A foundation is neither a secret trick nor a bureaucratic nightmare. It is a tool with clear strengths, concrete figures, and a specific use case. Those who understand it make better decisions.
The real value of a foundation lies in three aspects: continuity, control across generations, and under certain conditions, genuine tax relief. Not on every euro, but structurally and over the long term.
Unlike a limited liability company, a will, or a gift agreement, a foundation creates a structure that functions independently of the founder’s life. The assets remain intact. The rules remain in place. Inheritance disputes are structurally excluded.
“Anyone who wants to keep their assets together permanently, regulate them meaningfully, and manage them across generations will often find a foundation to be the most precise instrument.”
Many discussions fail due to vagueness. Here are the concrete benchmarks used in practice:
Recommended minimum capital:
€500,000
(possible from €100,000, but less common)
Tax-free initial contribution:
€1 million
(deductible over 10 years, §10b EStG, charitable)
Corporate tax:
0%
Substitute inheritance tax:
Every 30 years
(~19% on net assets)
With a conservative return of 3–4% per year, €500,000 generates €15,000–20,000 annually. From this, ongoing costs must be deducted—administration, tax advisors, auditors—typically €5,000–12,000 per year depending on structure. Below this level, little remains for the foundation’s actual purpose. From €1 million onwards, it becomes significantly more comfortable.
The charitable foundation is the most tax-efficient form—but tied to strict purpose requirements.
Corporate tax on income: 0% exempt
Trade tax: 0% exempt
Deductibility of donations (private individuals): up to 20% of income
Special expense deduction at founding: up to €1 million over 10 years
Inheritance/gift tax on transfer: 0% exempt
Crucial: tax exemption only applies if funds are actually used for charitable purposes (§§ 52–68 AO). Economic activities beyond this are taxable, although designated-purpose operations are largely exempt.
Different rules apply here, but the structure still offers tangible advantages over traditional inheritance.
Corporate tax on income: 15% + solidarity surcharge
Trade tax (depending on municipality): approx. 14–17%
Substitute inheritance tax (every 30 years): ~19%, predictable
Allowance: 2 × €400,000 = €800,000
Transfer at founding (gift tax): depends on relationship
Every 30 years, the tax office calculates inheritance tax as if two children had inherited—each with a €400,000 allowance (€800,000 total).
For example:
With €2 million in foundation assets → €1.2 million taxable.
Tax rate for children: 11–15% → approx. €132,000–€180,000 every 30 years.
Compared to direct inheritance across generations, this is often significantly more efficient.
Criterion | Charitable Foundation | Family Foundation |
Purpose | Public benefit | Family/private |
Legal entity | ✓ Yes | ✓ Yes |
Tax exemption | ✓ Full | ✗ No |
State supervision | ✓ Yes | ✓ Yes |
Setup effort | Medium–High | Medium–High |
Practical minimum capital | €100k+ (meaningful from €500k) | €100k+ (meaningful from €500k) |
Donation receipts | ✓ Yes | ✗ No |
Flexibility after setup | Low | Low |
Suitable if:
Assets of €500k–€1M+, stable and income-generating
Long-term preservation across generations desired
Philanthropic goals with tax advantages planned
A business should remain intact without inheritance fragmentation
Clear governance needed for multiple beneficiaries
Inheritance tax optimization over generations is relevant
Better alternatives if:
Assets are still growing or volatile
Flexible access to capital is required
Only one generation is involved (a will is sufficient)
Administrative effort should be minimal
The business is to be sold or restructured
Short-term tax effects are the goal
A foundation is not a passive container. It is subject to state supervision, reporting obligations, annual financial statements, and tax compliance. The workload is real but manageable.
Realistically, €5,000–€15,000 per year should be budgeted for administration, tax advice, and financial statements. Larger structures with their own management or business operations require more.
The key point: the charter is the central document. What is written there applies even if intentions change later. Amendments are possible but complex and require approval. A well-designed charter from the start avoids significant effort later.
Anyone considering wealth succession should understand foundations not fear or idealize them. They have clear strengths in clearly defined situations: substantial, stable assets; multiple generations; and a defined purpose.
If you are considering a foundation as part of your wealth succession strategy, we provide tailored solutions based on your specific situation. Schedule a free initial consultation to assess the foundation that is the right fit for you.
