How to Establish a Trust

What is a trust fund and why consider one

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

Why establish 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—from risks like enforcement proceedings, business failure, or family disputes. Assets placed in the fund are separate from the founder's personal property, thus better protecting them from creditors or unforeseen events.

Another common motive is intergenerational wealth transfer—a trust fund allows the founder to set the conditions for distributing assets to descendants precisely according to their wishes, bypassing standard inheritance proceedings. For example, it can provide funds directly to grandchildren, whereas they would otherwise have to pass through inheritance via the children. Trust funds also help prevent family disputes over assets (the founder predetermines who gets what and under what conditions) and can preserve the integrity of the family wealth, preventing it from being fragmented among many heirs.

In a business environment, a trust fund can serve to continue a family business if the descendants lack the interest or ability to run it. The founder can place the company into the fund, appoint a professional manager to run 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 business can continue to prosper under expert leadership, while the family receives the financial benefits of ownership.

A trust fund can also be established for a public benefit purpose (similar to a foundation)—for example, to support charitable projects, cultural events, or the founder's hometown. A major advantage is its flexibility: the founder sets the fund's operating rules according to their needs and wishes, so the fund can serve virtually any purpose within the law.

Before you start the establishment process, you need to choose the right instrument. Besides trust funds, there are also foundations and endowment funds, and the difference between them is crucial—and irreversible.

The key question is: do you want to retain the option to withdraw the assets in the future? From a trust fund, assets can be withdrawn under certain conditions, if the statute explicitly allows it. With a foundation or endowment fund, you effectively give up the assets permanently upon contribution—they become the property of that legal entity and are bound to its declared purpose.

Related to this is a second difference: a trust fund is not a legal entity; it is a collection of assets without legal personality, which gives it significantly greater flexibility in tailoring rules to a family's 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 subject to corporate income tax; however, specific tax regimes apply to public benefit taxpayers. A detailed comparison of both instruments, including when to use which, can be found in our article on when to choose a trust fund versus 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 serve its intended purpose and not get out of hand, it must be properly established and all conditions must be expertly set. Below, we therefore describe the individual steps for establishing a trust fund, including important advice on what to watch out for.

Procedure for 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 cooperate with a lawyer from the very beginning—both to meet all legal requirements and to avoid mistakes that could invalidate the fund or complicate its administration. Here is the basic procedure:

Step 1: Thorough preparation and planning.

Before you take any formal steps, you face careful legal and strategic preparation. At this stage, 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 set aside for the fund. You can place financial resources, real estate, business shares, securities, etc., into it—the law does not impose any special restrictions in this regard.

Realise that by transferring assets to the fund, you irrevocably lose them as the owner—these assets will no longer be yours but will be managed anonymously in the fund by the trustee. Therefore, consider what portion of your assets you will set aside 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 this transfer is simple and has two practical consequences, which are usually the main reasons for establishing a fund. The assets become autonomous: they cannot be seized by the founder's personal creditors and are not part of their inheritance estate.

Ownership rights to the assets are exercised by the trustee for the benefit of the beneficiaries, exclusively in accordance with the statute that you, as the founder, have predetermined. It is this dual protection—from creditors and from fragmentation in inheritance proceedings—that is the reason why a fund is established in advance and in a calm situation. More on using a fund for asset transfer and provision in case of death.

In the planning phase, it is extremely useful to consult with experts: a lawyer will help you set up the fund's structure and prevent legal pitfalls, while a tax advisor will point out the tax implications. The tax regime for trust funds is quite complex and can unpleasantly surprise the founder or beneficiaries if they do not pay attention to it in advance.

Careful preparation will save you a lot of trouble—the trust statute must cover as many possible situations as possible for decades to come, so set aside enough time for planning and feel free to involve the family members it concerns.

Step 2: Choosing the trustee.

The trustee is the person (or persons) who will officially act on behalf of the fund and take care of the designated assets. The choice of trustee is one of the most critical steps—you can be the trustee yourself, but often someone else you trust or who has the necessary professional skills is appointed.

The trustee can be either a natural or a legal person (e.g., a specialized firm providing trust services). The key is that it must be a person with full legal capacity and integrity who accepts the mandate to manage another's property with due diligence. Consider appointing more than one trustee—for example, one family member and a professional, who will act jointly or divide their roles.

You can also establish the function of a so-called protector of the fund, who oversees the trustee's activities and can dismiss them if they fail to fulfill their duties—however, this role must be enshrined in the fund's statute. When choosing a trustee, think about the future: what happens if the trustee dies, resigns, or loses their 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.

