Why a business fragments on its own
Arkady Sergeyevich is 66, and he is the sole owner of a company near Kaluga that makes packaging for dairy plants: 280 employees and revenue of about RUB 3 billion a year. He also holds 70% of an LLC that owns a warehouse; the remaining 30% belongs to an old acquaintance, Gleb. The story is a composite, with invented names and figures, but we see similar family situations regularly.
His son Ilya, 40, from his first marriage, is in his eighth year as commercial director. His daughter Katya, from the same marriage, is an architect in St Petersburg and has been to the plant twice. His wife Marina is 56; they have been married since 2006, and their younger son Gosha is 15. In the spring of 2026 Arkady Sergeyevich’s former partner died without leaving a will, and his company stood idle for six months. After the funeral, Arkady Sergeyevich sat down to do the sums.
The plant was founded in 2009, during the marriage, so by default half of the stake belongs to Marina. The other half goes into the estate, and the law divides it equally among four heirs. Marina ends up with 62.5% of the company, and each of the children with 12.5%. The man who knows every client by name gets one eighth.
Leave everything to Ilya by will? Gosha is a minor, and Marina is over 55, so for compulsory share purposes she counts as unable to work. Both will receive at least half of what intestacy would give them, that is 6.25% each. Ilya ends up with 37.5%, his stepmother with more than half. Frankly, it is better not to ask about relations in this family.
How an inheritance fund works since 2022
The inheritance fund was designed for exactly this task. It is a non-profit organisation that a notary sets up after a person’s death in accordance with their will. The fund inherits the property and becomes its owner, while the relatives are its beneficiaries: they receive payments under rules written in advance but take no decisions about the company.
Incidentally, many online texts still refer to Articles 123.20-1 to 123.20-3 of the Russian Civil Code. They ceased to apply on 1 March 2022. Such a fund is now treated as a type of personal fund, and the rules on it are set out in Articles 123.20-4 to 123.20-8. There is no RUB 100 million threshold here, unlike a personal fund established during the founder’s lifetime. Anyone except a commercial organisation can be a beneficiary, even the university the owner once attended.
A beneficiary’s rights cannot be sold or passed on by inheritance, and the heir’s personal creditors cannot levy enforcement against them. If at 25 Gosha runs up debts on a start-up of his own, the plant will not even notice.
A will that works like a charter
Such a will has three integral parts: the decision to establish the fund, its charter and its management terms. There are three copies, and the notary certifies each one. Such a will cannot be made as a closed (sealed) will, otherwise it is void.
The management terms are the hardest part. They must state what property each person receives and how much, when and in what circumstances. Arkady Sergeyevich provided Marina with a monthly payment from the plant’s profit and Katya with an annual share of the dividends. Gosha is more complicated: until he turns 23 the fund pays for his education, and a large sum will come at 25, and only once he has his degree in hand.
There is a catch. Once the fund has been created, its charter and management terms cannot be changed. A court may amend them only if managing on the old terms has become impossible due to unforeseen circumstances, or if a beneficiary has turned out to be an unworthy heir. Fixed rouble amounts go out of date within a few years, so formulas work better: a percentage of profit, indexation, a right for the fund’s bodies to decide for themselves whom within the named circle to pay and how much.
Ilya was in for a surprise here. A beneficiary of an inheritance fund cannot be its sole executive body, so he will not run the fund. However, the fund, as sole participant, appoints the plant’s director, and that ban does not extend to the plant. Nina Petrovna, the plant’s finance director since 2011, is named as director of the fund, with two reserve candidates in case she declines. The board of trustees is made up of Marina, Katya and the plant’s former auditor.
If something happens to Katya, her rights will not pass to her children automatically. So the terms state, in a separate line, that the grandchildren will take her place.
Three working days, one year and a warehouse partner
How does it all get started? The notary handling the probate file must submit the documents for the fund’s registration no later than three working days after the file is opened. The clock runs from when someone applies to the notary, not from the date of death, and while the family is getting organised the stake has no one in charge of it. That is why the will appoints an executor, Valery, a long-standing partner. Until the fund comes into being, he manages the stake as a trust manager and votes as the will directs.
Before submitting the documents, the notary invites the people named in the decision to sit on the fund’s bodies. If they refuse and the bodies cannot be formed, the notary has no right to file the application. Once a year has passed since the succession opened, the fund can no longer be registered, and the estate will most likely be divided on intestacy into the very stakes the owner was trying to avoid. Nina Petrovna and the reserve candidates gave their consent in advance, over dinner.
