How to Establish a Trust Fund: A Step-by-Step Guide

What is a trust and why consider one

A trustee holds and manages assets according to the instructions and rules set by the settlor in the founding documents. The beneficiary is the person for whom the trust is intended to provide (e.g., family members, descendants, or charitable purposes, etc.).

Why establish a trust? There can be many reasons. Many people choose a trust 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 a trust are separated from the settlor's personal property, thus better protecting them from creditors or unforeseen events.

Another common motive is intergenerational asset transfer. A trust allows for setting the conditions for dividing assets among descendants precisely according to the settlor's wishes, bypassing standard inheritance proceedings. For example, it can provide funds directly to grandchildren, whereas otherwise, the assets would have to pass through inheritance via the children. Trusts also help prevent family disputes over assets (the settlor predetermines who gets what and under what conditions) and can preserve the integrity of the family estate, preventing it from being fragmented among many heirs.

In a business environment, a trust can serve to continue a family business if the descendants lack the interest or ability to run it. The settlor can place the company into a trust, appoint a professional trustee to manage it, and specify that the business profits will flow to the family. This separates the day-to-day management of the company from its ownership—the business can continue to prosper under expert leadership while the family receives the financial benefits of ownership.

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

Before you start the establishment process, you need to choose the right instrument. Besides trusts, 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? From a trust, assets can be withdrawn under certain conditions, provided the trust deed explicitly allows it. With a foundation or an endowment fund, you are effectively giving up the assets permanently by contributing them—they become the property of this legal entity and are bound to the declared purpose.

This relates to the second difference: a trust is not a legal entity; it is a collection of assets without legal personality, which gives it significantly greater flexibility in tailoring the 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 corporate income taxpayers; however, specific tax regimes apply to public benefit taxpayers. A detailed comparison of both instruments, including when to use which, can be found in the article when to choose a trust versus an endowment fund. If you are also considering foreign instruments, we have also compared how a common law trust differs from a Czech trust.

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

The process of establishing a trust

Establishing a trust requires several consecutive steps. The entire process usually takes several weeks to months, depending on the complexity of the trust 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 trust 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 trust (private vs. public benefit), the circle of beneficiaries (who will benefit from the trust), and the assets you will set aside for the trust. You can contribute financial funds, real estate, business shares, securities, etc.—the law does not impose special restrictions in this regard.

Realise that by transferring assets into the trust, you irrevocably lose them as an owner—these assets will no longer be yours but will be managed anonymously in the trust by a trustee. Therefore, think about 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 trust—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 transfer is simple and has two practical consequences, which are usually the main reasons for establishing a trust. The assets become autonomous: they cannot be seized by the settlor's personal creditors and are not part of their estate upon death.

Ownership rights to the assets are exercised by the trustee for the benefit of the beneficiaries, exclusively in accordance with the trust deed that you, as the settlor, have predetermined. It is this dual protection—from creditors and from fragmentation in inheritance proceedings—that is the reason why a trust is established in advance and in a calm situation. More on using a trust 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 structure the trust and avoid legal pitfalls, while a tax advisor will point out the tax implications. The tax regime for trusts is quite complex and can unpleasantly surprise settlors or beneficiaries if they do not pay attention to it in advance.

Careful preparation will save you a lot of trouble—the trust deed must cover as many possible situations as possible for decades to come, so take enough time for planning and feel free to involve family members who are affected.

Step 2: Choosing a trustee.

The trustee is the person (or persons) who will officially act on behalf of the trust 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 is appointed whom you trust or who has the necessary professional skills.

The trustee can be either a natural person or a legal entity (e.g., a specialised firm providing trust services). The key is that it must be a legally competent and irreproachable person who accepts the mandate to manage another's property with due care. 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 trust, who oversees the trustee's activities and can remove them if they fail to fulfil their duties—however, this role must be enshrined in the trust deed. When choosing a trustee, think about the future: what happens if the trustee dies, resigns, or loses their capacity? The trust deed should contain mechanisms for appointing a successor trustee or a procedure for their removal. Remember that the trustee has fiduciary duties to the trust and the beneficiaries—they must act in the best interest of the trust.

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

How much influence the settlor actually retains after transferring the assets is determined by the trust deed—we discuss this in the article how a settlor can maintain control after transferring the assets.

Step 3: Drafting the founding instrument and the trust deed.