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

Step 3: Drafting the foundation deed and the fund's statute.

Once you have a plan and have chosen a trustee, the formal establishment of the trust fund by legal act follows. If you are establishing the fund during your lifetime, this is done by a contract between the founder and the trustee (the founding legal act). In it, the founder sets aside the assets, the trustee undertakes to accept them into administration, and everything is aimed at creating the fund for the specified purpose. The law requires this contract to be in writing and the statute of the trust fund to be in the form of a public deed (notarial deed).

In practice, you will go to 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 the key document that details all the conditions for the fund's operation. According to the law, the statute must contain at least the basic elements of the fund, such as the fund's name, purpose, definition of assets, designation of trustees, beneficiaries, conditions for distributions 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 is more than one), the method of accounting, whether and how the founder or protector can intervene in the administration, the procedure for conflicts between the trustee and beneficiaries, the possibility of changing the statute in the future, etc. The more thoroughly you prepare the statute, the smoother the fund's operation will be.

What a well-drafted statute looks like in practice

An abstract list of requirements is often not very illustrative, so let's take a typical situation from practice. The owner of a family business cannot imagine his life's work falling apart after his death among five adult children with different ideas about its future direction. He therefore places the business share into a trust fund and sets 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 the company's management, the fair distribution of proceeds, and protection against the dilution of ownership into future generations. The statute must be this specific—general phrases like "the assets will be managed for the benefit of the family" are insufficient in practice and are often a source of disputes. An overview of what to avoid during preparation can be found in the article on the most common mistakes when establishing a trust fund.

Be careful—subsequent changes to the statute are very difficult and time-consuming (in principle, they can only be made by a court or if you have explicitly reserved the right to change it in the statute). Therefore, do not underestimate the stage of its creation. When drafting, the notary will ensure that the document meets the legal requirements. After the statute is drawn up by the notary and the contract is signed with the trustee, 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 designated assets. This act often takes place simultaneously with the signing of the contract at the notary's office—the trustee confirms their acceptance of the function with their signature. From this moment, the trust fund is considered to have been established.

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

After the trustee accepts the function, it is advisable to physically transfer the managed assets to the trustee, or rather, into the fund. For example, for real estate, an application for the registration of ownership rights is filed with 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 for the fund, etc. These transfers are often arranged by a lawyer or notary in coordination with the trustee to ensure they comply with the fund's statute.

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

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

In practice, the notary often files the registration electronically immediately after the fund is established. The main data about the fund are recorded in the register: its name, purpose, date of creation, identification number (IČO assigned upon registration), the founder's name and address, the trustee's name and registered office (for a natural person trustee, also their date of birth), information about the beneficiaries or the rules for their determination, and, if applicable, information about a supervising person, if one has been appointed. The public can only see limited data from the register—for example, the names of the founder and beneficiaries are protected and are not shown in the public extract.

A full extract from the register or access to details is only permitted for authorized bodies (courts, law enforcement authorities, the financial administration) or for someone who can prove a legal interest. After registration in the register, the trust fund has legal personality for tax and accounting purposes—it becomes a corporate income tax payer and must keep accounts according to the law.

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

Note: Establishing a trust fund also involves certain costs. Expect a notarial fee for drawing up the public deed (which depends on the value of the assets being set aside and the complexity of the statute) and possibly a lawyer's fee for advice. Transfers of real estate may also incur administrative fees at the Land Registry. The operation of the fund also includes administration costs (trustee's remuneration, accounting, tax returns, etc.). These expenses should be proportionate to the value of the assets and the purpose of the fund—it is good to remember this in the planning phase as well.

Practical advice for fund founders

Establishing a trust fund is a complex process, and success depends on the details. Here is some proven advice from practice that will help you avoid problems and set everything up correctly 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 fund's existence and how the fund will react to them. For example, specify 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-written statute is the best prevention against disputes and uncertainties in the future.

• Cooperate with experts. Trust funds combine the fields of law, finance, and taxes, which is why it pays to have experienced advisors on hand. Turning to a specialized lawyer and tax advisor from the very first considerations is an investment that will pay off in the form of a smooth fund establishment process and optimized 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 correctly set up the fund's tax regime and take advantage of any tax reliefs so that the fund does not unnecessarily pay more than it has to. They will also keep track of deadlines for registrations 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 has proven effective to choose a trustee who has experience in asset or financial management, or to use a professional trust company. It is advisable to include in the statute an obligation for the trustee to regularly inform the founder or protector about the fund's management and significant steps. You can also appoint an independent supervisor (protector) who will monitor the trustee's activities and, in extreme cases, has the authority to propose their dismissal. This increases the credibility of the entire setup, and both the founder and the beneficiaries will have greater peace of mind that the fund is being managed properly. A professional trustee or supervisor does mean additional costs, but for larger funds, it is worth it.

