The non-legal foundation
The non-legal foundation is actually the little brother of the legally valid foundation. Legal capacity is granted to independent foundations with the approval of the foundation authorities. Before the approval, which has a legal effect, all foundations are not legal.
In the case of the non-legal foundation, the assets are transferred to a trustee (fiduciary) by means of a trustee agreement (foundation agreement). This trustee is required to use the money only for the previously defined purpose of the foundation.
How to found a legal foundation?
The establishment of a non-legal foundation is quite simple, in contrast to the legal foundation. You only need
- a foundation purpose - who should receive the assets?
- a trust treaty
- a person / organization of your trust
Low administrative expenses
Most of these foundations run under the umbrella of non-profit organizations (eg Caritas). This means: You determine for what purposes your endowment assets should be used within the scope of the charitable organization. This can be "broken down" except for individual projects.
An immense advantage is the greatly reduced administrative costs, in contrast to the legal foundations. You do not need your own board for the foundation. The founding documents will not be audited again separately by the Foundation Authority and the annual financial statements will not have to be submitted to the Foundation Supervision.
Only small assets necessary
For this reason, the establishment of a non-legal foundation is already practicable with a rather small capacity. A small asset is an asset that is less than 100.000 €. Why is that so?
The foundation purpose of a legally valid foundation may only be pursued through the income from the asset stock. In addition to the purpose of the foundation, however, the current expenses are also to be paid out of these income.
Pens to resolution
In the case of 100.000 € assets and an assumed interest rate of 5%, 5.000 € is therefore available for a good cause (before deduction of current expenses). This is not very much. However, the non-legal foundation can also be used for the purpose of the foundation.
The foundation is dissolved when no assets are available. For this reason, should a small fortune always an unincorporated foundation to receive priority. Alternatively, the assets could also pass through a donation.
Increase in assets
The term "endowment" refers to the transfer of money from an existing foundation. With an endowment you thus increase the assets of an existing foundation.
Another advantage is that you can use the simple foundation to "practice". It could be that the idea of the foundation does not suit you at all? If you like, the unincorporated foundation can be converted into a legal foundation (with a corresponding increase in assets).
Disadvantages of the non-lawful foundation
As so often in life, there are not only advantages but also disadvantages. The person / organization of your trust - the trustee - is not subject to state restrictions (supervision by the Foundation Supervision). So if he acts contrary to your good purpose, you have hardly a handle to stop the bustle.
Under civil law, the property even goes into the ownership of the fiduciary. If this happens badly, the trustee's transferred assets are used for their own purposes rather than for foundations. If the trustee is a natural person and dies, the foundation is forced to be dissolved.
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