Concept
The personal foundation is Russia's answer to Western trusts and private foundations. Since March 1, 2022, a founder may during their lifetime transfer property to a unitary non-profit organization they have created, which manages this capital according to approved articles of association and management terms in the interests of beneficiaries.
The hereditary foundation (Art. 123.20-1 of the Civil Code of the Russian Federation) is the posthumous variant of the same structure: it is created by a notary after the death of a citizen based on a will that contains a pre-recorded decision to establish the foundation, its articles of association, and management terms.
Both institutions solve the same problem—separating legal ownership of capital from beneficial enjoyment and establishing succession rules without fragmenting the business among heirs or leaving it in limbo for the six months of probate proceedings.
🍓 A personal foundation is a lifetime "Russian trust" with a preferential profit tax rate of 15%. A hereditary foundation is its posthumous version, which a notary is obliged to create within one year after the opening of succession.
Personal vs. Hereditary
A personal foundation is created during the founder's lifetime and at their will; the founder may themselves be one of the beneficiaries and see how the structure works during their lifetime. The law requires that the value of transferred property be at least 100 million rubles—this is an instrument for large capital.
A hereditary foundation is created only after death and only pursuant to a notarially certified will. There is no ₽100 million threshold for it, but it is no longer possible to revise its terms after the opening of succession: everything must be designed in advance.
⚙️ The notary conducting the probate case is obliged to submit an application for registration of the hereditary foundation within three business days. It is impossible to register the foundation after one year from the date of opening of succession—delay means that the testator's will has not been executed.
Tax Regime
Foundation Profit Tax
A preferential profit tax rate of 15% applies to personal foundations—provided that at least 90% of its annual income is passive in nature: dividends, interest, income from the sale of securities and real estate, rent. If the foundation engages in active commerce, it loses the benefit and pays at the general rate.
Personal Income Tax for Beneficiaries
Payments to beneficiaries after the founder's death are exempt from personal income tax. During the founder's lifetime, the benefit extends to the founder themselves and to close relatives—spouse, children, parents—provided they are tax residents of the Russian Federation. Transfer of property to beneficiaries is not subject to VAT.
Why Families Need This
🔗 Related
Private Foundations
The main value is succession without chaos. Business and capital continue to operate under professional management from day one, rather than being frozen for six months while heirs formalize their rights. Management terms determine in advance who receives what and under what conditions—this protects against both asset fragmentation and heir conflicts.
💡 A family holding packaged in a personal foundation survives generational transitions without shares entering the open market—the same logic as Western private foundations.
Foundation or Foreign Trust
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Private Foundations · Succession Planning · Asset Protection Trusts · Family Office
For a Russian resident, a personal foundation removes some of the problems of foreign structures: it is recognized by Russian banks and courts, and does not raise questions about CFC and beneficial ownership of a foreign structure. The price for this remains the youth of the institution—case law is thin, and articles of association and management terms must be designed without reference to decades of precedents, as in Liechtenstein.
⚠️ A personal foundation is an instrument for capital from ₽100 million; below the threshold it is unavailable. The management terms of a hereditary foundation cannot be changed after the founder's death, so a design error cannot be corrected—its cost falls on the heirs.
This material is for reference purposes and does not constitute individual legal advice.
Key factual claims
- A preferential profit tax rate of 15% applies to personal foundations—provided that at least 90% of its annual income is passive in nature: dividends, interest, income from the sale of securities and real estate, rent.