How to establish a trust fund

What is a trust fund and why consider it

The trustee holds and manages the assets based on instructions and rules set by the founder in the founding documents. The beneficiary is then the person to whom distributions from the fund are to be made (e.g., family members, descendants, or charitable purposes, etc.).

Why set up a trust fund? There can be many reasons. Many people choose a trust fund for the long-term protection of family assets – such as family real estate, savings, securities, or a family business – against risks like execution, business failure, or family disputes. Assets placed in the fund are separated from the founder's personal wealth, and thus better protected from creditors or unexpected events.

Another common motive is the intergenerational transfer of wealth – a trust fund allows setting the conditions for distributing assets to descendants exactly according to the founder's wishes, bypassing standard probate proceedings. For example, it is possible to secure funds directly for grandchildren, even if they would otherwise have to pass through inheritance via the children. Trust funds also help prevent family disputes over property (the founder determines in advance who gets what and under what conditions) and can preserve the integrity of family wealth so it is not fragmented among many heirs.

In a business environment, a fund can serve to ensure the continuation of a family business in the event that the descendants do not have the interest or ability to run the company. The founder can place the company into the fund, appoint a professional trustee to manage it, and stipulate that the business profits will flow to the family. This separates the day-to-day management of the company from ownership – the company can continue to prosper under professional management while the family receives the financial benefits of ownership.

A trust fund can also be established for a charitable purpose (similar to a foundation) – for example, to support charitable projects, cultural events, or the founder's hometown. A major advantage is flexibility: the rules of the fund's operation are set by the founder according to their needs and wishes, so the fund can serve virtually any purpose within the limits of the law.

Before you start dealing with the establishment process, you need to choose the right tool. In addition to trust funds, there are foundations and endowment funds, and the difference between them is fundamental — and irreversible. The key question is: do you want to retain the option to withdraw the assets in the future? Under Czech legislation, assets can be withdrawn back from a trust fund under certain conditions, provided the statute explicitly allows it. In the case of a foundation or an endowment fund, you effectively give up the assets permanently by contributing them — they become the property of that legal entity and are bound to the declared purpose.

The second difference is related to this: a trust fund is not a legal entity; it is a pool of assets without legal personality, which gives it significantly higher flexibility in setting rules tailored to the family situation. Foundations and endowment funds, on the other hand, are subject to a stricter legal form and state supervision.

From a tax perspective, all these structures are corporate income tax payers; however, specific tax regimes apply to public benefit taxpayers. A detailed comparison of both tools, including when to choose which, can be found in the article when to choose a trust fund and when an endowment fund. If you are also considering foreign instruments, we have also compared how a trust differs from a Czech trust fund.

In short, a trust fund offers a combination of asset protection, discretion, and control over how the assets will be used in the future. However, for the fund to truly fulfill its intended purpose and not get out of hand, it must be set up correctly and all conditions professionally configured. Below, we describe the individual steps of establishing a trust fund, including important advice on what to watch out for.

Process of establishing a trust fund

Establishing a trust fund requires several consecutive steps. The entire process usually takes several weeks to months, depending on the complexity of the fund and the speed of document preparation. It is recommended to work with a lawyer from the very beginning – both to meet all legal requirements and to prevent errors that could invalidate the fund or complicate its management. Here is the basic procedure:

Step 1: Thorough preparation and planning.

Before you take any formal steps, careful legal and strategic preparation awaits you. In this phase, clarify the purpose of the fund (private vs. public benefit), the circle of beneficiaries (who will benefit from the fund), and the assets you will allocate to the fund. You can place funds, real estate, business shares, securities, etc. into it – the law does not impose any special restrictions in this regard.

Be aware that by allocating assets to the fund, you lose them permanently as an owner – these assets will no longer be yours, but will be managed anonymously in the fund by the trustee. Therefore, think carefully about what part of your wealth you will allocate in this way so that it makes sense and at the same time you do not deprive yourself of the resources needed for your own security. Also consider the duration of the fund – it can be established for a fixed term (e.g., 30 years, until a certain goal is achieved) or for an indefinite/generational period.

The legal effect of the allocation is simple and has two practical consequences, which are usually the main reason why the fund is established. The assets become autonomous: they cannot be seized by the founder's personal creditors and, at the same time, they are not part of their estate.

