Slovakia has taken the first step towards introducing its own “family trust” solution. The new Civil Code, approved by the National Council of the Slovak Republic, introduces the private fund – a legal entity whose assets are intended to serve a lasting private purpose determined by its founder.

For succession planning and the protection of family wealth, the introduction of a private fund in Slovakia represents a significant development, particularly for those seeking to keep such a solution within the Slovak legal environment.

For now, we only know the basic framework

The key details are yet to come in separate legislation. This should regulate, in particular, governance rules, the position of the founder and beneficiaries, asset management and supervision, as well as the protection of creditors, forced heirs and the founder’s spouse.

The specific design of these rules will ultimately determine how the private fund can be used in practice.

The tax regime will be crucial

Another major question will be the tax treatment of private funds. The contribution of assets to the fund, their subsequent holding and distributions to beneficiaries may ultimately determine whether the new structure will work effectively in practice.

A private fund will therefore not be available merely upon the new Civil Code taking effect. Separate legislation will first need to be adopted, together with related amendments – particularly in the area of taxation.

The first step has been taken. Now comes the more challenging part – setting out in detail how the new structure will operate in practice.

The devil is in the detail.

Trusts in Slovakia and options for protecting family wealth

Although Slovak law has not previously provided for a domestic trust in the form known from other jurisdictions, the need for long-term wealth protection, asset management and intergenerational wealth transfer exists in Slovakia as well. Owners of family and business assets have therefore typically relied on structures available in other jurisdictions.

In our article Funds as a tool for effective asset protection and management, we explain how trusts work, the role they can play in protecting and managing family wealth, and which solutions have traditionally been among the most common choices for Slovak clients.

A new private fund in Slovakia could eventually provide a domestic alternative for some of these needs. Its actual scope and practical usefulness, however, will only become clear once the specific legal and tax framework is adopted.