The warehouse brought another problem to light. That LLC’s charter requires the participants’ consent for a stake to pass to heirs. If Gleb refuses, the fund will receive not 70% but the actual value of the stake in cash, and the warehouse will most likely have to be sold. The charter can only be changed during the owner’s lifetime.
The spousal half and the compulsory share
The fund inherits only what belonged to the testator. Half of the plant is Marina’s, so without a separate arrangement the fund would get 50% and Marina the other 50%, and the participants’ meeting would end in a perfect stalemate.
The solution was a marriage agreement: the stake in the plant became Arkady Sergeyevich’s separate property, while Marina received a house in the Moscow region and two flats in Moscow, plus payments from the fund. She found this easier to grasp than 62.5% of a company whose affairs she had never followed.
Compulsory heirs have their own mechanics. Anyone who has become a beneficiary of the fund loses the right to a compulsory share. It can be regained by declaring to the notary, within six months, a waiver of all rights in the fund. But the court may reduce such a share where what the person receives from the estate significantly exceeds what they need for their maintenance, taking into account their obligations and previous standard of living.
For 15-year-old Gosha, the decision would be his mother’s. His payments have been set noticeably more generously than an eighth of the estate, and he has no reason to leave the fund for a stake in a company where the fund holds everything else.
Taxes: what the fund pays and what stays with the family
Personal income tax worked out well. Payments from a personal fund under its management terms, and property distributed when the fund is liquidated, are tax-exempt. The only caveat concerns money received during the founder’s lifetime: in that case the exemption covers the founder, their spouse and close relatives, provided they are Russian tax residents. An inheritance fund is created after death, so Katya receives her payments tax-free.
Property that a non-profit organisation receives under a will is not included in its corporate profit tax base. After that, everything depends on the structure of its income. If more than 90% is passive, that is, dividends, interest, rent and proceeds from selling real estate, a personal fund (and therefore an inheritance fund) pays 15%; otherwise the standard 25% applies. That is why a fund usually produces nothing itself and instead holds a stake in an operating company.
Bill No. 617-9, passed by the State Duma at first reading on 29 October 2026, proposes raising the preferential rate for personal funds to 22% from 2027. It is not law yet, but Arkady Sergeyevich has already built the new figure into his payment model.
A fund during your lifetime or after death
Why not set up a personal fund straight away, during your lifetime? The market is clearly moving that way: at the end of 2022 there were four such funds, and by 14 September 2026 there were around 894, according to a study by Alfa Capital and HSE University. We have not come across comparable public figures for inheritance funds.
A lifetime fund can be tested and adjusted while the founder is alive, and spouses may establish one jointly and transfer their common property to it. But it requires assets worth at least RUB 100 million, the founder is liable for the fund’s debts, and for three years the fund is liable for the founder’s debts. That rule does not apply to an inheritance fund. There is also the foreign trust, with its own CFC reporting; we looked at that structure in our case on a trust in Cyprus.
Arkady Sergeyevich chose an inheritance fund. He did not want to hand ownership of the factory to another organisation while he was still alive.
How long preparation takes and when to see a lawyer
The family spent about five months on preparation: a marriage agreement, a long conversation with Gleb about the warehouse company’s charter, and three drafts of the management terms. The visit to the notary itself took a single day.
Not everyone needs a fund: sometimes a will combined with a shareholders’ agreement is enough. We prepare such solutions in our inheritance and division of property practice, including the fund’s charter and management terms. What happens to a company when the owner has prepared nothing is described in our article on inheriting a business. We agree the plan and the cost of the work in writing before we start.
Frequently asked questions
Is there a minimum amount for an inheritance fund?+
No. The RUB 100 million threshold applies only to a personal fund that an individual establishes during their lifetime.
Can the management terms be changed after the testator’s death?+
Only through the courts: if managing on the original terms has become impossible owing to unforeseen circumstances, or if a beneficiary has turned out to be an unworthy heir.
Do beneficiaries pay personal income tax on payments from the fund?+
No. Payments under the management terms and property received on the fund’s liquidation are exempt from personal income tax. The restriction on the circle of relatives applies only to payments made during the founder’s lifetime.
What does an heir entitled to a compulsory share receive?+
By becoming a beneficiary, the heir loses that right. It can be restored by renouncing all rights in the fund within six months, but the court may reduce such a share.
Need an assessment of your situation?+
Leave a request: a succession planning lawyer will review your company’s charter, your family situation and your assets, and tell you whether you need a fund.