A Czech legal expert on why trust funds are perfect for protecting wealth

For families that have amassed serious wealth, success is measured not in individual, but in generational terms. For the founders of successful businesses or owners of significant assets, securing what has been gained for the benefit of future generations is a key concern.

Trust funds are legal entities designed specifically to provide this kind of intergenerational security, and they’re becoming increasingly popular in Czechia. Expats.cz spoke to lawyer Jiří Tregler, a Senior Consultant at CCS Premium Trust, to find out more about how putting wealth into trust funds helps sustain families’ success.

Trust funds are entities for asset management and protection allowing business founders, high-net-worth individuals, and successful families to keep their assets insulated from the risks of transfer, especially in the context of transfer between generations.

“Czech trust funds have been provided for in the nation’s legislation since 2014,” Tregler explains. “A trust fund is a special legal entity without a legal personality, making it different to a company or other structure. It involves a founder, a trustee, and beneficiaries.”

“The main focus is currently on family trust funds, in which the whole family is involved in the structure. In this case, you’ll often have the founder – usually the person who founded the family business and who owns the majority of the assets – and the beneficiaries, meaning their sons, daughters, and other generations. The trustee can be someone from the family or a professional, depending on the client’s needs and whether they know someone they can trust with this responsibility.”

The main objective of setting up a trust fund is usually to keep assets whole across generations. Founders do not want the hard work they have put in for their family throughout their lifetime to be undone by messy inheritance proceedings.

“Clients are trying to prevent the situation in which, after they die, their assets are diversified between their heirs. They know that coming generations will always be able to gain more from these assets if they remain whole,” explains Tregler.

“It’s common for us to work with founders who started their family business 30 years ago with nothing and who have built it into a huge company. Starting from scratch in this way is very different to inheriting the whole asset. It’s often said that the first generation builds an asset, the second generation gains the most profit from it, and the third generation loses it. The goal of a trust fund is to stop this happening.”

CCS Premium Trust provides comprehensive services in the establishment and supervision of trust funds. The company’s experts have a deep understanding of what clients are looking for, including the recognition that every trust fund is as unique as the family that it serves.

“It’s the same as buying a suit,” says Tregler. “A tailored suit made for you personally will always fit and serve you better than one that you buy off the rack or online.”

“If you’re thinking about moving your whole life’s work, you want to do it the right way. Taking a tailored approach from the beginning means you end up with something specifically designed to help you and your family. We don’t just present stock solutions; we know that every family is special, that every founder is special, and that they’re looking to protect their own achievements. The result is a trust fund that’s flexible to meet specific needs.”

Hand-in-hand with the security provided by trust funds in the context of intergenerational transfer comes potential for growth.

“Trust funds can help assets grow; this is the overarching idea of intergenerational transfer, as it allows the next generation to get involved in the process,” explains Tregler. “A lot depends on whether clients want a more defensive, conservative approach, or whether they’re more open-minded. In most cases, the idea is to make the assets grow within the structure. With inflation and other external threats, you don’t want to just leave the family wealth without working with it.”

Czech trust funds may bring even more benefits in future amid evolving tax legislation. “There is currently no inheritance tax in Czechia, but this topic is heavily discussed,” Tregler points out. “Although we’ve had new tax legislation since the start of this year, it’s looking increasingly likely that the state will start looking for other ways to gain more income from tax residents. The discussion is not about if we will have inheritance tax in Czechia, but when.”

Assets contained within trust funds are not involved in the inheritance process – the legal owner of the asset is the trustee, not the founder – so any future tax levied on inherited assets would not affect those in trusts.

According to Tregler, trust funds are becoming increasingly popular instruments in Czechia, as the country catches up with other nations where they have been in existence far longer. Setting up a trust is usually not complicated from the legal standpoint; complications that do arise tend to stem from personal or family reasons.

“Setting up a trust fund is a process that requires time. While it’s not that complicated from the legal perspective, it can be much more complicated from the founders’ personal point of view. CCS Premium Trust aims to identify as many potential situations as possible and create as comprehensive a solution as possible,” says Tregler.

“To achieve this, we need to get to know the founders, and we need to understand how the family and business work. We combine clients’ expectations and goals with our own extensive experience in order to implement clients’ wishes into the documentation. The result is a complex solution that’s tailored to help the whole family and future generations.”

“This usually takes a total of between four and six months, including about 40 hours of the founder’s time to discuss all the possibilities. For some clients we have established trusts faster, in just one or two months, while we have been working with others for over a year. The time required depends on how many assets you want to structure in the fund, who the beneficiaries will be, and the founder’s goals.”

Any type of asset located in any country which recognizes trust funds as legal entities can be put into a Czech trust fund. “This can mean businesses, property, cars, money, watches, paintings; anything,” says Tregler. CCS Premium Trust can even seek out solutions for assets which are not located in a country that recognizes trusts, using other structures in order to achieve founders’ aims. “This is why it’s so important for us to start with a thorough analysis of the assets and the client’s aims,” says Tregler. “It’s also why it’s so important for clients to utilize the services of experts in this field.” 

Shares of business can also be added to trust funds. Although some companies may have limitations on such practices in their founding agreements, CCS Premium Trust is experienced in negotiating with shareholders to find solutions to such obstacles. “In larger companies with multiple shareholders, it can even be beneficial for them to know that a single trust will hold the shares and that there won’t be a change of ownership every 30 or 40 years,” Tregler points out.

Above all, ensuring the involvement of all who will be directly affected by the trust fund is key. Some families aim for a “democratic” approach to decision-making, while in others, the word of the “head” of the family is law; but in all cases, discussing the establishment of the trust with the entire family is crucial.

“Founders have the strongest involvement,” explains Tregler. “But trust funds are mechanisms intended to serve other generations, so it’s vital to know what they are thinking at the time when the trust is established.” 

“It’s also important to show these next generations that you are creating the trust fund for them, not for yourself. You’re creating it in order to ensure the wealth of your family in an uncertain future.”