Private foundations

What is a private trust foundation?

The foundation is a legal entity established for the purpose of continuously pursuing an enduring purpose, as defined in its deed. In the past, this long-term goal could only be a lasting public interest goal, but nowadays, in many countries, a foundation can be set up to achieve any long-term business or security goal.

Purpose of the private foundation

The private foundation holds and protects the assets owned by businessmen and their families for generations to come. Founders can think about the assets of their family members or the long-term operation of their business when they create a private foundation. They can  also simply set up the foundation to ensure their assets are managed properly after retirement and, of course, for their livelihood.

If significant wealth has been accumulated, its owner has a good reason to be concerned as to how this wealth could be preserved for future generations. Countries with highly developed capital markets provide several examples of major assets dwindling to nothing in inexperienced hands. It can be thus be ensured that if an unexpected death should occur, the heirs, who may not yet be fully ready or lack the experience for managing the assets, or whose lifestyle is unacceptable to the founder, will not run down their inheritance too soon.

Advantages of a private foundation

Private foundations can effectively manage more complex investment portfolios that can accumulate in market economies too, and it is important to note that the assets of a private foundation can be removed from the inheritance cycle, which means that death taxes and duties can also be saved.

In order to accomplish the goals, the detailed charter of the foundation makes it possible to provide for the assets in a much more complex and flexible way than in case of a will. The founder of the trust fund can precisely determine, even for several generations, who will be entitled to the assets and under what conditions or to a particular part of the property as well as the benefits stemming from the income generated by it. The foundation can provide security for the assets since the system of payments and support and the associated conditions and guaranties can be freely adjusted. The board of trustees of the private foundation manages the assets and makes sure that the provisions of the charter and the founder are observed.

Establishing a private foundation

The establishment of a private foundation in Hungary is regulated by several laws and regulations. These are not necessarily easy to understand as individuals. If you are thinking of setting up a private foundation, please contact us. We can assist you throughout the foundation process. With a personalized offer, we will make sure that you get the most out of your private foundation.