Ownership rights to it are exercised by the trustee for the benefit of the beneficiaries, strictly in accordance with the statute that you, as the founder, have determined in advance. It is this dual protection — against creditors and against fragmentation in probate proceedings — that is the reason why the fund is established in advance and in a stable situation. Read more about using the fund for transferring assets and securing them in the event of death.

In the planning phase, it is extremely useful to consult with experts: our Prague-based legal team can help you set up the structure of the fund and prevent legal snags, while a tax advisor will point out the tax implications. The tax regime of trust funds is quite complex and can unpleasantly surprise founders or beneficiaries if they do not pay attention to it in advance.

Careful preparation will save you a lot of worries – the trust statute must cover as many potential situations as possible for decades to come, so allow plenty of time for planning and feel free to involve the family members concerned.

Step 2: Choosing a trustee.

The trustee is the person (or multiple persons) who will officially act on behalf of the fund and care for the allocated assets. Choosing a trustee is one of the most critical steps – you can be the trustee yourself, but often someone else is appointed whom you trust or who has the necessary professional skills.

The trustee can be either a natural or a legal person (e.g., a specialized company providing trust services). The key is that they must be a person of full legal capacity and integrity who accepts the mandate to manage someone else's assets with due managerial care. Consider whether to appoint multiple trustees – for example, one family member and a professional who will act jointly or divide their roles.

You can also establish the office of a so-called protector of the fund, who supervises the trustee's activities and can dismiss them if they fail to perform their duties – however, this role must be anchored in the fund's statute. When choosing a trustee, think about the future: what happens if the trustee dies, resigns, or loses capacity? The statute should contain mechanisms for appointing a successor trustee or the procedure for their dismissal. Remember that the trustee has fiduciary duties to the fund and the beneficiaries – they must act in the best interest of the fund.

Still, the founder should not rely solely on good intentions; set clear rules and limitations for the trustee in the statute if they are to manage the assets only in a certain way. Without explicit limitations, the trustee is legally authorized to dispose of the fund's assets relatively freely, including investing them or changing their substance. By combining a trustworthy person with firmly established rules, you minimize the risk of the trustee managing the assets inappropriately.

How much influence the founder actually retains after allocating the assets is decided by the statute – we discuss this in the article how a founder retains control after allocating assets.

Step 3: Drafting the founding deed and the statute of the fund.

Once you have a plan and a selected trustee, it is time for the formal establishment of the trust fund through a legal act. If you establish the fund during your lifetime, this is done by a contract between the founder and the trustee (the so-called founding legal act). In this contract, the founder allocates the assets, the trustee undertakes to accept them for management, and everything is aimed at creating the fund for the specified purpose. Under Czech legislation, a written form is required for such a contract, and for the statute of the trust fund, the form of a public instrument (notarial deed) is strictly required.

In practice, you will visit a notary, where a notarial deed containing the Statute of the trust fund will be drawn up. The statute is issued by the founder and is a key document that regulates all conditions of the fund's operation in detail. By law, the statute must contain at least the basic essentials of the fund, such as the name of the fund, its purpose, definition of assets, designation of trustees, beneficiaries, conditions of distribution to beneficiaries, and the duration of the fund.

In practice, we recommend including many other details in the statute: rules for convening trustee meetings (if there are multiple trustees), the method of bookkeeping, whether and how the founder or protector can intervene in management, the procedure in case of conflicts between the trustee and beneficiaries, the possibility of amending the statute in the future, etc. The more thoroughly you prepare the statute, the smoother the fund's operation will be.

What a well-configured statute looks like in practice

An abstract list of requirements is often not very illustrative, so let us present a typical practical situation. A family business owner cannot imagine their life's work falling apart after their death among five adult children with different ideas about the future direction. Therefore, they place the business share into a trust fund and set the rules in the statute approximately as follows:

• the assets are managed by a single trustee, not all heirs jointly,

• profits are distributed among the beneficiaries according to a predetermined key,

• the share cannot be sold without the consent of the protector, who is designated as the eldest child,

• if any of the children die, their share does not pass to their descendants but returns to the fund for redistribution among the remaining beneficiaries.

