Even after ten years of the existence of trust funds in the legal system of the Czech Republic, interest in them among entrepreneurs in Slovakia continues to grow. Jakub Hollmann, Chairman of the Board of Directors of CCS PREMIUM TRUST, talks about why it is important to think about asset protection and the way of passing it on to the next generation.
Why should entrepreneurs consider setting up a fund?
The fund as an institution originated for the management of family assets, modeled after foreign legal systems. Its goal is to provide protection and various modes of asset management for the founder, who aims to safeguard the acquired assets and the family, and who can also divide it if necessary. Clients also create asset structures for reasons related to protecting assets from negative external influences, such as hospitalization or any other inability to perform a managerial role in the company or manage the assets.
If someone is considering placing family assets into a trust fund or a similar entity, what could be the main motivation and argument to take this step?
Clients often consider foundation or trust fund asset structures in relation to passing on the family business. For example, in situations where the owners do not see a successor in the upcoming generation, but there is someone in the next generation who has the potential to manage the company. By placing the company into an asset structure, this problem is solved because it is partly managed by the founder, partly by professional management, and the second or third generation of heirs can gradually become familiar with the business. Thanks to the asset structure, the family or the entire lineage is financially secured.
What are the biggest benefits of a fund for owners of family businesses?
The original owner decides on the fund and its designation for the entire family or lineage. It starts with the founder and can extend to generations not yet born. The founder specifies beneficiaries in the statutes, but can also leave room for beneficiaries who do not yet exist. The advantage is that what is in the asset structure can be kept long-term within the direct family line. Even if divorces occur in future generations, the assets are not divided and remain in the direct family line. The client also ensures anonymity for the heirs, which is a key feature of asset management structures in terms of passing on assets.
What role do the descendants play, and what are the benefits and consequences of establishing a fund for them?
Through asset structures, the owner motivates the beneficiaries of the new generation. The statutes assign them tasks and obligations that must be fulfilled to be entitled to higher benefits. What is in the asset structure is not part of inheritance law and is not subject to inheritance proceedings. It is also a way to prevent disputes within the family; without clear rules for dividing assets, disputes often arise among descendants.
Does the fund have advantages compared to traditional inheritance proceedings?
Asset structures are not subject to inheritance law, so even if an inheritance tax arises in the first line, it will not affect these assets. In Europe, such tax often exceeds thirty percent, which is a significant amount.
How does the fund establishment process work?
The client’s motivation is key — they must understand the risks of not having this structure and realize that they need it. Then they must decide who from the family will be members of the fund and set the recipients and conditions under which individual beneficiaries will receive payments. We take care of everything else. Our company has created so many funds that I dare say we have covered nearly all models of family situations and are rarely surprised. Asset structures are always tailor-made, and at the beginning of the process, a detailed analysis of the client’s current situation and their present and future wishes and needs is carried out.
Who can become the asset manager?
Most often, clients manage it themselves and appoint someone from the extended family or a close friend as an additional manager. Sometimes there are concerns about increased costs of asset management. The opposite is true because the asset structure is designed so that the client manages it themselves and does not need any external help.
How can your company specifically help interested parties with setting up a fund?
We have the most experience in the Czech and Slovak markets, but also abroad, where we have been active for many years and where these asset structures have existed for a long time, especially in Liechtenstein. We have extensive knowledge of foreign regulations and case law, so we create asset structures in a way that clients who use them are several steps ahead. To do this, you need practical experience, which is our greatest asset.
Read the full article at forbes.sk (October 13).