• Consider the tax implications and administration. As mentioned, a trust fund is a separate taxpayer for income tax purposes and is subject to specific tax regulations. Be prepared for the fact that the fund must keep accounts and file tax returns annually. The fund's income (e.g., from property rental, dividends, etc.) is subject to corporate income tax. If the fund makes 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 definitely recommend discussing the tax side of the fund with an advisor so that you are not surprised by a higher tax burden or the obligation to make additional payments.

• Do not confuse instruments by name, but by effect. A typical mistake looks like this: an entrepreneur has a foundation established with the idea 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 at registration is for public benefit activities, while the actual functioning corresponds to a private family arrangement. Such a structure is easily challengeable by supervisory authorities and in any potential dispute, and may not even fulfill the founder's original intention. If you want to retain influence over the assets, a trust fund with a carefully drafted statute and the role of a protector is generally a more suitable instrument—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 registers. However, current legislation already requires the registration of key data about the fund and its actors (albeit not publicly). Therefore, ensure that internal information protection rules are set up correctly. In the statute, you can bind the trustee and beneficiaries to confidentiality regarding the fund's affairs under penalty. Professional trustee firms often have sophisticated data protection measures; if you manage the fund yourself, do not underestimate cybersecurity and the storage of sensitive documents in private.

• Do not use the fund to intentionally defraud creditors or otherwise circumvent the law. A trust fund should serve legitimate purposes (family protection, asset diversification, charity, etc.), not as a shelter for assets just before bankruptcy. If you transfer assets to a fund only when you are genuinely threatened with enforcement proceedings or a lawsuit, a court may declare such a transfer invalid and include the assets back in the enforcement. 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—not only does this contradict the spirit of the legislation, but it also exposes 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 have clarified their legal regime and introduced new obligations. Here is an overview of the current legislation as of 2026 that must be taken into account when establishing a fund:

• Civil Code (Act No. 89/2012 Coll.) – Sections 1448 to 1474 of the Civil Code contain the basic regulation of trust funds. The Act defines the creation of a fund by setting aside assets and the trustee's acceptance of administration, specifies 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 disposition for the case of death. The Civil Code also regulates the termination of the fund (upon achievement of its purpose, expiration of its term, court decision, etc.) and the rules for releasing assets to the beneficiaries or back to the founder upon the fund's termination.

• Act on Public Registers 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 which documents form the collection of the register. Registration in the register is a condition for the fund's creation. Failure to comply with this obligation would mean that the fund has not legally come into existence. The Register of Trust Funds is partially non-public; the public can see, for example, the fund's name, purpose, and IČO, but not the personal data of the founder, trustee, or beneficiaries (which are protected).

• Act on the Register of Beneficial Owners (No. 37/2021 Coll.) – in response to European anti-money laundering directives, a separate register of beneficial owners was established, where the beneficial owners of trust funds are also recorded. Typically, this will be the founder, or persons having a significant influence on the fund's management or benefiting from it. Since 2021, every trust fund has been obliged to report its beneficial owner to this register, otherwise sanctions are threatened. 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 also an increase in the fund's credibility.

• Tax laws and accounting: A trust fund is a tax entity classified as a corporate income tax payer (rate of 19%). It has an obligation to keep accounts and register with the tax office. The fund's profits are taxed, but income from the gratuitous establishment of the 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 receiving a distribution from the fund. The fund may also have obligations related to VAT if it carries out economic activity; the tax on the acquisition of immovable property has been abolished.

• Other relevant regulations: Other laws may also affect the administration 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 the registration of real estate in the fund, the Land Registry Act is key. Only special trust funds that function as investment funds are subject to strict regulation by the CNB (Czech National Bank) under the Act on Investment Companies and Funds.

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

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

This is followed by proper registration in the relevant public register and compliance with subsequent tax and reporting obligations. We discuss the tax regime in more detail in the article how trust funds are taxed; we analyze the specifics of family structures 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, provide for your family, and prevent many potential disputes or risks.

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

Remember, 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 about your intentions, through the preparation of all documentation, to the final registration and subsequent administration. Trust funds are a useful and practical tool when established and managed with professional care.

We will be happy to provide you with the certainty that everything will proceed in accordance with current legislation and save you from unnecessary administrative burdens. Contact us for a no-obligation 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.