We increasingly ask, "What exactly is a family foundation?" and "What does the founder gain, and who is the beneficiary?" In practice, such questions point to the need to understand both the structure and functioning of a family foundation. In this article, we analyze what a family foundation is and how it operates, focusing on its advantages and disadvantages from a strategic and financial perspective.
What is a family foundation and how does it work?
A family foundation is a legal form introduced in Poland by the Family Foundation Act of January 26, 2023. Its primary 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. A foundation is established by a founder—usually the business owner—who establishes the rules for managing the foundation's assets and disbursing payments to beneficiaries (e.g., family members). In practice, a foundation can own companies, real estate, shares, or investments, and income from these assets is distributed to selected individuals in accordance with the founder's will. 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 articles of association or will, and a statute that defines the rules for its operation and payments to beneficiaries. The condition is to contribute assets worth at least PLN 100,000 and register the foundation in the Register of Family Foundations maintained by the National Court Register. Once entered in the register, the foundation acquires legal personality and can pursue the goals specified by the founder.
Foundation principles of a family foundation: founder, beneficiary and financial goals
A family foundation is established by a founder—usually a business or estate owner who wants to organize financial and family matters for the future. When establishing a family foundation, the beneficiary is determined, meaning who will receive payments from the family foundation. This could be a spouse, children, grandchildren, or another close relative. All the rules—who receives what, how much, and when—are written into 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 the assets and the implementation of the stated goals. This allows the founder to ensure that their vision will be maintained even after their passing.
The financial goals of a family foundation may include asset protection, distributing funds to loved ones , and long-term capital management —for example, investing for future generations. The foundation may pay regular amounts to beneficiaries, finance their education, or support selected projects, in accordance with the founder's wishes. Importantly, distributions from a family foundation to loved ones are tax-exempt if the beneficiary is a person in the so-called "zero tax bracket" (e.g., children, grandchildren, spouse).
Advantages of a family foundation from the perspective of the company and the owner
A growing number of family business owners in Poland are considering establishing a family foundation – not only as a succession solution, but also as a strategic tool that allows them to maintain control over assets, organize family relationships, and ensure a stable future for their business. This new legal institution, introduced in 2023, opens up entirely new possibilities – particularly for entrepreneurs who want to step back from operational management while still having a say in key decisions.
From the perspective of the owner and the company, a family foundation offers a number of practical benefits:
Protection of assets against division – the foundation collects assets in one place, which prevents their fragmentation among heirs.
Maintaining influence – the founder can determine the foundation’s operating principles, disbursement methods and investment policy, even after resigning from day-to-day management.
Smooth transition to a new management model – the owner can gradually limit his or her activities without destabilizing the organization.
Clear rules for the family – the foundation’s statute specifies who the beneficiaries are and what benefits they can receive, which reduces the risk of conflicts.
Business Opportunity – The foundation can continue to invest, manage assets and support the company.
Financial security for loved ones – beneficiaries receive funds according to an agreed schedule, without having to take over the responsibilities of the owner.
Protection against claims – property contributed to the foundation is excluded from inheritance proceedings and is generally not subject to compulsory share.
Tax preferences – payments to immediate family (e.g. children, spouse) are exempt from personal income tax.
Continuity of strategy and values – the company can be further developed in accordance with the founder's will, without the risk of an accidental change of ownership.
Increased company resilience – the foundation stabilizes the ownership structure and secures the future of the organization regardless of the personal situation of the founder.
Disadvantages and limitations of a family foundation that are worth knowing before making a decision
Although family foundations are gaining popularity as a succession tool, before establishing one, it's important to understand not only the benefits but also the limitations stemming from the legal framework and practice. One of the most common drawbacks of family foundations is the need for very precise documentation—especially the statute. An unclearly defined structure of a family foundation can lead to future disputes between the board and beneficiaries, particularly regarding payments and benefits to the family. The transfer of assets to a family foundation is irreversible—once contributed, assets cannot be directly returned to the founder.
Additionally, there are costs to consider: both one-time costs associated with establishing a foundation and recurring payments related to its operations , such as accounting, auditing, and administration. The foundation's activities are statutorily limited – pursuant to Article 2 of the Family Foundation Act , it can only pursue a specific set of goals and sources of income. This means that not every company or business model will be suitable for this formula. For some families, the mental shift from running a business based on an ownership model to a more institutional and formalized one can also be a challenge. Furthermore, if beneficiaries do not feel responsible for the assets but merely expect payments, this can lead to tensions and the erosion of the foundation's value.
Therefore, instead of treating a family foundation as a quick fix, it's worth considering it as part of a broader succession strategy . Only then can its goal—protecting assets and ensuring the family's long-term financial security —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 operations to real needs, mitigating 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 security and optimizing payments related to business operations. By transferring assets to a foundation, the owner not only gains greater control over their use but also the ability to plan distributions and investments in a predictable manner consistent with family goals. Thanks to the preferential tax treatment of a family foundation, it is possible to effectively manage financial flows within the structure. However, it is important to remember that each solution has its advantages and disadvantages—and decisions to transfer assets to a foundation should be preceded by an analysis of the 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 informed financial planning across generations.
Summary
A family foundation is a modern succession and estate planning tool that can bring real benefits to both the company and its owner. Its primary goal is to protect assets and provide benefits to beneficiaries in accordance with the founder's wishes, regardless of changing family or business circumstances. As a legal entity , a foundation operates in an orderly manner and in accordance with its statute, ensuring continuity and predictability in distributions and asset management.
This solution has many advantages: it avoids dividing the company among heirs, offers preferential tax treatment, and allows for maintaining influence on strategic decisions even after the founder withdraws from day-to-day management. On the other hand, it's also worth understanding the drawbacks of a family foundation —such as statutory restrictions, formality, and operating costs. Therefore, a well-designed structure and a realistic assessment of whether the family foundation's purpose aligns with the needs of the owner, the company, and the family are crucial. Only then will the foundation become a tool that not only secures the future but also supports development for future generations.
