Free use of private-foundation property by a beneficiary: board duties and use benefit

Section 5 PSG determines who is a beneficiary of a private foundation. The Act distinguishes designation in the foundation deed from determination by a body appointed for that purpose or, if there is no such body, by the foundation board. Status is the necessary starting point for the rest of the review.

Status alone does not create a right to a particular apartment, house or period of use. Section 9 PSG requires the applicable deed, supplementary deed and effective amendments to be read together. Those instruments may define beneficiaries and establish rules for distributions and the internal organisation of the foundation bodies.

The board should be able to explain the connection with the foundation purpose. A family residence may be contemplated by the foundation documents, but family ties to the property do not replace that review. The article on beneficiaries and information rights deals with status and information questions separately.

Free use gives the beneficiary an economic advantage even though no money is transferred. The resolution should state which rooms or areas are made available, who may use them and which payments the foundation assumes. Use by the beneficiary's relatives belongs in the factual description as well.

The board must connect the benefit with the permitted framework of the foundation deed. That requires a review of beneficiary status, purpose and decision-making authority. Informal earlier use or an oral promise does not replace a current, reasoned resolution. The distinction between a discretionary benefit and a fixed entitlement is explained in discretionary benefits and fixed entitlements.

The arrangement should be precise even when the family describes it as a permanent right to live there. A contractual use agreement, a right in rem and a revocable permission have different consequences. The board should determine which legal position is granted and how it ends.

A reliable file needs an understandable value for the use benefit. Relevant factors may include location, size, condition, type of use, equipment, duration and comparable charges. If only part of a property is made available, the rooms and the effect on other use should be identified.

The benefit is not limited to the saved rent. The foundation may pay operating costs, insurance, maintenance, public charges or major investments. The resolution should distinguish costs of the foundation, costs of the user and costs of shared areas. An unsupported estimate makes later review difficult.

Tax treatment is a separate layer of the analysis. The article on in-kind distributions, valuation and equal treatment shows why the object, valuation date and assumed burdens should be recorded together. A beneficiary loan has a different structure, as explained in loans and repayment.

Under section 17(1) PSG, the foundation board manages and represents the private foundation, ensures fulfilment of its purpose and must comply with the foundation deed. Under section 17(2) PSG, each board member must act economically and with the care of a diligent business manager. Those duties also apply to a family-requested housing arrangement.

The resolution should identify the effective deed version, beneficiary status, property, authorised users, duration, value of the benefit, cost allocation and return rules. It should also explain why the arrangement serves the foundation purpose and takes the foundation's liquidity into account.

If a board member is a user or has a special economic interest, the conflict requires separate treatment. Section 17(5) PSG may require approval by the other board members and the court for a transaction between the foundation and a board member where there is no supervisory board. The exact facts determine whether this special rule applies. The article on foundation board duties of care provides the wider context.

Free use needs a clear endpoint. The agreement or resolution should regulate start, duration, termination or revocation, the condition on return, access for necessary works and items installed by the user. For a long-term residential arrangement, death, move-out and changes in beneficiary status require particular care.

Changes should be part of the operating rules. Alterations, additional residents, subletting or a permanent change in cost allocation may change the economic benefit. Material deviations from the approved model should be reviewed before implementation.

Where several beneficiaries are involved, different use arrangements should remain factually explainable. Equal treatment does not mean identical benefits. The board should record comparable use, the criteria in the deed and the reasons for differences. The article on distribution resolutions and records complements this documentation duty.

Section 30 PSG gives beneficiaries, subject to the statutory conditions, a right to information about fulfilment of the foundation purpose, the foundation assets and management. A complete use file therefore also supports later information and review.