ESTABLISHING A TRUST FUND FROM ONLY CZK 19,900 WITHOUT VAT!
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Basic information on the Trust fund
To explain in an easy-to-understand manner, a trust fund is a form of management of any property that is generated by detaching it from the founder's property, while maintaining its anonymity. The property thus ceases to be the property of the trust funder and becomes an anonymous and independent property. The trust funds can be used primarily as a tool for the protection and long-term management of family or corporate property, too maintain the confidentiality of information about the property, or to secure and stable structuring of future transfers of assets within the family and to prevent the dilution of family assets.
A trust fund may be created by any person, whether legal or natural, who, by virtue of his or her will, has reserved his property or part thereof for a particular purpose. This person becomes the founder of the trust fund by this legal action. The advantage is that if the above mentioned property is a real estate or another form of immovable property, the 4% tax on the acquisition of immovable property does not applied, as in the case, for example, of contribution to the registered capital of a company.
We distinguish two basic groups of trust funds with regards to their purpose: trust funds set up for private or for public benefit purposes.
Typically, for a trust fund, public oversight is almost eliminated, in special cases the court may intervene (especially when the trust fund is changed or terminated).
Benefits of establishing a Trust fund
Trust funds are a great way to build wealth for future generations. A trust fund is a special type of legal entity that holds property for the benefit of another person, group, or organization. There are many different types of trust funds. There are also many different trust fund provisions that change how they work.
No one has ownership rights for the assets earmarked for the fund. The assets of the fund, which must be registered in the official register (e.g. real estates in the cadastre), are registered under the trustee's name, with the addition that he or she is a trustee. The right of ownership passes directly to the fund itself, but it does not have legal personality.
Another advantage for the founder is the reduction of the tax base and hence lower tax payments. By establishing a trust fund, its founder will ensure control over the capital and the income paid to the beneficiary trust fund.
If the fund is set up in the event of death, the entities avoid the often lengthy inheritance proceedings and payment of inheritance costs.
Creation of the Trust fund in Czech Republic
A trust fund may be set up by earmarking the property of the founder by a contract in the form of a notarial deed (the contract is concluded between the founder and the trustee on the assignment of the property to the trustee) or in the form of a will (as of the time of the death, the fund does not enter into inheritance proceedings). A business may also be incorporated into the fund, but the trustee enters into the rights of the employer; the fund can be set up even with CZK 1. Then the property can be obtained from other persons.
The contract defines the purpose of the fund, whether it is a publicly beneficial or private trust fund. The trustee undertakes to hold and manage the property (acceptance in the contract). The founder establishes the fund's statute in the form of public document (notarial deed).
The Trust Fund is created by a registration in the relevant public register.
The creation of the trust fund results in separate and independent ownership of the assigned assets and the trustee is obliged to take over this property and its management. Ownership rights in the trust fund shall be exercised by the trustee in his own name and on behalf of the fund. However, the assets in the trust fund are neither the property of the trustee, nor the property of the founder, nor the property of the beneficiary.
A trust fund set up for private purposes serves for the benefit of a person, or in memory of a particular person. This fund may also be set up for the purpose of investing to share the profit between founders, employees, partners or other persons, but this is not quite common in practice.
The Founder of the Trust fund
The founder may be a legal entity or a natural person. There can also be more than one founder.
- Define a beneficiary and define his benefits; the founder may change or cancel his decision
- Supervise the trustee's activities
- change the fund's statute
The trustee can be any fully legally competent person, or eventually even an investment company. The trustee may also be the founder of the trust fund or the beneficiary. In such a case, however, the trust fund must have another trustee, a third person, and in legal issues, the trustees must act jointly. The trustee is appointed and removed by the founder, who may, however, determine in the statute another way of appointing or withdrawing the trustee.
The trustee is entitled to the full management of the property of the trust fund, so he or she can do whatever is necessary and useful with the property (e.g. changing its substance, reproducing it, and investing it). The trustee must also comply with the general obligations laid down for the fiduciary and other obligations required by the relevant legislation, for example, with respect to the persons supervising the management of the trust fund. The trustee shall enter to any public registry (such as the cadastre) as the owner of the property with the note “Trustee”.
The founder has the right to appoint a beneficiary and to determine his benefits from the trust fund, unless the trust fund's Statute determines otherwise. The beneficiary may be granted the right to the fruits or benefits of the trust fund or the right to the property of the trust fund, or to the shares in it. Anyone who is entitled to appoint a beneficiary or to determine his or her benefits from the trust fund, proceeds according to the statute and at his own discretion. He may change or revoke his decision under the conditions laid down by the Statute. The beneficiary's right to benefit from the trust fund arises under the conditions set out in the Statute.
If the trust fund was set up for private purposes, the beneficiary's right to receive payment will arise no later than one hundred years after the formation of the trust fund, even if the Statute has been determined a later date. Even after one hundred years, however, the right to payments may arise for the beneficiary, who is to receive a share of the property according to the Statute at the latest at the expiry of the last right to fruits or benefits, as well as to the beneficiary who was the founder's contemporary or the child of the founder or his contemporary, if, according to the statute, he / she is to enter at the latest at the death or demise of his / her previous beneficiary, to take the fruits or benefits as the next; during his or her life, other people may also be able to enjoy fruits or other benefits.
If the trust fund was set up for private purposes, the right of the beneficiary to obtain fruits or benefits shall expire at the latest one hundred years after the trust fund was established. With regard to a natural person, however, such right may last until his/ her death. During the duration of the trust fund, the beneficiary has the right to claim the relevant payments in accordance with the Statute.
Changes in the Czech Trust fund
Anybody else can contribute to the trust fund after it has been created, either without claim for consideration or in order to become a beneficiary of the trust fund. The person contributing to the fund does not become the founder of the fund nor has the rights of the founder of the trust fund. Whoever increases the trust fund's assets by a contract or acquisition in the event of death is not its founder. The assets acquired in this way are subject to administration in accordance with the statute and law.
The purpose of the fund cannot be changed (private or public).
Termination of the Czech Trust fund
If the period for which the trust fund has been set up expires, if the purpose for which the trust fund has been established is reached, or if the court so decides, the trust administration shall cease. If the trust fund has been set up for private purposes, the trust fund shall cease to exist if all beneficiaries waive the rights to payments from the trust fund. However, the termination of the administration does not lead to the disappearance of the fund at the same time, as it would lose the nature of an independent property.
Upon termination of trust administration, the trustee shall release the property to the person entitled to it. It is believed that the beneficiary has the right to the property, and if such person does not exist, the founder of the trust fund. If none of them exists, the property shall belong to the state. The trust fund then expires by transferring the property to the ownership of the entitled person and subsequently deleting it from the public register.