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We meet: the hereditary fund and its capabilities

Use case
Imagine that there are two partners, “P1” and “P2”. They own the company A LLC. The specific percentage of the partners’ shares in the authorized capital is not of fundamental importance.

“P1” has heirs who, for certain reasons (we will come back to them), cannot rationally manage the company. Moreover, this statement is consistent with the opinion of both partners. However, “P1” still wants to ensure the comfortable existence of its loved ones. To do this, he turns to the notary and draws up a will, according to which, after his death, the notary will create a hereditary fund.

The property “P1” – a share in company “A” – will be transferred to the hereditary fund. Heirs will become beneficiaries of the fund, and “P2” will manage it.

And here the most interesting part begins: “P1” needs to determine how its heirs receive a share and / or income from managing it. There can be a lot of options, we believe that for the most part they depend on the reasons why P1 decided to create a fund.

The heir is sick or does not want to continue the work of the testator.
Solution: under the terms of management, beneficiaries should regularly receive part of the income from the use of the estate (dividends). In this case, the minimum amount of deductions will be set in advance.

Also, the conditions of management will provide for a circumstance upon the occurrence of which the estate will transfer all property to the heirs. This is a kind of insurance against malicious acts “P2”. Such circumstances, for example, may be: a delay in periodic deductions, transfers of a smaller amount or the fund does not have funds to pay.

In other words, if a fund managed by P2 ceases to pay income (even for objective reasons), then the heir gets the right to demand the transfer of the share to his direct ownership.

The described example may not seem very fair in relation to “P2”, because the reasons why the fund does not transfer incomes may be different, and their occurrence does not always depend on the actions of the remaining partner. At the same time, even if things go wrong for objective reasons, we believe that transferring control to the heirs is an adequate solution. What “P2” does not work for can happen to the heirs.

The heir is young and does not have sufficient competencies to manage.
Solution: in this case, under the terms of management, a share in LLC A can be transferred to the heir upon reaching a certain age or acquiring the necessary competencies (for example, obtaining two higher educations or seniority in a certain specialty).
At the same time, no one prohibits transferring a share in parts. Those. heir turned 25 years old, received 10% of the share; studied at two universities, another 10%; received work experience in a particular specialty, another 10%. Etc …
Again, it seems that the option is unfair to the minority shareholder. However, think about what has changed regarding him? Yes, of course, a minority shareholder alone keeps the company afloat, while his future prospect is a loss of control. At the same time, the size of its share remained the same. Status quo saved. In addition, he receives an adequate partner, gained experience.

After the death of one partner, the remaining can redeem his share.
Option of solution: the management conditions determine the purpose of the fund’s existence – the sale of the testator’s share to one or several participants of LLC “A”. The conditions also establish the value of the share (the procedure for determining it) and the period during which the share must be realized. Thus, the remaining partner can receive installments in the acquisition of a share from the heirs and guarantees of non-interference in the operational management on their part, and the heirs – a clear understanding of the prospects of calculation. If the terms of the buyback are not respected, then the share goes to the heirs, who begin to “steer” in their own way.
In any case, for the purposes of control, the heirs or proxies of the testator may enter the composition of the higher collegial body (EKR), while the EKR itself may be authorized to approve transactions for the alienation of the property of the fund.

We want to note that one option for using the inheritance fund can always be combined with another. So, for example, “P2” can get the right to redeem part of the share of “P1”, while the other part will be transferred to the heir gradually.

general information
An inheritance fund is a non-profit organization established by a notary public by order of the testator. The fund is created after the death of a citizen, provided that it is provided for by his will. The period for which such a fund is created may be limited. Management bodies: executive (sole or collegial), supreme (supreme collegial body) and supervisory (board of trustees).

The fund is created to manage the inheritance, that is, what the testator bequeathed. In addition, the assets of the fund are income derived from the use of inheritance.

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