These four provisions simultaneously address the continuity of company management, the fair distribution of yields, and protection against the dilution of ownership into future generations. The statute must be this specific — general formulations like "assets will be managed for the benefit of the family" are not sufficient in practice and tend to be a source of disputes. An overview of what to avoid during preparation can be found in the article most common mistakes when establishing a trust fund.

Please note – subsequent amendments to the statute are very difficult and time-consuming (in principle, they can only be made by court order or if you have explicitly reserved the right to amend in the statute). Therefore, do not underestimate the phase of its creation. The notary will ensure that the document meets legal requirements during drafting. After the statute is drawn up by the notary and the contract with the trustee is signed, you have formally established the trust fund, but so far only "on paper."

Step 4: Creation of the fund – acceptance by the trustee and notarial deeds.

To complete the establishment of the fund, the trustee must formally accept the mandate to manage the allocated assets. This act often takes place simultaneously with the signing of the contract at the notary – the trustee confirms by their signature that they accept the office. At this moment, the trust fund is deemed to have been set up.

For trust funds established during the founder's lifetime, the next step is registration in the register, which we discuss below – it is through registration that the fund officially comes into existence. (It is different for funds established by a will – these come into existence at the moment of the testator's death and are registered additionally.)

After the trustee accepts the office, it is advisable to physically transfer the managed assets to the trustee, or to the fund. For example, in the case of real estate, a proposal for the entry of ownership rights is submitted to the land registry – the new owner will be the trustee with a note that they are the trustee for the given fund. Similarly, securities are transferred to the trustee's account, money to a special bank account of the fund, etc. These transfers are often arranged by a lawyer or notary in coordination with the trustee to match the fund's statute.

Step 5: Registration of the fund in the Register of Trust Funds.

The crucial final step is the official registration of the fund in the Register of Trust Funds, which is an information system of public administration maintained by the Ministry of Justice. The registration is carried out by a notary or directly by the trustee by submitting an application; by law, the trustee of the fund is authorized to submit the application for registration.

In practice, the notary often submits the registration electronically immediately after the fund is established. The main details of the fund are entered into the register: its name, purpose, date of creation, identification number (IČO assigned upon registration), name and address of the founder, name and registered office of the trustee (including the date of birth for a natural person trustee), details of the beneficiaries or rules for their determination, and, if applicable, details of the supervising person if one was appointed. The public only sees limited data from the register – for example, the names of the founder and beneficiaries are protected and are not listed in the public extract.

A full extract from the register or viewing details is only permitted to authorized bodies (courts, law enforcement agencies, tax administration) or to those who demonstrate a legal interest. After registration in the register, the trust fund has legal capacity for tax and accounting purposes – it becomes a corporate income tax payer and must keep accounts in accordance with the law.

This completes the entire establishment process. From this moment on, the trustee acts officially on behalf of the fund, manages the allocated assets, and fulfills duties according to the statute. As the founder, you no longer directly intervene in the day-to-day operation of the fund unless you have reserved certain rights for this purpose (e.g., the right to dismiss the trustee or change the circle of beneficiaries – but such interventions must be anticipated by the statute and have a basis in law).

Note: Establishing a trust fund also entails certain costs. Expect a notarial fee for drafting the public deed (which depends on the value of the allocated assets and the complexity of the statute) and potentially a lawyer's fee for advice. Real estate transfers may also involve administrative fees at the land registry. The operation of the fund further includes management costs (trustee's remuneration, bookkeeping, tax returns, etc.). These expenses should be proportionate to the value of the assets and the purpose of the fund – it is good to keep this in mind during the planning phase as well.

Practical advice for fund founders

Establishing a trust fund is a complex process, and success depends on details. Here are some proven practical tips to help you avoid problems and set everything up correctly right from the start:

• Do not underestimate the preparation of the statute and documentation. Many future complications stem from vaguely or incompletely written fund rules. Pay maximum attention to the preparation of the statute – think through various scenarios that may occur during the existence of the fund and how the fund will react to them. For example, determine what happens if one of the beneficiaries dies prematurely, how the fund's assets will be replenished if they decrease, or how the trustee can be changed. A well-drafted statute is the best prevention of disputes and ambiguities in the future.

