One of the main reasons for setting up a Liechtenstein foundation is structured succession planning. In doing so, the founder often wants to anticipate succession.
The founder is regularly concerned that the cohesion of the family fortune could be endangered by legal succession and that it would have to be divided among several heirs, thus resulting in fragmentation. Such fragmentation of the family fortune makes it impossible to pass it on to future generations in an orderly fashion. In addition to maintaining the cohesion of the family fortune, setting up a foundation can also be associated with the need to prevent the next generation from thoughtlessly consuming the assets.
In addition to maintaining the cohesion of the family fortune, setting up a foundation can also be associated with the need to prevent the next generation from thoughtlessly consuming the assets.
However, in the event of the founder’s inheritance, disagreements can arise time and again because the generation of heirs does not want to accept the founder’s instructions. The forced heirs then usually want to contest the foundation or the disposition of assets in favor of the Liechtenstein foundation in order to gain access to the testator’s assets. However, the establishment of a foundation is in most cases legally valid.
The rule of thumb in this context is that assets transferred to a Liechtenstein foundation can be contested by heirs entitled to a compulsory portion (= forced heirs) in the same way as gifts, provided that these took place two years before the death of the testator (the founder). After this two-year period has expired, heirs entitled to a compulsory portion can thus no longer access the assets of the Liechtenstein foundation, which thus provides full protection. This also applies if the inheritance law applicable to the claim provides for a longer contestation period.
When setting up a foundation, it is important to ensure that the founder actually makes a so-called capital sacrifice (“Vermögensopfer”) and thus separates from the endowed assets in favor of the foundation. The conditions developed in case law are crucial here.
If the main purpose of setting up the foundation is anticipated succession and the foundation is to provide protection from heirs entitled to a compulsory portion of the estate as quickly as possible, it is advisable to design the foundation together with an expert in the field in order to meet the requirements for the sacrifice of assets (“Vermögensopfer”).
