Succession and Estate Planning
Today’s families, as in previous generations, face enormous challenges – both financial and ethical. Some of these challenges revolve around succession planning and the intergenerational transmission of wealth. Succession planning is an intimate and necessary aspect of family life for any high net worth family today. With utmost discretion, our consultants will undertake this engagement, making sure that the settlor’s wishes are respected in perpetuity.
Sometimes, transmission of wealth is not straightforward: what happens if patriarchs have assets that were never declared to tax authorities? What if there are bitter disputes between family members, or adopted children or family members who need special care? Maybe the patriarch does not want grandchildren to know they are beneficiaries of the family trust. These are typical challenges that a professional family office advises on regularly. Confronting patrimonial challenges with discretion, diplomacy and a long term worldview is the job of your private multi-family office.
The Serbian endowment is perfectly designed for this task, offering a Central European alternative to the common-law trust or the Liechtenstein foundation, with added advantages of discretion and confidentiality.
The Serbian Endowment as a Family Office Structure
Endowments, or “zadužbina” in Serbian, serve as unique legal entities designed to manage assets for specific purposes. They are often compared to the “Trust” concept that exists in English common law.
Legal Basis
- Serbian endowments are firmly rooted in the country's civil law system, governed by the Law on Endowments and Foundations.
- The "Zakon o zadužbinama i fondacijama" (Law on Endowments and Foundations) is the primary legislative document that regulates the establishment, management, and dissolution of Endowments in Serbia.
- The endowment and the foundation are established by a deed of establishment or a contract (hereinafter: the deed of establishment), drawn up in written form. An endowment may also be established in a bequest.
- The endowment and the foundation acquire the status of a legal entity on the day of registration in the Register.
Formation and Purpose
Charitable or Private Objectives:
- The Law on Endowments explicitly permits the establishment of endowments for private purposes. Chapter II, Article 5 outlines the specific conditions for establishing private endowments.
Perpetuity and Beneficiaries:
- The law does not restrict private endowments from lasting indefinitely. Articles 7 and 8 provide guidance on perpetuity and the designation of beneficiaries.
Management and Governance
Founder's Intent and Governance:
- Chapter III of the law emphasizes the importance of the founder's intent, providing a legal framework for ensuring that endowments adhere to the specified purposes.
Board of Trustees:
- The law, in Articles 20-23, establishes the role of the board of trustees or administrators, detailing their responsibilities and oversight functions.
Flexibility in Purpose:
- Article 9 of the law allows for flexibility in defining the purpose of the endowment, facilitating a broad range of private interests while ensuring legal compliance.
Legal Characteristics
Separate Legal Entity:
- As a separate legal entity, distinct from founders and beneficiaries, endowments maintain clear delineation. This concept is reinforced in Chapter IV of the law.
Compliance and Reporting:
- Chapter VI, particularly Articles 38-42, outlines compliance requirements, reporting obligations, and the legal consequences of non-compliance.
Compliance and Reporting, Beneficial Ownership Registry
Beneficial Ownership Registry:
- In line with global transparency efforts, Serbia has implemented a Beneficial Ownership Registry. This registry, governed by the Law on Central Record of Beneficial Owners (Official Gazette of RS, No. 91/2018), requires endowments to disclose information about their beneficial owners.
Application of the Registry:
- Endowments, as legal entities, are subject to the registry's requirements, necessitating the identification and registration of beneficial owners. This enhances transparency and aligns with international standards.
Conclusion:
Serbian endowments, governed by the Law on Endowments and Foundations, provide a legal framework that accommodates private interests while ensuring compliance and transparency. By referencing specific chapters and articles within the law, individuals and families can navigate the legal landscape to establish and manage endowments for their specific objectives. The incorporation of the Beneficial Ownership Registry further underscores Serbia’s commitment to international standards and transparency in the management of endowment assets.
Beneficial Ownership
1. Identifying Beneficial Owners:
- In the context of Serbian endowments, the identification of beneficial owners is governed by the Law on Central Record of Beneficial Owners (Official Gazette of RS, No. 91/2018). According to Article 4(2) of this law, beneficial owners are individuals who definitively exert significant influence or control over the endowment's operations, decisions, or financial matters. This includes those actively involved in decision-making roles, such as executive and management positions.
2. Ultimate Beneficial Owners (UBOs):
- The term "ultimate beneficial owner" is specifically defined in the Law on Central Record of Beneficial Owners (Article 4(15)). UBOs are individuals who definitively derive economic benefits from the endowment or have substantial influence, acknowledging scenarios where economic benefits may accrue without exercising control. This recognition is particularly relevant in situations where professional managers make decisions on behalf of the endowment.
To find out more about our family governance and succession services, you can schedule a call with one of our professional consultants.
in Serbia