• Work with experts. Trust funds combine the fields of law, finance, and tax, which is why it pays to have experienced advisors at hand. Turning to a specialized attorney and tax advisor at the very first thoughts is an investment that will pay off in the form of a smooth establishment process and optimization of conditions. Experts with experience in the trust field will ensure the correct establishment of the fund according to current legislation and minimize your administrative burden. For example, they will help set up the fund's tax regime correctly and take advantage of any tax exemptions so that the fund does not unnecessarily pay more than it has to. They will also keep track of deadlines for registrations in registers and other obligations.

• Choose the trustee carefully and arrange for control. The trustee plays a key role – they must be a completely trustworthy, capable, and ethical person. In practice, it proves successful to choose a trustee who has experience in asset or financial management, or to use a professional trust company. It is advisable to anchor in the statute the trustee's obligation to regularly inform the founder or protector about the fund's management and significant steps. You can also designate an independent supervisor (protector) who will monitor the trustee's activities and, in extreme cases, has the authority to propose their dismissal. This will increase the credibility of the entire setup, and both the founder and beneficiaries will have greater peace of mind that the fund is being managed properly. Although a professional trustee or supervisor means additional costs, it pays off for larger funds.

• Consider tax implications and administration. As mentioned, a trust fund is a separate income tax payer and is subject to specific tax regulations. Be prepared for the fund to keep accounts and file tax returns annually. The fund's income (e.g., from real estate rental, dividends, etc.) is subject to corporate income tax. If the fund pays distributions to beneficiaries, this may also have tax implications for them (depending on the nature of the distribution and the family relationship to the founder). We strongly recommend discussing the tax aspect of the fund with an advisor so that you are not surprised by a higher tax burden or the obligation to pay additional taxes.

• Do not confuse tools by name, but by effect. A model mistake looks like this: a business owner has a foundation established with the intention of "preparing assets for the children," but at the same time wants to continue deciding how the assets are handled. The result is a structure that may not hold up — the declared purpose of the foundation upon registration is aimed at public benefit activities, while the actual functioning corresponds to a private family arrangement. Such a structure is easily challengeable by supervisory authorities and in potential disputes, and it may not even fulfill the founder's original will. If you want to retain influence over the assets, a trust fund with a carefully set statute and the role of a protector is usually a more suitable tool — not a foundation.

• Think about discretion and privacy protection. One of the attractions of trust funds is a certain degree of anonymity – you do not appear as the owner of the assets in public registries. However, current legislation already requires the registration of key details about the fund and its actors (albeit non-publicly). Therefore, ensure the correct setup of internal information protection rules. In the statute, you can bind the trustee and beneficiaries to confidentiality regarding the fund's affairs under penalty. Professional trustee companies often have sophisticated data protection measures; if you manage the fund yourself, do not underestimate cybersecurity and keeping sensitive documents private.

• Do not use the fund for the purpose of defrauding creditors or otherwise circumventing the law. A trust fund should serve legitimate goals (family protection, asset diversification, charity, etc.), not as a hiding place for assets just before bankruptcy. If you place assets into a fund only when you are facing a real threat of execution or a lawsuit, the court may declare such a transfer invalid and include the assets back in the execution. Therefore, plan with the fund in a timely and strategic manner, not hastily under the pressure of a problem. Likewise, it is not advisable to establish a fund with the intention of aggressively avoiding taxes or legal obligations – on the one hand, this contradicts the spirit of the legislation, and on the other hand, you expose the fund and yourself to the risk of sanctions and lawsuits.

Legislative framework and requirements (2026)

Trust funds are a relatively new element in the Czech legal system – they were introduced in 2014 by the new Civil Code. Since then, they have undergone several amendments that clarified their legal regime and introduced new obligations. Here is an overview of the current legislation as of 2026, which must be taken into account when establishing a fund:

• Civil Code (Act No. 89/2012 Coll.) – the basic regulation of trust funds is anchored in Sections 1448 to 1474 of the Civil Code. The law defines the creation of a fund by allocating assets and acceptance of management by the trustee, sets the mandatory requirements of the statute, the rights and obligations of the trustee and beneficiaries, etc. It also states, for example, that the fund must have its own name containing the designation "svěřenský fond" (trust fund) and that the founder can establish the fund by contract or by a will. The Civil Code also regulates the dissolution of the fund (by achieving the purpose, expiry of time, court decision, etc.) and the rules for releasing assets to beneficiaries or back to the founder upon dissolution of the fund.

