Every family may unfortunately have members who can be confrontational, aggressive and uncooperative, who are in addition convinced that they are always right and that the world is always against them. They can create chaos and confusion, are a source of constant conflict or simply do not fit into the overall harmony. Sometimes we call them ‘black sheep’ because they cause difficult situations, place stress on relations or fail to meet expectations.
How can we protect ourselves from the consequences of their actions or omissions? Especially when we are faced with the prospect of succession of family wealth and do not want it to be fragmented, squandered and wasted? The answer is a family foundation.
What is a Family Foundation
A family foundation is a legal vehicle for the orderly and long-term management of family wealth and values. It allows you to set clear rules, objectives and values to be followed, protecting your assets from unwanted influences and the consequences of rash actions or decisions.
How to structure a family foundation to avoid undue influence
The concentration of wealth in the structure of a family foundation eliminates the risk of its distribution and fragmentation – the foundation’s resources are exempt from the general rules of inheritance and are therefore not inheritable. Instead, they are held by the foundation, which manages them according to the will and strategy of the founder.
The rules governing the management of the assets contributed to the foundation and the use of the funds accumulated by it may be designed so as to preserve the value of these assets as far as possible, while at the same time permitting their further accumulation.
The proper regulation of a family foundation’s articles of association can protect against the squandering of capital by, for example, irresponsible family members.
This is because such a document can set out very specific procedures for restricting access to assets and management processes and participation in decision-making, thus helping to limit the influence of those who do not meet certain criteria or do not act in accordance with a family’s values.
This protects the entire organisation and its beneficiaries from dishonest or irresponsible actions and reduces the risks associated with the management of family assets by those who are not prepared to do so.
How to placate the ‘black sheep’ in the family
The foundation can also play an educational role by promoting values and attitudes that are important to the family.
This helps to foster positive relationships and minimises the risk of a ‘black sheep’ emerging.
This is because the foundation’s articles of association can specify who can use the foundation’s resources and under what conditions, thus protecting against unwanted influences, for example, from spouses, distant relatives or unhelpful advisors.
The use of the foundation’s assets can be made dependent on the fulfilment of certain criteria, such as:
- Reaching a certain age
- The attainment of a certain level of education
- A profit generated by the foundation
- An increase in the foundation’s assets
or the occurrence of a certain fortuitous event (such as a serious illness).
It is worth remembering that payments can also be cyclical or targeted (e.g. to cover education costs). They may also be subject to the decision of a specific body of the foundation.
You can find out more about family foundations here: Fundacja rodzinna – o czym warto wiedzieć.
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