Setting up a family foundation: process, costs and requirements

Requirements: who can set up a family foundation?

In principle, any natural person, alone or together with others, for example as a married couple. Legal entities such as a GmbH can also establish a foundation. You do not need a business or a company.

A foundation can be set up in two ways:

• during your lifetime by a written act of establishment (Sec. 81 (3) BGB),
• upon death by will or contract of inheritance (Sec. 81 (3) BGB).

For recognition, the authority checks three things: a permissible, clearly worded purpose, complete articles and assets that secure the purpose permanently and sustainably. A family foundation can be approved; it does not have to be charitable. Whether it is the right solution for you at all is explained in the guide Family foundation: what it is and when it pays off.

How much in assets does a family foundation need?

The law does not name a minimum sum. Sec. 82 BGB only requires that the permanent and sustainable fulfilment of the purpose appears assured. The figures given for what the authorities expect in practice vary widely: they range from around €50,000 to recommendations of over €1 million.

You can contribute, among other things:

• money and securities
• real estate
• shares in a GmbH or other companies
• rights, such as trade marks or copyrights

It is important that at least part of the assets generates ongoing income. This is because the benefits to the family and the running costs are paid from the income, while the endowment capital itself is preserved. The calculation is therefore: realistic income per year minus costs for administration, tax advice and corporation tax. If hardly anything is left for the purpose, the assets are too small.

Setting up a family foundation in 6 steps

Step	What happens	Who does it	Duration
1. Clarify goals, check alternatives	record assets, family and goals; foundation, GmbH or will?	founder with lawyer	week 1
2. Tax planning	gift tax, tax class, substitute inheritance tax, ongoing taxes	tax adviser	in parallel with steps 1 to 3
3. Draft the articles	purpose, beneficiaries, distributions, bodies, rules on amendments	lawyer with founder	weeks 2 to 3
4. Appoint the bodies	board, advisory board or board of trustees if applicable	founder	together with step 3
5. Act of establishment and application	signature, application to the foundation authority, queries	founder, lawyer advises	several months
6. After recognition	transfer assets, tax office, register, account	board, notary if applicable	first weeks after recognition

1. Clarify goals and check alternatives

The starting point is the question of what the foundation is to achieve: provide for the family, keep a business together, secure real estate? And whether a foundation is the best tool for this. A family GmbH or a will with long-term executorship can be more flexible. A comparison of these solutions can be found in the guide to the family foundation. Involve the family early on. Anyone who only learns about the foundation from the authority feels passed over.

2. Tax planning

The transfer to the foundation triggers gift or inheritance tax. For family foundations, the tax class is based on the most distant beneficiary under the articles (Sec. 15 (2) sentence 1 ErbStG). So anyone who includes future generations as beneficiaries reduces the allowance. Later additional endowments (Zustiftungen) may be taxed less favourably than the initial endowment. On top of that come the ongoing corporation tax and, every 30 years, the substitute inheritance tax (Erbersatzsteuer). Your tax adviser does this calculation before the articles are finalised.

3. Draft the articles

The articles must at least regulate the purpose, name, registered office and formation of the board; you dedicate the assets in the act of establishment (Sec. 81 (1) BGB). For a family foundation, the following are also decisive: who the beneficiaries are, whether beneficiaries have a claim or the board decides at its discretion, how the assets are invested and under what conditions the articles may be amended. You will find an outline further below.

4. Appoint the bodies

A board is mandatory (Sec. 84 BGB). You can appoint yourself to the board, even for life, and thus manage the administration yourself during your lifetime. One to three board members are usual, often supplemented by an advisory board or board of trustees with family members as a supervisory body. Also regulate who succeeds you on the board.

5. Act of establishment and application for recognition

The act of establishment is your binding declaration to dedicate specific assets to a specific purpose. During your lifetime, written form with your own signature is sufficient (Sec. 81 (3) BGB). You need notarisation if real estate or GmbH shares are contributed. You can revoke the act of establishment until recognition (Sec. 81a BGB).

You submit the application to the foundation authority at the future registered office. The authority checks the articles, the assets and whether the purpose can be fulfilled permanently, often with queries. With recognition, the foundation acquires legal capacity. Before that, there is no "foundation in formation": it cannot open an account or conclude contracts.

6. After recognition

Now you transfer the promised assets to the foundation (Sec. 82a BGB): transfer money, transfer the securities account, transfer real estate before a notary and have the land register amended, assign GmbH shares. In parallel:

• Tax office: apply for a tax number, engage a tax adviser.
• Account: open a foundation account with the certificate of recognition, the articles and the board members' identity documents.
• Transparency register: the beneficial owners must be reported (Sec. 20 GwG). Recht 24/7 does this on request via the transparency register service for €129 net plus VAT.
• Foundation register: the new foundation register at the Federal Office of Justice (Bundesamt für Justiz) only starts on 1 January 2028; the Foundation Register Act is not yet in force (Act of 8 December 2025, Federal Law Gazette 2025 I no. 319). Until then, there is no registration. Recht 24/7 supports the registration as part of the service.
• Board: first meeting with minutes, investment strategy, bookkeeping with opening balance sheet.

Which documents do you need?

When required	Documents
Always	articles, act of establishment, list of assets with evidence, copies of the identity documents of the founder and board, details of the beneficiaries
Additionally for the foundation authority	plan of income and running costs, declarations of willingness of the board members
For real estate	current land register extract, valuation report or evidence of market value, leases, details of loans and land charges
For GmbH shares	articles of association, current list of shareholders, latest annual financial statements, valuation documents, consents under the articles of association
For securities	current securities account statement

The more complete the package, the fewer the queries and the shorter the procedure.

