Changing beneficiaries of a private foundation: declaration, resolution and records

If the foundation declaration names individuals, replacing them will generally require an amendment of the governing document. If it defines an open class and appoints a body to identify persons, that body may identify individuals under the existing criteria.

The appointing body may not invent new criteria. It must apply the wording, the foundation purpose and the beneficiary scheme as a whole. Family connection alone is insufficient where the declaration also requires age, education, need or membership of a defined family branch.

Before any decision, the current foundation deed, supplementary deed, previous identifications and amendments must be combined. Only the effective document set shows whether the task is application or amendment.

The foundation declaration may appoint a person, advisory board or other body to identify beneficiaries. If it does not, the foundation board performs the statutory task. A family preference or a vote among beneficiaries does not replace the competent body.

Members of the appointing body may themselves be affected or closely connected. The governing documents should address conflicts, quorum and replacement. An informal abstention is not enough unless the remaining authority has also been examined.

A complete resolution identifies the provision applied, the material facts, the relevant period and the outcome. The path to the decision should remain traceable for later information requests, audits and distribution resolutions.

Where the class set by the declaration is to be broadened, narrowed or reordered, the power to amend must be reviewed. After the foundation exists, a founder may act only under an effectively reserved right of amendment.

If the founder route is unavailable, the foundation board has no general power to redesign family entitlements. Section 33(2) PSG permits only a subsidiary adjustment to changed circumstances that preserves the purpose and receives court approval. The Supreme Court requires a concrete connection between the change and the particular foundation.

Under section 33(3) PSG the amendment becomes effective only on registration in the commercial register. Until then the previous beneficiary scheme remains controlling and the intended change must not be anticipated.

Beneficiary status does not automatically create a right to a particular payment. A distribution also depends on the purpose, the declaration, liquidity and creditor protection. Our article on distributions and sound resolutions explains this second level.

Conversely, withholding a distribution does not silently remove beneficiary status. If the person is no longer to be included, the legal act required by the effective declaration must be taken.

After an identification, the foundation board must make the electronic notification required by section 5 PSG to the competent tax authority. Internal lists, distribution files and information access should show the same status.