In recent years, there has been growing interest in Russia in tools for managing personal wealth and transferring assets to heirs and other beneficiaries. One such tool is the personal or inheritance fund.

What is a Personal Fund?

A personal fund is a unitary non-profit organization established to accumulate and manage the assets of an individual, either during their lifetime or, in the case of an inheritance fund, after their death by a notary.[1] The founder independently determines the terms of asset management, but transfers ownership of the assets to the fund.

The primary purpose of the fund is to ensure control over the assets, protect them from unlawful claims, and simplify the inheritance process. While such funds are not yet widespread in Russia, the legal framework is gradually evolving.

Why Establish a Personal Fund?

• Flexibility in management and confidentiality

The founder may amend the governance structure of the fund during their lifetime, adjusting the rules and the list of beneficiaries. The fund’s charter and management conditions are not subject to public disclosure, ensuring privacy regarding the identities of owners and beneficiaries—an important factor for maintaining confidentiality and protection from unwanted interference.

• Protection of assets from creditors and hostile takeovers

Assets transferred to a personal fund become protected from creditors’ claims three years after its establishment. This protection prevents enforcement actions against the fund’s property, which is particularly relevant for entrepreneurs and high-net-worth individuals. Additionally, personal funds offer reliable safeguards against corporate raiding and fraudulent activities.

• Avoidance of inheritance disputes and equitable distribution of property

Assets held in a personal fund are not included in the estate and are not subject to division among heirs, helping to avoid family conflicts and litigation. The founder may predefine beneficiaries and set conditions for asset distribution, such as deferring transfers until the occurrence of specific events (e.g., graduation, marriage). This approach ensures fair resource allocation and transparency in dealings with heirs.

• Tax advantages

Personal funds benefit from a unique tax regime. Unlike standard commercial entities, which may face profit tax rates up to 25%, the tax burden on personal funds is typically much lower. For example, if at least 90% of the fund’s income is classified as passive, the applicable tax rate is only 15%. These tax preferences are expected to be widely utilized in practice.

• Stability and long-term asset protection

The fund continues to exist and manage assets after the founder’s death, ensuring business continuity and preservation of family wealth. This is particularly important for large companies with multiple heirs, where it may be necessary to appoint a single manager and allocate shares or income to others.

Registration Procedure

To register a personal trust, it is necessary to prepare a package of documents that comply with the requirements of the tax authorities. The mandatory package includes notarized documents: the founder’s decision to establish the fund, the charter specifying the fund’s name, objectives, and management procedures, as well as internal management conditions, which remain confidential and are not submitted to the registering authority.

The application form (R11001) must state the full name of the fund, its legal address, and founder’s details. The applicant’s signature must be notarized, and the address must match the supporting property documents. The organizational-legal form must be included in the name. An independent appraiser’s report confirming the value of the transferred assets (minimum RUB 100 million) is required and may be submitted electronically with a digital signature.

The deed of transfer of assets records the legal separation of the trust’s assets from the founder’s personal property. The state fee of 4,000 rubles may be paid in advance; however, it is not mandatory to submit the payment receipt, as the Federal Tax Service will verify the payment independently.

Conclusion

A personal fund is a powerful tool for those seeking to manage their assets competently during their lifetime and ensure seamless transfer to heirs, free from disputes and unnecessary formalities. It combines asset protection, management flexibility, confidentiality, and tax optimization, making it an attractive solution for wealthy individuals and business owners in Russia.

Key Information on Inheritance Funds

A testamentary trust, according to current provisions of civil law, is a non-profit organization established exclusively after the death of an individual based on a will, which contains the testator’s express intention to create such a trust.

Main Advantages of an Inheritance Fund

• Preservation of business and assets after the owner’s death

An inheritance fund enables uninterrupted management of business and assets, preventing company operations from halting and avoiding losses associated with inheritance disputes or delays in succession.

• Protection of assets from division and debts of heirs

Assets held by the fund are excluded from the estate, thus not subject to division among heirs and protected from creditors’ claims against the deceased or the heirs. This ensures capital preservation and prevents conflicts.

• Flexibility in the designation of beneficiaries

The founder may specify beneficiaries and the conditions for their receipt of income or assets, including restrictions on asset disposition, thereby maintaining control over the use of the inheritance and supporting the long-term interests of the family or business.

• Possibility to include foreign assets

Inheritance funds may include assets located outside Russia—such as securities, shares in foreign companies, real estate, works of art, and more. This facilitates de-offshorization and simplifies management of international assets.

Establishment Procedure

An inheritance fund in Russia may only be established by will, in which the testator explicitly provides for its creation. The will must include three key elements: the decision to establish the fund, its charter, and asset management conditions. The document must be notarized; closed wills or those made under extraordinary circumstances cannot contain such provisions.

After the testator’s death, the notary handling the estate must submit an application for fund registration to the competent authority within three business days of the estate’s opening. Registration is not permitted if more than one year has passed since the estate was opened.

The fund’s charter must specify its name (including the words “inheritance fund”), legal address, objectives, management structure, and procedures for forming governing bodies. Asset management conditions must also be detailed, including asset distribution procedures, payment schedules (e.g., upon reaching a certain age), or event-based triggers (e.g., graduation, marriage).

There is no statutory minimum asset threshold for inheritance funds—assets are transferred as part of the estate, including income generated from their management. In practice, the asset value should be sufficient to cover the fund’s maintenance and objectives. The notary must offer candidates named in the will the opportunity to join the management bodies; if they refuse, registration is not possible. Upon establishment, the fund receives a certificate of inheritance and commences asset management for an indefinite period or as specified in the will.

Conclusion

An inheritance fund is a modern and effective instrument that enables owners of substantial assets to preserve and manage their wealth after death, protect businesses and heirs’ interests, and streamline the inheritance process. This tool is particularly valuable for entrepreneurs seeking to avoid the risks of traditional inheritance and maintain family capital over the long term.

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In Russia, legislation governing testamentary and personal trusts is evolving gradually. Therefore, careful attention must be paid to the practical implementation of establishing such trusts. It is important to understand that transferring assets into a trust is a significant step that limits the former owner’s freedom to dispose of those assets.

Establishing a personal or testamentary trust is an effective method of asset management and protection in Russia. These structures help ensure the financial stability of the family and other beneficiaries during the lifetime of the trust’s founder and help avoid conflicts during inheritance when a testamentary trust is created. Successful implementation of this approach requires professional legal support, as well as long-term advance planning and preparation.

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[1] Article 123.20-4 of the Civil Code of the Russian Federation (Part One), dated 30.11.1994 No. 51-FZ