What does it cost to set up a family foundation?

Setting up the foundation itself has no entry fee, but costs arise for advice, the authority and, where applicable, the notary. On the market, five-figure sums are sometimes quoted for advice, articles and recognition. At Recht 24/7, the lawyer's price is fixed in advance:

Item	One-off	Ongoing per year	Note
Lawyer (Recht 24/7)	€1,449 net plus VAT	none	fixed price: structuring advice, act of establishment, articles, advice on the application, support with registration in the foundation register
Authority's recognition fee	approx. €100 to €1,500 depending on the federal state	none	figure from /stiftung-gruenden
Foundation register	registration fee, only once the register starts on 1 January 2028	none	amount not determined
Notary	based on the business value	none	only for real estate or company shares
Transparency register	€129 net plus VAT (optional)	none	report by Recht 24/7
Tax adviser	according to effort	according to effort	tax planning, returns, annual financial statements
Ongoing administration	none	depending on scope	bookkeeping, asset management, meetings

The foundation's assets themselves are not a fee. They remain the assets of your foundation and serve the family.

How long does it take to set up a family foundation?

The duration has two parts: the lawyer phase, which you can control yourself, and the authority phase, which you cannot.

Period	What happens
Week 1	structuring advice and questionnaire: goals, assets, family, purpose
Weeks 2 to 3	Recht 24/7 drafts the articles and the act of establishment and agrees them with you
Afterwards	application to the foundation authority, advice on queries
Authority phase	several months until recognition
After recognition	transfer of assets, tax office, account, register

It usually takes longer with real estate (valuation report, notary, land register) and with company shares (valuation, consents). Plan backwards: if the foundation is to be in place by a certain date, start early enough.

During your lifetime, upon death or "in reserve"?

During your lifetime: you design it yourself, answer the authority's queries, can become a board member and see whether the foundation works. Disadvantage: the assets are gone immediately.

Upon death: you provide for the foundation in your will or contract of inheritance, usually with an executor who establishes it after your death. Advantage: you keep the assets until the end. Disadvantage: no one can answer the authority's queries in line with your wishes, and ambiguities in the purpose or articles can jeopardise recognition and trigger disputes. Whether your will regulates this properly is checked by a lawyer via will review for €169 incl. VAT.

In reserve: you set up the foundation during your lifetime with smaller assets that already support the purpose, and top it up later by additional endowment or will. In this way the foundation is recognised and tested. Note, however: the additional endowment may be treated less favourably for tax purposes than the initial endowment.

Family foundation by federal state

The competent authority is the foundation authority of the federal state in which the foundation is to have its registered office. Since 1 July 2023, the civil law on foundations has been regulated uniformly at federal level in the BGB, but fees and the scope of supervision are still determined by the federal states. Some states exempt family foundations wholly or partly from ongoing supervision; in Bavaria, for example, there is no supervision for family foundations (Art. 10 (1) BayStG); recognition remains mandatory everywhere (Sec. 80 (2) BGB). An overview of supervision in several federal states can be found in the guide to the family foundation.

What do the articles of a family foundation look like?

Articles are always individual. This outline shows which points are typically regulated. It does not replace a template or advice.

1. Name, legal form, registered office
2. Purpose of the foundation (providing for the family, preserving the assets, a business if applicable)
3. Beneficiaries: group of persons, order, exclusion, cessation
4. Benefits: type, amount, claim or discretion, occasions
5. Foundation assets: endowment capital, additional endowments, preservation, investment principles
6. Board: number, appointment, term of office, succession, remuneration, representation
7. Advisory board or board of trustees: composition, tasks, rights
8. Decision-making and the family's information rights
9. Financial year, accounting, audit
10. Amendment of the articles and change of purpose: conditions, majorities
11. Dissolution, merger, devolution of assets
12. Foundation supervision, entry into force

Typical mistakes when setting up

• Articles too narrow or too vague: too narrow, and the foundation cannot adapt in 30 years. Too vague, and the authority does not recognise it or the family argues about interpretation.
• Tax class privilege wasted: anyone who starts small and later makes a large additional endowment may pay significantly more gift tax on the additional endowment.
• Compulsory portion overlooked: the transfer can trigger claims to supplement the compulsory portion, which melt away over 10 years (Sec. 2325 (3) BGB). Without a waiver of the compulsory portion, a risk remains.
• Assets too tight: if the assets generate hardly any income, nothing is left for the family after costs.
• Substitute inheritance tax not planned for: it is certain to come after 30 years and must be paid, even for real estate with low income.
• Planning into the waiting period: before recognition, the foundation cannot buy anything or conclude contracts.

Example: a business family contributes GmbH shares and a property

Thomas, 62, holds 100 per cent of a mechanical engineering GmbH and owns a let apartment building. His two children are to be provided for, and the business is not to be divided or sold. The process:

• Week 1: structuring advice. Result: family foundation with Thomas as the board, an advisory board with both children, beneficiaries only children and grandchildren.
• Weeks 1 to 3: the tax adviser calculates gift tax and substitute inheritance tax, also with regard to business assets. A valuer values the building.
• Weeks 2 to 3: Recht 24/7 drafts the articles and the act of establishment. Thomas aligns the GmbH's articles of association, which must permit assignments to the foundation.
• Afterwards: notarisation of the act of establishment because of the property and the GmbH shares, application to the foundation authority, queries about the income plan.
• After recognition: assignment of the GmbH shares, notarial transfer of the building with amendment of the land register, report to the transparency register, tax number, account.

The tax amounts depend on values and structure and are deliberately not quantified here. The example shows the sequence, not a recommendation for the individual case.