Separation through a company
Holding the property in a company separate from the operating business. See holding and property companies.
Individuals · Protecting your assets
The family asset fund (fondo patrimoniale)
It is often presented as the ultimate shield against creditors, and it is not. It protects against some debts and not others, it does not work against earlier debts, and when it comes to tax debts the protection is much narrower than people claim.
01 · The restriction
What the family asset fund is
It is a restriction that earmarks certain assets, set up by the spouses or by a third party, to meet the needs of the family. The assets remain owned as before, but they are set aside for that purpose.
- It can hold real estate, registered movable property and negotiable securities: not cash or current accounts.
- It is set up by notarial deed, or by will in the case of a third party.
- It requires a marriage: it ends with annulment, dissolution or the end of the civil effects of the marriage.
- If there are minor children, the fund continues until the youngest comes of age.
- It must be noted in the margin of the marriage certificate: this is the formality that makes it enforceable against third parties.
- Acts disposing of the assets placed in the fund require the consent of both spouses and, where there are minor children, the authorisation of the court.
The note in the margin of the marriage certificate is the decisive formality: without it, the fund cannot be enforced against third parties. Recording it in the land registers alone is not enough. It is a step that is sometimes overlooked, and it makes the fund useless exactly when it would be needed.
02 · The limit
Which debts it really protects against
The rule is precise: the assets in the fund cannot be seized for debts that the creditor knew had nothing to do with the needs of the family.
| Type of debt | Protection |
|---|---|
| Debts taken on for the needs of the family | None: the assets are liable |
| Debts unrelated to family needs, known to be so by the creditor | Protection applies |
| Unrelated debts where the creditor did not know they were unrelated | No protection |
| Debts that predate the setting up of the fund | None, and the fund can be set aside |
| Tax and social security debts | Very limited protection: the prevailing view often treats them as serving family needs |
| Debts arising from unlawful acts | No protection |
The notion of "family needs"
It is much broader than people think.
- It is not only what is essential: it includes the family's standard of living
- Debts of the business that supports the family often fall within it
- The burden of proving that a debt is unrelated lies with the person claiming protection
- That is why the fund protects much less than people believe
03 · The critical point
The family asset fund and tax debts
This is the point on which the fund is most often proposed, and it is where it protects least.
- The prevailing view treats tax debts as serving the needs of the family when they arise from the activity that supports it.
- The tax collection agent can therefore register a mortgage and take action against the assets in the fund.
- The burden of proving that the debt is unrelated to family needs lies with the taxpayer.
- The proof is hard to provide: a business that produces income for the family serves its needs by definition.
- A fund set up after the debt arose can be challenged with a revocatory action (azione revocatoria, the action to set aside an act that harms creditors).
- In serious cases there can be criminal consequences, for fraudulently evading the payment of taxes.
Anyone presenting the family asset fund as a screen against the tax authorities is selling an expectation that case law has contradicted for a long time. Protection, where it exists, is marginal and requires proof that is hard to provide. It is not the right tool for that problem.
04 · The risk
When the fund is swept away
Setting up the fund is a gratuitous act (made for no consideration), and as such it is particularly exposed to action by creditors.
The ordinary revocatory action
An earlier creditor can have the setting up of the fund declared ineffective, within its own limitation periods.
The proof required
Since it is a gratuitous act, the creditor only has to show that the debtor was aware of the harm caused.
The effect
The asset can be seized again, as if the fund had never been set up.
Bankruptcy clawback
In insolvency proceedings it operates with presumptions that are even less favourable, and with its own time limits.
A fund set up when debts already exist or can be foreseen is not only ineffective: it worsens your position, because it documents that you were aware of the harm. In the most serious cases it amounts to fraudulent evasion of tax payment.
05 · Other routes
The alternative tools
If the aim is to protect your assets, there are tools that are better suited and more solid.
Limited liability
Running the business as a limited company rather than as an individual. See SRL or sole proprietorship.
Trust
Stronger segregation, but it requires actually giving up control. See passing on assets to the next generation.
Purpose restrictions
A separate legal tool (vincolo di destinazione), which requires the purpose to deserve legal protection.
Insurance policies
Some types are protected from seizure, within limits and subject to conditions.
Professional indemnity insurance
For liability risks, it is the natural tool and often the most effective one.
06 · The proper use
When the fund really makes sense
Outside defensive use, the arrangement has a legitimate purpose of its own.
- To set aside certain assets on a lasting basis for the needs of the family, with the restriction that follows.
- To limit the freedom to dispose of the assets: acts disposing of them require the consent of both spouses and, where there are minor children, the authorisation of the court.
- As a tool for organising family affairs, not for protection from creditors.
- When it is set up in bonis (while solvent), well before any difficulty.
- It makes no sense when the stated aim is to put assets out of reach of existing or foreseeable creditors.
- It makes no sense as a screen against the tax authorities: it does not work.
The family asset fund is a tool of family law, not of asset protection. Using it for what it is (tying assets to family needs, limiting the freedom to dispose of them) is legitimate and sensible. Using it as a shield is a choice that almost always disappoints the person who makes it.
Frequently asked
The questions that keep coming up
Does the family asset fund protect me from the tax authorities?
Very little. The prevailing view treats tax debts arising from the activity that supports the family as serving family needs, and therefore not covered by the protection.
The burden of proving that the debt is unrelated lies with the taxpayer, and it is hard to prove. The tax collection agent can register a mortgage and take action against the assets in the fund.
Can I set one up now that I have debts?
You can set it up, but it would be ineffective against earlier creditors and open to a revocatory action, which for gratuitous acts requires much lighter proof.
In the most serious cases, setting it up while tax debts are outstanding can amount to fraudulent evasion of tax payment, with criminal implications. This is the case where the tool makes your position worse instead of better.
Can I put my current account into it?
No. A family asset fund can only hold real estate, registered movable property and negotiable securities: cash and current account balances stay outside it.
This is one of the reasons why the protection is narrower than people imagine: cash, which is the first thing creditors go after, cannot be tied up in it.
What happens if we divorce?
The fund ends with annulment, dissolution or the end of the civil effects of the marriage, because it presupposes the marriage.
If there are minor children, however, the fund continues until the youngest comes of age, and the court can set rules for its administration. See separation and divorce.
Let's talk
Set up when the debts already exist, it is almost always useless
A revocatory action sweeps it away. If asset protection is what you have in mind, let's talk about it before you need it.