Research project “The Dead Hand. Private Foundation as a Multi-Generational Estate Planning Tool”

In 2022, a research project dedicated to private (family) foundations as an instrument for succession planning began at the Faculty of Law and Administration of the University of Warsaw. It is funded by Poland’s National Science Centre (OPUS grant no. 2021/41/B/HS5/00857). The research is directed by Prof. Konrad Osajda, Director of the Centre for Family Business Law at the University of Warsaw, while the project team includes members and collaborators of the Centre: Dr Wojciech Bańczyk, Dr Kacper Górniak and Dr Kamil Wielgus from the Jagiellonian University and Krzysztof Grzegorczyk from the University of Warsaw, who is also the Administrator of the Centre.

The research carried out is in the field of succession law. It regulates the rules under which the property of one person (the testator) passes to another person or persons (the heir or heirs) on the death of the former. Since the time of ancient Rome, it has been a tradition – alongside legal succession – for the testator to be able to designate during his or her lifetime who will become his or her heir. The most common way of appointing an heir is through a will. However, drawing up a will only allows the fate of the estate after death to be shaped for one generation (in favour of a specific person or persons living or existing at the time of the opening of the succession). If the testator has died and his or her estate has been acquired by the persons he or she had previously named in his or her will, they, i.e. the heirs, become the owners and disposers of the assets thus acquired, and it is they alone who can decide what happens to these assets during their lifetime (e.g. by concluding a contract of sale with a selected person) and after their death (e.g. by drawing up their own will). The original testator has a limited ability to force his or her will on his or her own heir, and can almost never exert such influence on subsequent ‘generations’ of successors in title.

The subject of the research carried out under the supervision of Prof. K. Osajda is one of the instruments allowing one to influence the fate of one’s property in the long term, i.e. a private foundation (sometimes also called a family foundation, e.g. in Polish law). Traditionally, a foundation is a legal person (an artificial, ‘fictitious’ legal entity independent of the lives of specific individuals) with a public benefit purpose defined by the founder and implemented by the foundation’s authorities (e.g. combating child malnutrition, supporting an animal species threatened with extinction). A private foundation differs from a ‘traditional’ (public) foundation in that its purpose can be more freely defined by the founder and can be ‘private’, with no direct benefit to the general public (e.g. regular laying of flowers on the founder’s grave). This issue has also become directly relevant in Poland with the entry into force of the Family Foundations Act (22 May 2023).

The main research objective of the project to be initiated is to investigate how a private foundation can effectively serve as a vehicle for multigenerational decision-making on the fate of assets. The chance to answer this question is offered by a comparative legal perspective, which requires getting to know and contrasting similar solutions in different countries. Private foundations (Ger. Privatstiftungen) exist in Austria, Liechtenstein, Germany and Switzerland. It is these four regulations, together with the recent Polish legislation, that are the subject of the research team’s analysis. On the one hand, they are close to each other (they belong to the Germanic strand of the so-called continental legal tradition), on the other hand, they show characteristic differences with regard to private foundations. Only in Germany are public and private foundations regulated in the same act ( in Germany, a foundation can have either a public or a private purpose); in the other three German-speaking countries, private foundations are regulated independently as separate types of legal persons (and in Austria, for example, there is even a separate Private Foundation Act for them). In Germany and Switzerland, the admissibility of the private purpose of foundations has a long tradition, whereas in Austria, Liechtenstein, and especially in Poland the relevant provisions have only been introduced in recent decades.

The legal issues under comparative analysis are structured according to the “life cycle” of a foundation, i.e. successively the issues relating to the establishment of the foundation (“birth”), its operation (“life”) and its possible liquidation (“death”). In addition to deepening the understanding of what a private foundation is and what is meant by ‘multigenerational estate planning’ (and how it can be regulated), Prof. Konrad Osajda and his team seek to answer the question of how exactly private foundations can be used for multigenerational estate planning. They also analyse how the private foundation differs from (and is similar to) other legal instruments that can be used for multigenerational succession planning. These provide a broader comparative background for the project. These include, for example, the Anglo-Saxon trust, the ancient Roman fideicommissum, or the ancestral ordynacja that once existed in Polish law. Such an approach can provide tools for assessing the private foundation regulation introduced in Poland or elsewhere not only against the background of other legislation providing for such a legal instrument (i.e. to obtain an answer to the question whether a given private foundation regulation uses models appropriate to the intended purposes), but also against the background of other institutions serving multi-generational decision-making on the fate of property in case of death (i.e. to obtain an answer to the question whether the choice of a private foundation among other possible instruments is justified).