Asset Management Foundation – A Solution for Managing Significant Wealth

If you are seeking a solution for preserving significant wealth across generations, investing it strategically over the long term, and ensuring its secure and tax-efficient transfer to future generations, an asset management foundation is the most suitable vehicle.

Conscious asset management at home and abroad

Related articles:

About fiduciary asset management in general

The advantages of Hungarian trust asset management are also available to foreigners

In addition to the fiduciary asset management structure, the Hungarian legal system introduced the institution of the asset management foundation in 2019. It is designed to preserve, protect, and grow substantial wealth (exceeding HUF 600 million) for an unlimited period within a stable and well-regulated legal framework supported by robust institutional safeguards.

What is the essence of the asset management foundation as a legal institution?

An asset management foundation is an independent legal entity registered by a court, which is authorised to actively manage assets transferred by the founder(s) for the purpose defined in its founding charter. It is registered by the court, which also exercises legal supervision over it.

The Purpose of an Asset Management Foundation – Differences from Traditional Foundations

Unlike traditional foundations, an asset management foundation may serve not only a public-interest purpose but also a purely economic one. Such an economic purpose may include preserving and growing a family’s wealth across generations. To achieve this objective, the asset management foundation engages in business activities, primarily investment activities. From the income generated through the investment of its assets, the foundation may make financial distributions to the beneficiary or beneficiaries designated in the deed of foundation.

How is an asset management foundation established?

The founder transfers the assets to the asset management foundation prior to the submission of the application for registration. Thereafter, until the assets are distributed, neither the founder nor the beneficiary has any ownership rights over the transferred assets. As a result, the assets remain intact within the foundation and are protected against third-party claims. The assets transferred to the foundation may include, for example, real estate, movable property, securities, corporate equity interests, and other transferable rights.

What is required to establish an asset management foundation?

Deed of Foundation

The deed of foundation sets out the purpose of the foundation, the conditions for managing its assets, the provisions relating to the beneficiaries, and the rules governing asset management. The deed of foundation may also specify a minimum asset value below which the assets may not fall; this generally corresponds to the statutory minimum capital, which is HUF 600 million. Based on the deed of foundation, the court registers the asset management foundation as a legal entity. In addition to the deed of foundation, an investment policy must also be prepared.

Founder

The natural or legal person who establishes the foundation and provides the initial assets prior to the submission of the application for court registration. The founder is entitled to appoint and remove members of the governing body, amend the deed of foundation, and determine the purpose of the foundation as well as the manner of asset management.

Beneficiary

From the assets of the foundation, financial benefits may be granted in connection with the realization of the foundation’s purpose to the person designated as a beneficiary in the deed of foundation or by the foundation body authorized to do so. The beneficiary may include the founder and their family, thereby ensuring that, under controlled conditions of foundation asset management, appropriate financial benefits can be provided to family members.

Board of Trustees

The governing body of an asset management foundation is the board of trustees, which is responsible for the operation of the foundation and the management of its assets. The board of trustees consists of at least five natural persons; however, in the case of a non-public-interest asset management foundation, it may also consist of a single member, who may simultaneously be the founder, trustee, and beneficiary. The founder may decide to designate the board of trustees as the body exercising the founder’s rights. In this way, continuity in the exercise of founder’s rights can be ensured in the event of the founder’s death or incapacity.

Asset Controller

The asset controller is responsible for supervising the activities of the board of trustees and monitoring compliance with the objectives set out in the deed of foundation. An asset controller may be, for example, an auditor, a law firm, or another person with a clean criminal record and a relevant higher education qualification specified in the deed of foundation.

Supervisory Board

As a general rule, the supervisory board consists of at least three members. If the asset management foundation does not serve a public-interest purpose, the deed of foundation may provide that the foundation does not operate a supervisory board. In such a case, the duties of the supervisory board are performed by the foundation’s asset controller.

Statutory auditor

In the case of an asset management foundation, the appointment of a statutory auditor is mandatory.

What tax advantages are associated with an asset management foundation?

Gift tax in the context of an asset management foundation

Although the transfer of the founder’s assets to the asset management foundation takes place as part of a gratuitous transaction, this act of asset disposition is not subject to gift tax. In other words, the founder’s asset disposition—similar to the transfer of assets in the course of fiduciary asset management—is exempt from gift tax. The exemption from gift tax for the asset disposition also applies to foundations registered in other EEA member states, provided they can demonstrate that they comply with the Hungarian legal requirements governing the establishment and operation of asset management foundations.

The obligation to pay gift tax in the case of asset management foundations must also be assessed at the time of the distribution of assets, in accordance with the rules applicable to gifts, as if the beneficiary had acquired the managed assets directly from the founder.

Asset management foundations: double tax treaties and favourable taxation in Hungary

In addition to preferential stamp duty rules, asset management foundations offer significant tax advantages, which are particularly important in the field of international asset management. An asset management foundation established in Hungary is considered a legal entity with Hungarian residency, which means that the favorable provisions of double taxation avoidance agreements can be directly applied to it. Asset management foundations are also subject to favorable domestic tax rules: a low corporate tax rate, and opportunities for corporate and personal income tax exemptions.

The taxation of asset management foundations is similar to that of trust asset management, which we have described in detail in another article.

For a business or a high-net-worth family, the Hungarian asset management foundation can be an excellent tool for consolidating wealth into a single, stable legal entity, ensuring the professional, long-term management and integrity of assets within a European onshore legal framework. However, due to the high capital requirements, mandatory institutions, and significant operating costs, the foundation structure is primarily suited to the complex management of very substantial assets and requires careful legal, tax, and family governance planning.

Private Clients Division

High-net-worth individuals encounter a range of specific financial and tax issues in managing their investments and income. Decisions must be made with due consideration of all relevant factors: ensuring fair treatment of family members while preserving the value of the wealth; fully complying with both domestic and international tax regulations, while at the same time identifying opportunities that provide the most advantageous tax burden. Just as every individual is different, every family is unique, and personal and family wealth therefore requires tailored treatment.

The Private Clients divison and Family Office competence center of LeitnerLeitner and LeitnerLaw offer exactly this to you!