Tools for the protection of personal property

Nowadays, when family assets are more and more often the target of unpredictable events, many owners are looking for effective ways to protect them. Popular legal instruments for asset management and protection include trusts, endowments, foundations and European trusts. These structures allow not only the protection of property against external risks, but also the efficient solution of succession in families. In this article, we will compare them, taking into account the advantages and disadvantages of each of these options.

Trust fund

A trust fund (or trust fund in the Czech Republic) is a legal instrument that enables the separation of property ownership from its management. The property is entrusted to an administrator who manages it in the interests of the beneficiaries. This tool is used for long-term property protection and inheritance protection.

Advantages:

• The property is segregated from the founder’s private assets, which reduces the risk that it will be subject to the founder’s personal liabilities.
• Flexibility in determining the terms of asset management.
• The possibility of concealment of the beneficiaries and the extent of the property.

Disadvantages:

• Higher costs for setting up and managing the fund.
• The need for a highly qualified administrator for effective asset management.

Endowment fund

An endowment fund is a special legal entity that is often used to protect family assets and at the same time to support public benefit purposes. Assets invested in an endowment fund can be managed to ensure family interests, but also for charitable purposes.

Advantages:

The endowment fund offers an effective solution for the management of family property and the prevention of its fragmentation among heirs.

• Possibility to combine personal and public purposes.
• Suitable for long-term family security and property protection from external threats (for example, partners of offspring).

Disadvantages:

• More limited flexibility compared to trusts.
• More complicated administration if the endowment fund is established with a public benefit purpose.

Foundation

A foundation is a legal entity whose purpose is the permanent appreciation of property for a specific goal, often charitable or public benefit. Unlike an endowment fund, a foundation must focus its resources primarily on supporting defined public purposes.

Advantages:

• Strong legal protection of assets, as the foundation’s assets are tied to the fulfillment of a long-term purpose.
• Taxation of foundations is favorable in many countries, which makes it possible to manage assets efficiently.

Disadvantages:

• The founder and the family do not have direct control over the property, which must be used according to the stated purpose.
• Less flexibility in asset management compared to trust funds

European trust

A European trust is similar to a trust fund, but operates within the legislative framework of various European countries where trusts are recognized. This tool is mainly used in international cases, when assets or beneficiaries are scattered across different countries.

Advantages:

• International reach and recognition in countries that use trust structures.
• Protection of assets from legislative and tax risks in various jurisdictions.
• Flexibility in the management of international assets​

Disadvantages:

• Complexity in setting up a trust in different jurisdictions.
• Higher costs for international legal and tax administration.

Conclusion

Individual family needs, succession planning and long-term goals need to be taken into account when choosing the right personal asset protection tool. Trusts and European trusts are ideal for flexible asset management and protection, while endowments and foundations offer stability and asset protection for charitable and family purposes. Contact us and we will be happy to help you choose the right tool.