• Act on Public Registries and the Register of Trust Funds (No. 304/2013 Coll.)– this act introduced the mandatory Register of Trust Funds. It regulates what data is entered into the register, who performs the registration, and what documents form the collection of deeds. Registration in the register is a condition for the creation of the fund. Failure to meet this obligation would mean that the fund did not legally come into existence. The Register of Trust Funds is partially non-public; the public will see, for example, the name of the fund, its purpose, and IČO, but not the personal data of the founder, trustee, or beneficiaries (these are protected).

• Act on the Register of Beneficial Owners (No. 37/2021 Coll.) – following European anti-money laundering directives, a separate register of beneficial owners was established, where the beneficial owners of trust funds are also registered. Typically, this will be the founder, or persons having a major influence on the management of the fund or benefiting from it. Since 2021, every trust fund has been obliged to report its beneficial owner to this register, otherwise sanctions apply. This change responded to initial concerns that trust funds could be used to hide the identity of asset owners – transparency has thus increased. For the founder, this means an additional administrative step, but at the same time increases the credibility of the fund.

• Tax laws and accounting: A trust fund is a tax entity classified among corporate income tax payers (rate of 19%). It is obliged to keep accounts and register with the tax office. The fund's profits are taxed, but income from the gratuitous establishment of a fund (within a family) may be exempt. The tax regime differs depending on the type of fund (public benefit funds have reliefs). Beneficiaries pay tax only upon distribution from the fund. The fund may also have VAT obligations if it carries out economic activity; the real estate acquisition tax has been abolished.

• Other relevant regulations: Other laws may also affect the management and operation of trust funds. The Trade Licensing Act applies if the fund exceptionally operates a trade. The Act on Special Court Proceedings regulates court proceedings in matters of the fund (e.g., appointment of a trustee). For registering real estate in the fund, the Cadastral Act is key. Only special trust funds that function as investment funds are subject to strict regulation by the CNB under the Act on Investment Companies and Investment Funds.

Overall, it can be said that the legislation as of 2026 emphasizes the registration and transparency of trust funds while leaving considerable freedom as to the purposes for which the fund can be used. Thanks to mandatory registers, initial concerns that funds would be misused for illegal purposes have been dispelled. For the founder, however, it is crucial to meet all these legal requirements – in particular, to register the fund, report beneficial owners, and fulfill tax obligations. Otherwise, fines or other penalties may apply, which could outweigh the benefits of the fund.

Whichever tool you choose, you need complete legal documentation in any case: for a trust fund, a statute in the form of a notarial deed; for a foundation or endowment fund, a founding deed and articles of association. The documents must clearly define the rights and obligations of the founder, beneficiaries, and the trustee (or statutory bodies in the case of a foundation).

This is followed by proper registration in the relevant public register and fulfillment of subsequent tax and reporting obligations. We discuss the tax regime in more detail in the article how trust funds are taxed; the specifics of family structures are then analyzed in the text family foundations and trust funds in 2026.

In conclusion: a safe path to a trust fund

Establishing a trust fund can be one of the best decisions for protecting and managing family assets – if done correctly. It allows you to map out the fate of your wealth in advance, secure your family, and prevent many potential disputes or risks.

At the same time, however, it is a complex legal act where an error can have far-reaching consequences. Trust, experience, and diligence – these are the key ingredients of success. Trust in the trustee and advisors, the experience of a professional team when setting up the fund, and diligence in every detail of the contracts and statute.

Remember that you are not alone in this. Our law firm has extensive experience with trust funds and will be happy to help you at every step – from the initial consultation on your intentions, through the preparation of all documentation, to the final registration and subsequent management. Trust funds are a useful and practical tool if they are established and managed with professional care.

We will be happy to provide you with the assurance that everything will proceed in accordance with current legislation and save you from unnecessary administrative burdens. Contact us for a non-binding consultation – together we will find the optimal way to establish a trust fund tailored to your needs and how to best protect your assets and the future of your loved ones.