Divorce is one of the most frequent events that genuinely threaten the stability of business assets. Division of marital property can halt a company’s succession, disrupt its dividend policy, force the sale of assets and, in extreme cases, undo years of investment. PLA.partners advises business owners on using the family foundation as a tool of protection against the consequences of a future, hypothetical divorce, but also as a tool for ordering the spouses’ financial situation during their lifetime, including for the protection of children.
Does a family foundation protect assets from divorce? A short answer
Yes, the family foundation is one of the strongest legal constructions allowing assets to be permanently separated from the marital property pool. The mechanism is simple to describe but demanding in design. Assets contributed to a family foundation become its property and cease to be part of the spouses’ estate. In consequence, in the event of divorce, assets accumulated in the foundation are not subject to division.
Maciej Pilarek, attorney and partner at PLA.partners, points out that this feature of the family foundation is of fundamental importance for families whose assets have been built over years.
Why a family foundation genuinely removes assets from the marital pool
A family foundation operates as an autonomous legal person, separate from the founder and beneficiaries. Being a founder or beneficiary alone does not mean acquiring shares or any ownership rights in the foundation’s assets. This is a fundamental difference from a company, in which shareholders hold shares and those shares are part of personal property.
In the practice of the PLA.partners team, this feature is often a key argument for choosing a family foundation. Assets that have ended up in the foundation are managed by it independently, and the founder and beneficiaries are deprived of classical ownership rights to them.
Consent of both spouses when contributing joint property
Contribution of marital property to a family foundation causes its exclusion from the spouses’ joint estate. This, however, requires the prior consent of both spouses. After this action, the asset ceases to be part of the joint estate. This means that the family foundation is not a tool for unilaterally hiding assets from a spouse. Contribution of joint assets must result from a common decision taken in a period when the marital relationship allows for it.
What happens to the foundation’s assets in case of divorce?
In the event of divorce, neither spouse may derive claims against the foundation’s assets solely on the basis that they previously formed part of the joint estate. From a formal point of view, these assets no longer belong to either spouse, but to the family foundation. Property division proceedings do not extend to the foundation’s assets.
This arrangement is particularly beneficial in situations where concern about the future stability of the marital relationship should not affect the durability of the company. The family foundation allows personal risk to be separated from business assets.
Family foundation as a tool for protecting children
A family foundation may be designed with the financial protection of the spouses’ common children in mind, especially minor children. It allows significant components of the parents’ assets to be transferred to the foundation, directing its purpose toward meeting the needs and interests of the children. In this way, the family foundation not only protects assets against divorce risk, but also ensures continuity of protection for the next generation.
In projects run by PLA.partners, this model is often chosen by families with young children, where life risks of the parents should be addressed over the long term.
Limits of protection, alimony and the founder’s obligations
The family foundation does not provide absolute asset protection. The foundation is jointly liable with the founder for the founder’s obligations arising before its establishment, including alimony obligations. This liability cannot be limited or excluded without the creditor’s consent. If the founder’s alimony obligation arose after the foundation was established, the foundation is also liable for its performance. Where enforcement against the founder’s personal assets of an alimony obligation arising after the foundation’s establishment proves ineffective, the entitled person may pursue enforcement against the foundation’s assets.
The family foundation’s liability for the founder’s alimony is, however, limited to the value of assets contributed by the founder, calculated according to the state at the moment of contribution and prices at the moment of satisfying the creditor. At the same time, the founder is not personally liable with their own assets for the foundation’s obligations.
Legal and business consequences for the client
From the perspective of a business owner, board member and persons responsible for private assets, divorce protection through a family foundation means:
- permanent separation of assets contributed to the foundation from the spouses’ joint estate,
- minimisation of the risk that the company will be divided through divorce,
- the possibility of designing protection of children’s interests, especially minor children,
- the need for consent of both spouses when contributing joint assets,
- maintenance of the foundation’s liability for the founder’s alimony obligations within a defined scope,
- the need to ground the decision in a thorough diagnosis of the spouses’ property and legal situation.
Possible actions, a plan for the business owner
In the work of the PLA.partners team, protecting assets against divorce consequences with the use of a family foundation involves:
- diagnosis of the spouses’ current property situation and existing arrangements,
- assessment of the family and business goals of both sides,
- design of the family foundation with a distribution policy oriented to the family and children,
- setting the order and scope of asset contributions, including joint property,
- securing consents of both spouses and the legal documentation,
- analysis of exposure to the founder’s alimony obligations,
- ongoing service model for the foundation over a multi-year horizon.
Contact PLA.partners Law Firm
Do you need legal support or an individual analysis of your matter? Visit PLA.partners and contact our team, we will help assess the situation and propose specific solutions.
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