.
Ability to conduct business activities – the foundation can continue to invest, manage assets, and support the company.
Financial security for loved ones – beneficiaries receive funds according to a set schedule, without having to take on the owner's responsibilities.
Protection against claims – assets contributed to the foundation are excluded from inheritance proceedings and, as a rule, are not subject to the statutory forced share.
Tax preferences – disbursements to close family members (e.g., children, spouse) are exempt from personal income tax.
Continuity of strategy and values – the company can continue to be developed according to the founder's wishes, without the risk of an accidental change of ownership.
Increased company resilience – the foundation stabilizes the ownership structure and secures the organization's future regardless of the founder's personal situation.
Disadvantages and limitations of a family foundation worth knowing before deciding
Although a family foundation is gaining popularity as a succession tool, before establishing one, it is important to understand not only the benefits but also the limitations resulting from its legal structure and practice. One of the most common disadvantages of a family foundation is the need for very precise document preparation – especially the statute. An unclearly defined family foundation structure can lead to disputes between the board and beneficiaries in the future, particularly regarding disbursements and benefits for the family. The transfer of assets to a family foundation is irrevocable – once contributed, assets cannot be directly returned to the founder.
Additionally, one must account for costs: both one-time costs upon establishing the foundation and recurring payments related to the foundation's activities, such as accounting services, auditing, or administration. The foundation's activities themselves are legally limited – according to Article 2 of the Family Foundation Act, it can only pursue a specific catalog of goals and revenue sources. This means that not every company or business model will be suitable for this formula. For some families, the mental shift from an owner-managed business model to a more institutional and formalized one can also be a challenge. Moreover, if beneficiaries do not feel responsible for the assets and merely expect disbursements, this can lead to tensions and erosion of the foundation's value.
Therefore, instead of treating a family foundation as a quick fix, it should be seen as part of a broader succession strategy. Only then can its goal – asset protection and long-term financial security for the family – be achieved in a way that supports both the company and interpersonal relationships. A well-prepared succession plan allows for tailoring the foundation's structure and operation to real needs, limiting risks, and maximizing the potential of this new tool.
Family foundation as a tool for succession and financial planning
From a financial strategy perspective, a family foundation can play a key role in long-term asset protection and optimizing payments related to the company's operations. By transferring assets to a foundation, the owner gains not only greater control over their use but also the ability to plan disbursements and investments in a predictable manner consistent with family goals. Thanks to the preferential taxation of family foundations, it is possible to effectively manage financial flows within the structure. It is important to remember, however, that every solution has its pros and cons – and decisions about transferring assets to a foundation should be preceded by an analysis of tax implications, operating costs, and the actual needs of the family. A well-designed foundation can not only support succession but also serve as a tool for conscious financial planning across multiple generations.
Summary
A family foundation is a modern tool for succession and asset planning that can bring real benefits to both the company and its owner. Its main purpose is to protect assets and make disbursements to the beneficiary in accordance with the founder's wishes, regardless of changing family or business circumstances. As a legal entity, the foundation operates in an orderly manner and in accordance with the provisions of its statute, ensuring continuity and predictability of disbursements and asset management.
This solution has many advantages: it helps avoid dividing the company among heirs, offers preferential tax conditions, and allows the founder to maintain influence over strategic decisions even after withdrawing from daily management. On the other hand, it is also important to know the disadvantages of a family foundation – such as legal limitations, formalism, or operating costs. Therefore, a well-designed structure and a realistic assessment of whether the family foundation's goal aligns with the needs of the owner, company, and family are crucial. Only then will the foundation become a tool that not only secures the future but also supports development for future generations.
