A trust is increasingly becoming a key instrument for the administration and intergenerational transfer of family wealth. When combined with a holding structure, it provides an effective way to protect and manage assets and to keep them consolidated over the long term. When establishing a trust for this purpose, it is essential to take into account the specific features of Czech law while also drawing on time‑tested solutions developed in foreign jurisdictions.
Today, a holding structure is widely regarded as an unwritten standard for the management of equity interests, not only for large corporations. Even relatively smaller entrepreneurs have learned to use such structures effectively in various forms.
In practice, there is often a need to configure the structure so that it also serves future intergenerational succession and long‑term asset protection. In addition to traditional inheritance law instruments such as a will or an inheritance contract, one of the available fund‑type structures—specifically a trust—naturally presents itself as a suitable solution.
By contributing assets to a trust—such as shares in a holding company—the settlor separates those assets from their personal ownership. As a result, the settlor ceases to be the owner of the contributed assets, and any unforeseen event affecting the settlor should, if the structure is properly set up, no longer have a negative impact on the management of the holding.
Additional assets may also be contributed to the same trust; however, in such cases it is important to carefully consider the purpose of the trust and the consequences (including tax implications) for future beneficiaries.
Contributing assets to a trust represents a simple and effective way to keep wealth consolidated across generations. Upon the death of the settlor, all assets contributed to the trust remain within the trust and continue to be administered by the trustee in accordance with the rules set out by the settlor in the trust deed.
One of the key advantages of a trust lies in the fact that the settlor establishes it and transfers assets to it during their lifetime. Even though the settlor is no longer the owner of the trust assets, they may—subject to the rules defined in the trust deed—retain an important role within the trust structure.
For long‑term, sustainable asset management, it is crucial to properly structure and balance the rights and obligations of the various actors involved in the trust. These include both the statutory roles (settlor, trustee, beneficiaries) and optional roles defined by the settlor in the trust deed, such as a protector, a family council, or similar bodies.
The trustee is entrusted with the full administration of the trust assets, making the choice of trustee a key decision for any settlor. A trust may have more than one trustee. Appointing multiple trustees can reduce the risk of operational paralysis in the event that one trustee is unavailable. Trustees’ roles may be divided according to their expertise, or the trust deed may specify certain key legal acts that require joint action by more than one trustee.
A commonly used arrangement is a combination of a professional trustee and a family trustee—either a member of the settlor’s family or a close associate. Czech law expressly allows the settlor or even a beneficiary to act as a trustee. In such cases, however, there must always be an independent trustee appointed and acting alongside them, meaning a trustee who is neither the settlor nor a beneficiary.
While multiple trustees may facilitate the day‑to‑day operation of a trust, settlors typically choose to appoint additional persons or bodies to oversee the administration of trust assets over the long term. Given the absence of detailed statutory regulation, the powers and duties of these supervisory bodies—as well as their mutual relationships—must be carefully defined in the trust deed.
Commonly established oversight bodies include a protector, usually conceived as a single supervisory authority, or a family council as a multi‑member body.
A private trust is established for the benefit of designated persons—the beneficiaries. In trusts of the type discussed here, it is advisable to anticipate that the circle of beneficiaries may evolve over time. Some beneficiaries may not even be known to the settlor at the time the trust is established. The trust deed should therefore include clear mechanisms and rules for determining and appointing beneficiaries, as well as for defining the scope and form of distributions to each of them.
As a general rule, a trust is treated as a corporate income taxpayer under Czech tax law. A key tax feature enabling the use of a trust at the top of a holding structure is the exemption of profit distributions received from a subsidiary (holding) company, provided that the trust holds at least a 10% participation in the holding company for a minimum period of 12 months.
Profits generated by the holding company may therefore be distributed to the trust without additional tax burden, in a manner comparable to profit distributions between subsidiaries and a holding company within a standard holding structure.
The contribution of assets to a trust—whether at the time of its establishment or during its existence—is treated in the same way as a contribution to a commercial corporation and is not subject to tax.
When making distributions to beneficiaries, it is necessary to distinguish whether the distribution is made from the trust’s profits or from its principal (i.e. other trust assets). As a rule, distributions must first be made from profits and only subsequently from the principal.
Distributions made from profits are treated as income from capital for the beneficiary, whereas distributions made from the principal constitute other income.
In certain cases, the law allows distributions from a trust to be exempt from tax at the level of the beneficiary, but only where the distribution is made from the principal. This exemption typically applies to distributions to persons closely related to the settlor. For this reason, the trustee should carefully record, at the time of each distribution, whether it is made from profits or from other trust assets.
Trusts positioned at the top of a holding structure are not a passing trend, but a proven instrument for asset management and protection. When properly structured, they can provide peace of mind to the settlor and their family, while also strengthening the position of the entire group vis‑à‑vis banks, business partners, and investors by reinforcing the perception of the structure as a stable, long‑term, and trustworthy entity.
