Summary

Chapter 1 This chapter contains the formulation of the research subject. That subject is whether a foundation created on death is a special foundation:

There are two variants of the foundation created on death: the foundation created under a last will and testament and that created pursuant to a last will and testament.

The foundation created under a last will and testament is effected in accordance with the specified intent of the testator, as evidenced by a statement included in a last will and testament. The foundation created pursuant to a last will and testament sees the light of day by virtue of a mandate to create such.

The mandate to create a foundation can take either of two forms: the direct mandate pursuant to Art. 4:130 of the Civil Code, and the conversion mandate pursuant to Art. 4:135 par. 2 of the Civil Code.

The difference between the foundation created under and that created pursuant to a last will and testament lies in the existence requirement set out in Art. 4:56 of the Civil Code. The foundation created under a last will and testament meets the existence requirement, while the foundation created pursuant to a last will and testament does not. As a result, the foundation created on death can benefit from a disposition.

Chapter 2 The requirement was to compare the Dutch situation with that under German and Belgian law. Chapter 2 contains an examination of whether such comparison is relevant, based on whether the historical backgrounds of the foundation created on death are common. The background of the foundation in all three countries is “ad pias causas” (for salutary causes). The historical developments diverge as from the nine­teenth century. In the Netherlands, the existence of foundations was acknowledged. It also turned out, after a certain lack of clarity, that foundations could still be created after the introduction of the Civil Code of 1838, without any government involvement.

The situation in Germany was different. Especially in Prussia and later under the German Empire, the government wanted to maintain control over private initiatives in areas that it regarded as its public domain. This led to stringent regulation by way of foundation law.

In Belgium, the situation was different again. Fear of mortmain led to stringent restrictions regarding the establishment of foundations. Influenced by the use of foundations in the Netherlands, Belgian law was deregulated extensively. Since 2003 it is possible to establish a private foundation without governmental involvement, also on death.

An aspect that is important for foundations in the Netherlands, Germany and Belgium is the founder’s intent. The intent of the founder is expressed in particular in the principle that the articles of association of the foundation, in particular the objective, cannot be altered. The importance of the founder’s intent is great in all three countries, though not unlimited. Under specific circumstances, the articles of association can be amended, even the objective. However, this is only possible if unamended articles of association would lead to consequences that were not foreseen at the time of establishment of the foundation.

My conclusion is that comparison of the law with that in Germany and Belgium is relevant for my research.

Chapter 3 This chapter centres around Art. 4:135 and 2:286 of the Civil Code, the key provisions for the foundation created on death.

The establishment of a foundation under a last will and testament is achieved by inclusion of a statement to that effect by an authorised testator in a last will and testament, passed before a Dutch civil-law notary. If that has not been done, the law then converts such invalid establishment into a mandate to establish a foundation pursuant to a last will and testament (the conversion mandate). Chapter 1 sets out that a foundation created pursuant to a last will and testament cannot claim benefits from dispositions under a last will that the conversion mandate emanates from, as the existence require­ment has not been met. The question is then how a foundation created pursuant to a conversion mandate becomes entitled to dispositions that are intended for it (though invalidly). I have searched for solutions to this problem. Perrick and Breemhaar see the solution in the conversion of dispositions for the foundation in a third-party preferen­tial treatment. Van der Grinten and Schols assume that the foundation created pursuant to a conversion mandate already exists at the time of devolution of the estate. I too choose to regard the foundation created pursuant to a conversion mandate as already existing. However, I believe that such foundation cannot be a beneficiary in light of failure to meet the requirement of immediate identifiability (Art. 4:115 Civil Code). A possible appointment of an heir is converted, in my opinion, into a bequest.

German and Belgian law also mention the existence requirement but not the conversion mandate. The problem with the existence requirement was resolved in Germany by determining that, if the foundation created on death acquires legal personality, such foundation is then regarded to have acquired this pursuant to inheritance law. In Belgium the problem with the existence requirement was resolved by the notional provision that the foundation created under a last will and testament is assumed to exist as from the devolution of the inheritance.

The requirement in the Foundations Act of 1957 of a notarial deed for the establishment of foundations was made especially for practical reasons. The method of conferring assets was amended in a fundamental way. Prior to 1957, a foundation was created under customary law by segregating assets on behalf of a specific purpose. In the Foundations Act, the creation and the conferral of assets were split. Since that time a testator who wished to bequeath assets to a foundation that he had created on death had to use a disposition, a testamentary obligation or a distribution from life insurance. For that reason, Art. 4:135, par. 1 of the Civil Code is superfluous nowadays.

Chapter 4 Chapter 4 covers various aspects of the law of legal entities. It is apparent that the rules set out in legal entity law for a foundation created on death and a ‘regular’ foundation are identical. The method of creation seldom presents problems. It is also clear that, by law, the civil-law notary is responsible for including a number of key elements in the articles of association (Art. 2:286, par. 4 Civil Code). The responsibility of the civil-law notary must be assessed based on the moment when the last will and testament is drawn up and not on the moment of death of the testator.

