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Personal funds

Federal Law No. 287-FZ of July 1, 2021 "On Amendments to Parts One and Three of the Civil Code of the Russian Federation" established the possibility of creating personal funds during life to manage property and business.

The law provides for the possibility of creating not only hereditary ("posthumous") funds, but also "lifetime" personal funds created and operating during the life of the founder and continuing to exist after his death. The advantage of a personal fund is that the founder has the opportunity to control the process of creating the fund himself, to adjust its work and assess possible risks.

For this purpose, the concept of "personal fund" is introduced into the Civil Code of the Russian Federation. In accordance with paragraph 1 of Art. 123.20-4 of the Civil Code of the Russian Federation, a personal fund is a unitary non-profit organization established for a certain period or indefinitely by a citizen or after his death by a notary that manages the property transferred to it by this citizen or property inherited from this citizen in accordance with the management conditions approved by him.

According to the law, the founder of a fund is a citizen who has created a personal fund or provided for its creation in a will. A personal fund can have only one founder, except in cases where the personal fund is established by the spouses and the common joint property of the spouses is transferred to it.

The property of the personal fund transferred to the fund belongs to it on the basis of ownership, the founder has no rights to the property of the personal fund. When creating a personal fund, it is needed to transfer property worth at least one hundred million rubles. In this case, the value of this property is determined on the basis of an assessment of its market value. The specified rule on the value of property will not apply to hereditary funds.

The personal fund has the right to engage in entrepreneurial activity, however, this activity must comply with the charter of the personal fund. To carry out entrepreneurial activities, the personal fund has the right to create business companies or participate in them. The founder of a personal fund bears subsidiary liability for the obligations of the fund, and the fund, in turn (with the exception of hereditary funds), bears subsidiary liability with its property for the obligations of the founder within three years from the date of its creation.

Mandatory document for the creation of a fund is the charter. But there are also optional documents - for example, approving the conditions for managing a personal fund and other internal documents of the fund, which are mandatory for the governing bodies. The charter and conditions for managing a personal fund must be certified by a notary. After the death of the founder, the approved documents cannot be changed, except on the basis of a court decision.
The beneficiaries of the fund can be named in the documents of the fund, and can also be defined as a separate category of persons from an indefinite circle of persons. The conditions for receiving the property by the beneficiaries can be determined by the fund documents (for example, the property is transferred to the beneficiary upon reaching a certain age).

The founder determines the composition of the bodies, their functions and persons who make up the bodies of the fund (for example, these can be beneficiaries). In cases stipulated by the charter of a personal fund, a supreme collegial body and a board of trustees are created in it, which may include beneficiaries or the founder of the personal fund. The charter of the personal fund may also envisage the creation of a supervisory body of the personal fund, the powers of which are to supervise the activities of the bodies of the personal fund.

Federal Law No. 287-FZ of 01.07.2021 eliminates the previously existing gap associated with the impossibility of the beneficiaries to create a fund during the lifetime under Russian law and to test the work of such a fund in practice. Since 2018, it has become possible for citizens of the Russian Federation to create hereditary funds. The management of the hereditary fund was entrusted to the trustees and it was determined to whom, in what amount and for what purposes the profit or payments from the fund's property should go. However, the inheritance fund could be created only after the death of the founder, so it was impossible to control its work, take into account errors and make changes to the charter documents.

The new law fills this gap. In Russia, issues of inheritance and business management can be resolved during the life of the founder, and the hereditary (or "posthumous") fund is recognized as a kind of personal fund with the specifics defined in the Civil Code.