Inheritance Fund - New Russian Legislation and Foreign Experience

Recently, a law has been approved that makes it possible to organize a new type of legal entity - hereditary funds in Russia. They will be created to transfer funds and assets by inheritance by analogy with those operating abroad.

The bill extends the rights of the inhabitants of our country regarding the disposal of their funds and assets after death. Changes, according to the new laws, will be introduced into civil law.

What it is?

The inheritance fund is a unique, still non-existent way of managing funds after the founder has passed away. The possibility of creating it will interest wealthy citizens who are worried about maintaining their own business and transferring control to reliable managers. The inheritance fund for ordinary people is quite burdensome expenses for its management. Spending is made from the money of a newly organized legal entity.

Subjects

The subjects of the fund are:

Testator.
Heirs after the issuance of a certificate of inheritance.
Beneficiaries.
Governing bodies.

The legal side of the issue of the inheritance fund

The bill highlights the main points of the new provisions on these organizations in our country:

The sphere of inheritance by will is legalized in a broader sense. The order on the organization of the fund, on the one hand, is an integral part of the testament document, and on the other, it is understood that the testator’s wish is a separate way of disposing of property after passing away from life. The testator predetermines a special procedure for the distribution of the transferred property. His will to create a new legal entity may limit the rights of future heirs legally, including their right to share after entering into the inheritance after the death of an individual. The heirs taking part in the activities of the fund are not the rightholders of ownership of the testator's property. It implies a restriction on the intended use of the property of the organization, which fundamentally differs from unlimited possession of the inherited mass. The creation of a new subject of inheritance law replaces the previously familiar relations of participation in the management of the fund or the acquisition of dividends from it with new ones.
The founder of the fund is its founder in a single person. This is a legal echo of the fact that the testament document may contain the will of one testator. The legislation of our country does not provide for such an institution as a joint testament.
The creation of the fund begins after the death of the testator. The organization does not include a person who would be the owner of the funds and assets transferred to her, even after inheriting after the death of the heirs. The foundation exists separately in civil society without belonging to any individual who even inherited after the death of its founder.
A foundation is a legal entity.
The activities of the fund are non-commercial in nature.
The property transferred to the fund must have the intended use. The organization is a non-profit enterprise without membership, founded by an individual on the basis of a voluntary contribution of property or cash. The goals of the inheritance fund should be related to charity and activities useful to civil society.This legal entity uses the property for non-commercial purposes described in its charter, which provides for the right to carry out profitable activities permitted by law.

Creature

According to the law, a notary will be engaged in the creation of a hereditary fund after the citizen passes away, with the subsequent transfer of existing assets to it. The notary must act according to the will of the testator.

The founder of the foundation should write in the testament information:

on the establishment of a legal entity;
on the approval of its charter;
on the definition of managerial conditions;
on the procedure and amount of formation of the property of the fund;
about the persons who are entrusted with the management of the fund;
on the procedure for the appointment of persons.

Actions of the notary after the death of the owner of the state:

A notary employee is given three days to send an application to the government agency on the creation of a fund with the data of an individual or the name of the legal entity managing this organization in the future.
Asset management is carried out without specifying a period or for a limited time period in accordance with the conditions set forth in its charter.
All inherited property is transferred to the fund.
A part shall be allocated from the organization’s property, which is supposed to be the heirs at the time of their entry into the right to use after the owner of the fund passes away.

Fund management

The management of the organization should be detailed in the will by the collegial body of the inheritance fund. The innovations of the law provide for a special procedure for creating a governing council. Prior to sending the application for registration of the fund, the notary is considering the creation of the management bodies of the fund. If no management bodies are established within a calendar year, the organization may be liquidated at the request of the beneficiary or the state regulatory body. In this case, the fund is not registered, does not become a legal entity. The legal form of the fund requires high-quality management and high competence of board members, which are typically characteristic of corporate organizations.

The charter and management conditions cannot be adjusted after the person who was the founder of the fund passed away and during the organization’s work. An exception is the adjustment of the constituent document on the basis of a court decision at the request of the collegial body of the fund in cases:

Management of the organization under the previous conditions is impossible for reasons that could not have been predicted.
The beneficiary is an unworthy recipient of the inheritance, provided that this was not known at the time the fund was created.

Beneficiary

The beneficiaries of the inheritance fund can be anyone, with the exception of commercial organizations. Consider a few key points of the beneficiary's rights:

He is entitled to receive all or only part of the assets of the fund.
His rights are inalienable; they cannot be levied on his debts.
His rights in relation to the fund are not inherited.
If the beneficiary is a legal entity, then its rights terminate after a possible reorganization, with the exception of transformation, unless management conditions provide for the termination of rights during the transformation of the person.
He is not liable for the obligations of the fund, and he, in turn, is not liable for his obligations.
An heir who has rights to an obligatory share and is a beneficiary loses the right to demand the part that is due to him. If the successor during the period for acceptance of the inheritance declares the waiver of the rights of the beneficiary, then he has the right to demand his share.