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

In practice, you will go to a notary, where a notarial deed containing the trust deed will be drawn up. The trust deed is issued by the settlor and is the key document that details all the conditions for the trust's operation. According to the law, the trust deed must contain at least the basic details of the trust, such as its name, purpose, definition of assets, designation of trustees and beneficiaries, conditions for payments to beneficiaries, and the duration of the trust.

In practice, we recommend including many other details in the trust deed: rules for convening trustee meetings (if there is more than one), the method of accounting, whether and how the settlor or protector can intervene in the administration, the procedure for conflicts between the trustee and beneficiaries, the possibility of amending the trust deed in the future, etc. The more thoroughly you prepare the trust deed, the smoother the trust's operation will be.

What a well-drafted trust deed 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 their life's work falling apart after their death among five adult children with different ideas about its future direction. Therefore, they place their business share into a trust and set the rules in the trust deed 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 formula,

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

• If any of the children dies, their share does not pass to their descendants but returns to the trust for redistribution among the remaining beneficiaries.

These four provisions simultaneously address the continuity of the company's management, the fair distribution of profits, and protection against the dilution of ownership into future generations. The trust deed 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 the most common mistakes when establishing a trust.

Be aware—subsequent changes to the trust deed 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 make changes in the trust deed). Therefore, do not underestimate the creation phase. When drafting the deed, the notary will ensure that the document meets legal requirements. After the trust deed is drawn up by the notary and the contract with the trustee is signed, you have formally established the trust, but so far only "on paper".

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

To complete the establishment of the trust, the trustee must formally accept the mandate to administer 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 is considered to have been established.

For trusts established during the settlor's lifetime, the next step is registration in the register, which we will discuss below—it is through this registration that the trust officially comes into existence. (The situation is different for trusts established by a will or other testamentary disposition—they come into existence upon the death of the testator and are registered retrospectively.)

After the trustee accepts the function, it is advisable to physically transfer the managed assets to the trustee, or rather, into the trust. 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 trust. Similarly, securities are transferred to the trustee's account, money to a special bank account for the trust, etc. These transfers are often handled by a lawyer or notary in coordination with the trustee to ensure they comply with the trust deed.

Step 5: Registration of the trust in the Register of Trusts.

A crucial final step is the official registration of the trust in the Register of Trusts, 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 who is authorised to file the application for registration.

In practice, the notary often files the registration electronically immediately after the trust is established. The main data about the trust are recorded in the register: its name, purpose, date of creation, identification number (IČO assigned upon registration), the settlor'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 supervisory person if one has been appointed. The public can only see limited data from the register—for example, the names of the settlor and beneficiaries are protected and are not included in the public extract.

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

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

Note: Establishing a trust 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 trust deed) 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 trust further includes administration costs (trustee's remuneration, accounting, tax returns, etc.). These expenses should be reasonable in relation to the value of the assets and the purpose of the trust—it is good to remember this in the planning phase as well.

Practical advice for trust settlors

Establishing a trust 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 trust deed and documentation. Many future complications arise from vaguely or incompletely written trust rules. Pay maximum attention to the preparation of the trust deed—think through various scenarios that may occur during the trust's existence and how the trust will react to them. For example, specify what happens if one of the beneficiaries dies prematurely, how the trust's assets will be replenished if they decrease, or how the trustee can be changed. A well-drafted trust deed is the best prevention against future disputes and uncertainties.

• Cooperate with experts. Trusts combine areas of law, finance, and tax, so it pays to have experienced advisors on hand. Turning to a specialised lawyer and tax advisor from the very first considerations is an investment that will pay off in the form of a smooth establishment process and optimised conditions. Experts with experience in the trust field will ensure the correct establishment of the trust according to current legislation and minimise your administrative burden. For example, they will help correctly set up the tax regime for the trust and take advantage of any tax reliefs so that the trust does not 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 is proven 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 trust deed an obligation for the trustee to regularly inform the settlor or protector about the trust'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 power to propose their removal. This increases the credibility of the entire setup, and both the settlor and the beneficiaries will have greater peace of mind that the trust is being managed properly. A professional trustee or supervisor means additional costs, but for larger trusts, it is worth it.