As to the contents of the articles of association, the subjects discussed are the objective, amendment of the articles, lack of administrative authority under Art. 2:291, par. 2 Civil Code, the designation of a settlement surplus, and the appointment of directors. These subjects do not lead to questions of law but do require careful consideration of the purpose and operating method of the foundation created on death and the further contents of the articles of association.

As to Germany and Belgium, I have examined the possibilities of amendment of the articles of association. It turned out to be possible only under strict requirements. The reason for this is, same as in the Netherlands, the importance that is attached to the intent of the founder.

Chapter 5 The testator gives the foundation created on death a reason for existence, a ‘purpose in life’ as it were, which is expressed in the articles of association, especially in the objective. The objective assigned to a classic foundation, a special-purpose fund, must be regarded under the circumstances as a mandate. Since this mandate arises from the objective of the foundation, implementation of the mandate does not conflict with the so-called prohibition on distributions.

Chapter 6 The key question here is as follows. May a foundation created on death refuse a beneficial entitlement or appointment to a position? In my opinion, this is not possible. My arguments are:

The impossibility of renouncing a beneficial entitlement can lead to the foundation acquiring more liabilities than assets. It is important therefore that the foundation accepts the inheritance of the testator under the benefit of inventory. If it does not, the directors then run the risk of personal liability for the liabilities of the foundation.

I have also attended to the question of, on the one hand, the relationship between the possibility of the courts to amend the articles of association by way of the law of legal entities (Art. 2:294, par. 2 Civil Code) and, on the other hand, the route of inheritance law (Art. 4:123 and 4:134 Civil Code), which allows for change of bequests and mandates. One might assert that the route of inheritance law does not exist. On the other hand, whoever agrees with me that the objective of a foundation is often a mandate must also acknowledge that, under certain circumstances, amendment of the objective is possible under Art. 4:134 of the Civil Code.

Chapter 7 A testator can use a foundation created on death to rule from the grave. I have examined what the limits are for ruling from the grave. I point out four limitations.

The first limitation is the prohibition of circumvention of the law. The key question here is whether a legal act (or set of acts) involving a foundation created on death leads to invalidity of intent. In the case of circumvention or evasion of the law, the testator tries to rule from the grave beyond what is permitted by law. I have examined the possibility of circumvention of the regulations pertaining to conditional dispositions and administrative regimes. It is clear that circumvention of the law does not occur easily. Only when mandatory provisions are evaded can circumvention of the law be at issue. The remedy to prevent this is applying a mandatory provision as yet.

The second limitation under inheritance law is the prohibition of an exclusion of sale or encumbrance of property (Art. 4:45, par. 2 Civil Code). It turns out that, other than for the cases mentioned in Art. 3:83 Civil Code, it is not allowed to make property non-transferable. Art. 4:45, par. 2 Civil Code therefore does not pertain to prevention or restriction of the transferability of property. It is ultimately the court that decides the limit when it comes to restricting the power to transfer or encumber property.

The third limitation for the testator to assert his power after death that I have examined is how far a testator can go in setting up a wall of defence against creditors, by creating a foundation on death. That includes three different means of defence. The first involves the protection against liabilities of the testator. A foundation created on death can be used to prevent undesirable consequences of the seisin. A second possibility offered by a foundation created on death is protection of surviving dependents against one’s own creditors. It takes prudence, however, to prevent the limits of the regulation of testamentary guardianship from being exceeded. The last form of protection against liabilities discussed here is the protection of the executor. It is clearly possible to protect the director (as actual executor) of the created foundation (as formal executor) against legal liability for unpaid inheritance tax, because Art. 47 of the Collection of State Taxes Act 1990 applies exclusively to the formal executor.

Chapter 8 In this chapter I examine the main elements of the levying of taxes of foundations created on death, with particular focus on inheritance tax.

As recipient from the estate of the testator, a foundation created on death can become involved in the levying of estate tax in four different ways: as a public benefit organisation (Dutch: ANBI), as social benefit organisation (Dutch: SBBI), as other special-purpose fund, or as separated private assets (Dutch: APV). In the first three, the levy of estate tax takes place in a predictable and consistent manner. In the case of separate private assets, it is altogether different. It seems as if the foundation created on death has hardly been considered, if at all. The regulation covering these assets is overly complicated, so that legislative intervention is warranted.

Chapter 9 The conclusion of my research is that essentially no distinction is made between a natural person and a foundation created on death, with one exception. A natural person is not obliged to accept entitlements, regardless of how unreasonable and unfair this may seem to others. A foundation created on death does not have this liberty. The only reason for this is that, even though the foundation just like a natural person belongs to itself, the foundation nonetheless has a higher goal in ‘life’: attaining the goal in terms of legal personality.