A trust is a so-called dependent foundation (unselbständige Stiftung) with no legal capacity. Therefore, it needs the trustee as representative. In return, a trust can be set up quickly and without the involvement of the foundation authority. 

Since a trust does not have a legal personality, it needs the trustee as representative. Therefore, the founder enters into a contract with the trustee which covers the establishment and administration of the foundation. Under the terms of this contract the founder shall transfer the promised assets to the trustee. The trustee must manage these assets, that are usually dedicated to a charitable cause, as a fund for special purposes and use them for the defined purpose of the foundation in accordance with the bylaws.

A trust holds a lot of benefits, but also has its risks. For example: 

  • A trust can be set up very quickly, sometimes in a matter of weeks.
  • Possibility of delegating administration tasks (e.g. to a foundation such as the University of Mannheim Foundation)
  • A trust is not subject to additional supervision by the foundation authorities.
  • It does not require a board of directors, so the positions of the same may be filled permanently. 
  • It is much easier to make amendments to the bylaws in the case of a trust. 
  • The cost of establishing a trust is lower. 
  • A trust can be dissolved much easier.
  • It can be “converted” into a foundation with legal capacity at any time.
  • Risks include selecting the “right” trustee and transferring funds to the trustee, which, if mishandled, become the assets of the trustee.

The University of Mannheim Foundation will be happy to assist you with any questions.