Family foundations: Legal framework, structures and taxation

In this study, Prof. Dr. Gerhard Kraft examines family foundations from a civil law, tax law and economic perspective. The author dispels widespread misconceptions about this legal institution, demonstrating that it is not merely a tax planning device, but rather a complex instrument that can be used for the purposes of corporate succession and asset structuring as well as to promote family cohesion. The study systematically analyses the various types of family foundations, their taxation regimes and the legal relationships between founders, foundations and beneficiaries in a national and international context. It outlines both the considerable advantages (asset protection, avoidance of disputes, succession planning) and the significant disadvantages (irreversible tie-up of assets, substitute inheritance tax, governance problems) of family foundations. Particular attention is devoted to the complex tax aspects of endowments, ongoing taxation and the tax implications for beneficiaries. The study comes to the conclusion that a family foundation should only be set up after a thorough analysis of the disadvantages and advantages in each individual case and should never be established for tax reasons alone.