• Consider the tax implications and administration. As already mentioned, a trust is a separate taxpayer for income tax purposes and is subject to specific tax regulations. Be prepared for the fact that the trust must keep accounts and file annual tax returns. The trust's income (e.g., from real estate rental, dividends, etc.) is subject to corporate income tax. If the trust makes payments to beneficiaries, this may also have tax implications for them (depending on the nature of the payment and the family relationship to the settlor). We definitely recommend discussing the tax side of the trust 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 fulfil the settlor's original intention. If you want to retain influence over the assets, a trust with a carefully drafted deed 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 trusts 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 trust and its actors (albeit non-publicly). Therefore, ensure that internal information protection rules are set up correctly. In the trust deed, you can bind the trustee and beneficiaries to confidentiality regarding the trust's affairs under penalty. Professional trustee firms often have sophisticated data protection measures; if you manage the trust yourself, do not underestimate cybersecurity and the storage of sensitive documents in private.

• Do not use the trust for the purpose of defrauding creditors or otherwise circumventing the law. A trust should serve legitimate goals (family protection, asset diversification, charity, etc.), not as a shelter for assets just before bankruptcy. If you transfer assets to a trust 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 trust in a timely and strategic manner, not hastily under the pressure of a problem. Likewise, it is not advisable to establish a trust with the intention of aggressively avoiding taxes or legal obligations—firstly, it contradicts the spirit of the legislation, and secondly, you expose the trust and yourself to the risk of sanctions and lawsuits.

Legislative framework and requirements (2026)

Trusts 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 trust:

• The Civil Code (Act No. 89/2012 Coll.) – sections 1448 to 1474 of the Civil Code contain the basic regulation of trusts. The law defines the creation of a trust by setting aside assets and the trustee's acceptance of administration, specifies the mandatory elements of the trust deed, the rights and obligations of the trustee and beneficiaries, etc. It also states, for example, that a trust must have its own name containing the designation "svěřenský fond" (trust) and that the settlor can establish a trust by contract or by a testamentary disposition. The Civil Code also regulates the termination of a trust (upon achievement of its purpose, expiration of its term, a court decision, etc.) and the rules for releasing assets to the beneficiaries or back to the settlor upon the trust's termination.

• The Act on Public Registers and the Register of Trusts (No. 304/2013 Coll.) – this act introduced the mandatory Register of Trusts. It regulates what data is recorded in the register, who performs the registration, and which documents form the collection of the register. Registration in the register is a condition for the creation of the trust. Failure to comply with this obligation would mean that the trust has not legally come into existence. The Register of Trusts is partially non-public; the public can see, for example, the name of the trust, its purpose, and its IČO, but not the personal data of the settlor, trustee, or beneficiaries (which are protected).

• The Act on the Register of Beneficial Owners (No. 37/2021 Coll.) – in line with European anti-money laundering directives, a separate register of beneficial owners was established, where the beneficial owners of trusts are also recorded. Typically, this will be the settlor, or persons having a significant influence on the administration of the trust or benefiting from it. Since 2021, every trust has been obliged to report its beneficial owner to this register, otherwise sanctions are threatened. This change responded to initial concerns that trusts could be used to hide the identity of asset owners—transparency has thus been increased. For the settlor, this means an additional administrative step, but also an increase in the trust's credibility.

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

• Other relevant regulations: Other laws may also affect the administration and functioning of trusts. The Trade Licensing Act applies if the trust exceptionally operates a trade. The Act on Special Court Proceedings regulates court proceedings in matters of trusts (e.g., appointment of a trustee). For the registration of real estate in a trust, the Land Registry Act is key. Only special trusts that function as investment funds are subject to strict regulation by the Czech National Bank 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 trusts, while leaving considerable freedom in the purposes for which a trust can be used. Thanks to the mandatory registers, initial concerns that trusts would be misused for illegal purposes have been dispelled. However, it is crucial for the settlor to comply with all these legal requirements—especially to carry out the registration, report the beneficial owners, and fulfil tax obligations. Otherwise, there is a risk of fines or other penalties that may outweigh the benefits of the trust.Whichever instrument you choose, you will in any case need complete legal documentation: for a trust, a trust deed in the form of a notarial deed; for a foundation or endowment fund, a founding charter and statutes. The documents must clearly define the rights and obligations of the settlor, 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 trusts are taxed; we then analyse the specifics of family structures in the text family foundations and trusts in 2026.

In conclusion: a safe path to a trust

Establishing a trust 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 trust, and diligence in every detail of the contracts and the trust deed.

Remember, you are not alone in this. Our law firm has extensive experience with trusts 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. Trusts are a useful and practical tool if they are 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 unnecessary administrative burdens. Contact us for a no-obligation consultation—together we will find the optimal way to establish a trust tailored to your needs and how to best protect your assets and the future of your loved ones.