Fund Taxation

The tax legislation of our country does not provide features for the fund. The taxation of the institution is carried out in accordance with the regime of all non-profit organizations.This determines the investment relevance of the inheritance fund and the desire of wealthy citizens of our country who own their own businesses to choose the form of disposition of property after death. Guided by an attractive fiscal policy regarding income acquired from a fund in Europe, this form of property management after death is in demand among European citizens who have high tax rates for personal income.

Foundation and Family Law

The issues of the relationship between the institution of the foundation in Russia and the foundations of family legislation on legal relations in the field of joint property of spouses, the rights of the other spouse, evidence to invalidate the sole decision on the creation of such a foundation have not been fully worked out. The new law does not contain a reference to the norms of family law governing the legal relations of spouses. This indicates the emergence of a new judicial practice. This applies, in particular, to hereditary funds.

Foreign examples

Currently, the ability to create funds exists in many countries of the world. For example, there are hereditary funds in Germany.

Abroad, such organizations are created by wealthy businessmen. This is done for the public good. Funds from a non-profit structure are spent on the development of universities, cities, countries. The most famous example is the Nobel Foundation.

Differences between domestic and foreign funds

We describe the significant differences between European and Russian funds:

The existence of foreign public law funds and private foundations. Such structures belong to private legal entities, are entered in the commercial register. For example, the Liechtenstein Deposit Fund, whose constituent documents are to be sent to the commercial register, but information about it is closed from public media coverage to maintain anonymity about this organization. The legal personality of the Liechtenstein Fund is characterized by transactions through a representative office. The obligation to disclose information about the beneficial owner, members of the collective management body is transferred to deposit assets.
European lawmakers limit the range of potential uses of assets to hereditary funds. Goals should be beneficial to civil society. Commercial activity is allowed only on condition that it is directly aimed at achieving the stated goals.
An impressive amount of the authorized capital of organizations in Europe. If for such a fund in our country the minimum amount of authorized capital is not limited by law, then for the European one it is limited. The authorized capital of the fund in Germany is from fifty thousand euros.
A clear focus on the stated goals of inheritance, simplicity and convenience of the creation procedures. In Liechtenstein, to create a fund, a statement by the testator about the separation of his personal property into the fund is enough.
In Europe, an organization is a means of protecting assets from the requirements of the testator's creditors. The legal nature of the foundation in Europe may provide for the right of preference to an obligatory share to the heirs and (or) the right to privilege payments on an ongoing basis to the beneficiary over creditor claims.
The widespread practice of organizing anonymous funds.
Control over the activities of the fund by the authorized authority. The structure of the regulatory bodies of European countries includes institutions for monitoring public and private funds, including hereditary ones. Authorities monitor the use of property in accordance with stated objectives. European funds are required to report annually to the supervisory authority.
The presence of specialized courts considering disputes arising from legal relations in funds.

Recognition of Russian funds abroad

The situation regarding the recognition of funds abroad is complicated by the fact that the issuance of a certificate of inheritance by a Russian notary in foreign states requires recognition by a court or other state body. When transferring to a fund in our country property located outside Russia, it becomes difficult to accomplish the task of taking possession of property located abroad. In this case, you should refer to international legal standards for the recognition of foreign official documents by virtue of the provisions of the international treaty and national law.

This is a frequently occurring problem in international law due to the inactivity of the authorities of our country in coordinating with other states to resolve issues of daily needs of citizens in family and inheritance legal relations.

Before the entry into force of new laws on the fund in our country this fall, there is little time. The noted problems can be resolved in the process of international cooperation between Russia and other countries or in the process of law enforcement practice with the expectation of a reasonable consideration of cases in courts.

The most famous funds

Abroad, funds are created by wealthy people in order to:

to ensure the well-being of their family and relatives after their departure from life;
to benefit society.

We list the well-known hereditary organizations:

Nobel Foundation. It was founded at the beginning of the twentieth century according to the will of a famous Swedish inventor. The scientist left his entire fortune, with few exceptions, to pay several bonuses once a year (physics, chemistry, physiology and medicine, literature, international recognition). The bulk of the fund’s assets has been invested in projects. Premiums are funded from return on investment. The size of the premium today is about a million dollars.
Ford Foundation. The organization was founded by Henry Ford's son, passing him the first twenty-five thousand dollars. After the death of him and his father, the fund received all their assets. The Board of Trustees of fifteen people was led by the youngest grandson of the founder of the company. New members are elected by the council itself. Now the fund is engaged in investments and is one of the largest charitable organizations in the world.
Velcom Foundation. After the death of the founder of a pharmaceutical holding in the UK, Henry Velcom, all his property was transferred to an organization bearing his name. It now functions as a nonprofit structure with assets of £ 18 billion sponsoring medical developments.
Bosch Foundation. Based on the decision of the founder of the German concern Bosch, an organization named after him was created. The fund owns part of the group’s shares and operates at the expense of its dividends.

These are the most famous and richest non-profit organizations in the world.