The Austrian foundations & trusts - history, benefits and clichés

Since its introduction in 1993, this legal form has established itself as a popular instrument for securing assets and managing them over the long term. Today, the private foundation plays a particularly important role in the succession planning of family businesses and assets. But what exactly are its advantages and disadvantages, how did it come about historically and for whom can it be particularly useful? This overview is intended to provide answers from a legal perspective.

Historical development: The Private Foundation Act 1993

Origin: The Austrian private foundation owes its existence to an amendment to the law in 1993, which was initiated by the then Finance Minister Ferdinand Lacina. The main motive for the creation of this new instrument was the rapidly increasing Capital flight abroad - above all to Liechtenstein, which attracted people with its liberal foundation laws. The aim was to attract migrating assets by offering an attractive domestic foundation law. back to Austria . Accordingly, at the beginning tax advantages to creatively shape the Austrian foundation. With success: in the years that followed thousands Foundations & trusts. A total of over 4,000 foundations have been established since then, of which just under 3,000 are currently active. The majority of these foundations hold stakes in domestic family businesses (around 64% of foundation assets).

Reforms: Over the last three decades, however, private foundation law has been amended several times. sharpened . The initially generous Tax privileges were severely restricted for socio-political and fiscal reasons. These restrictions led to a fall in the number of new foundations and a slight decline in the total number of foundations & trusts. However, the Core purpose of foundations & trusts - the long-term commitment of assets - has remained unaffected and has proven itself in many cases, especially in the case of family-owned companies.

Advantages of foundations & trusts

The Strengths the main focus of the foundations & trusts lies in the orderly Property succession and the protection of companies and family assets. A private foundation can prevent a family business from being fragmented or split up as a result of inheritance. It ensures that the Life's work of the founder after his death and is continued in his spirit. The foundation also offers a outstanding protection of the transferred assets from external risks - such as creditor access or short-term speculative access. The company or assets remain in the shell of the foundation and are therefore less susceptible to disputes between heirs or unwanted takeovers. Many of the largest Austrian family businesses are now (partly) owned by foundations & trusts, which gives them Stability lends.

Even beyond companies, foundations & trusts make it possible to individual design the management and transfer of assets to future generations. The founder can specify in detail in the articles of association who is a beneficiary and to what extent, how income is used and how the succession of beneficiaries is regulated. These Flexibility allows tailor-made solutions to be created for complex family situations - for example, to protect certain relatives or to preserve an artistic life's work. A private foundation is therefore not only suitable for business families, but also for wealthy private individuals. Artists in turn, they can use a foundation to transfer their copyrights, art collections or royalties to the future in an orderly manner and manage their creative legacy according to their wishes. In short, foundations & trusts are an instrument that can help to preserve assets in a controlled and long-term manner.

Disadvantages and challenges

However, the advantages mentioned are also Disadvantages and expense that potential founders need to consider. The establishment and ongoing administration of a foundations & trusts is associated with Costs connected. In addition, the founder effectively Rights of disposal once he has transferred his company or capital to the foundation, he can no longer withdraw it at will, as it is now dedicated to the foundation's purpose.

The fiscal attractiveness of a foundations & trusts is now manageable - the decision in favor of this structure should therefore be made primarily for strategic rather than tax reasons.

Benefits for entrepreneurs, wealthy private individuals and artists

Entrepreneur

For owners of family businesses, the foundations & trusts offer a ideal successor solution . By contributing business shares to a foundation, the entrepreneur can ensure that the company is preserved as a whole and is not split up by inheritance disputes.

Private individuals

Private foundations & trusts can also be attractive for individuals or families who do not own a company. It enables a professional asset management and can be used, for example, to protect family members without giving them direct power of disposal over large parts of the assets. For example, regular payments or the financing of certain purposes (e. g. Education of grandchildren, preservation of real estate, support for charitable projects) can be specified in the foundation deed. The foundations & trusts prevent the assets from being distributed in an uncontrolled manner or possibly misappropriated after the founder's death. Instead, it remains true to a defined purpose. The founder creates a trust for his assets legal framework who has an effect beyond his death and makes his ideas binding.

Artists

When it comes to succession, artists, musicians or authors in particular often do not think of traditional wealth, but their "work", including the corresponding copyrights and rights of use, can have considerable value and generate income over generations. A private foundation offers the opportunity to steer an artist's life's work in an orderly direction. For example, a successful artist can set up a foundation during his lifetime, transfer his rights to it and determine how his works and the resulting income should be dealt with after his death. In this way, it could be arranged that part of the income benefits young artists or that certain cultural purposes are supported, while at the same time the artist's own family is financially secure as beneficiaries. For artists, the foundation can therefore Balance between Estate administration and continuation of the cultural heritage - and help to avoid posthumous disputes (for example between heirs or with exploiters).

Image change

Despite its factual advantages, foundations & trusts still have a somewhat dusty image today. Image on. In the public perception, they have long been the playthings of aged industrialists. In fact, enormous assets are pooled in Austrian foundations & trusts: Estimates speak of 70 to 100 billion euros in the approximately 3,000 foundations. This scale and the often anonymous structure (beneficiaries often remain hidden from the public) have made the Prejudice the idea that foundations primarily serve to conceal and save tax for an elite has been nurtured. However, modern developments show that this image outdated is. Firstly, as explained above, the tax advantages have been largely eliminated - a foundations & trusts is hardly worthwhile today for purely fiscal reasons. Secondly, the foundation landscape is slowly opening up: among the founders there are more and more younger entrepreneurs who actively use this instrument to make forward-looking arrangements for their Business Succession or wealth transfer. In addition, foundations are now being set up in a wide range of areas - from art and culture to science and social projects - demonstrating that it is not always just about the traditional family wealth of old dynasties.

Conclusion: When used correctly and managed professionally, foundations & trusts offer unique opportunities to for generations to come and use it in the desired way. Especially for entrepreneurs, wealthy private individuals and artists with specific succession needs, it can be a customized solution represent. In any case, it requires long-term thinking as well as the willingness to accept the given legal framework. The foundations & trusts is a powerful instrument in succession planning.

Image ©: Burdun Iliya, ID 580927696 | shutterstock. com