Tracing the Path of Generational Wealth

Hungary’s economic system was based on a socialist planned economy until 1989, which meant that significant wealth accumulation only became possible after the introduction of a capitalist market economy – essentially within the past four decades. Many founders of companies established around the time of the regime change have already retired, while others are currently seeking successors to take over their businesses.

Under Hungarian (and many European) inheritance law, an estate is transferred to heirs either through intestate succession or testamentary disposition. However, the Civil Code imposes strict requirements under both systems. As a result, the death of a business founder can unfortunately lead to conflicts among siblings, fragmentation of the family business, or even paralysis in its management. Even if the testator carefully and fairly determines each heir’s share at the time the estate – such as a company quota – is distributed, they cannot dictate how their heirs must continue operating the business they built.

The Secret Tool: the Trust

Hungary is not the only country facing this issue. Western European nations came up with a solution centuries ago: that is the trust. From the Mulliez family behind the Auchan retail business to the Rothschild banking dynasty, this structure has protected some of the most durable family fortunes in history. The flexibility if trust are its strengths: the settlor of a trust may decide ahead of time who will receive the monetary benefits, how much, when, and under what conditions, as well as how the assets allotted into the trust should be handled. The terms under which businesses within the estate may be sold, whether a qualified outside manager should be in charge of the assets, and the degree to which family members should be involved in management are just a few examples of the decisions that must also be made by the settlor.

Inheritance-Planning Advantages

One of the major challenges of inheritance proceedings is asset fragmentation, which is compounded by long procedures that might last months or even years. A single property may be divided among multiple heirs under statutory succession, and a successful firm may wind up in the hands of three or four groups of heirs whose interests frequently vary. The fact that the capacity to dispose of the assets is highly restricted during the probate period – businesses are unable to make ownership-level decisions, real estate transactions are restricted, and bank accounts stay frozen – further complicates the problem.

In contrast, a trust provides a pre-planned, coherent framework within which the entire estate – real property, investments, and enterprises – remains unified and operates flawlessly. Asset management is carried out by a trustee appointed by the settlor, who may be a family member or an external professional, and who closely adheres to the settlor’s established goals and instructions. This arrangement frees heirs from forced co-ownership and the conflicts it frequently causes, while also avoiding common interest clashes and operational deadlocks that occur in traditional inheritance.

As a result, even after several generations, the estate can function steadily rather than disintegrate. Because the assets continue to serve the family’s long-term interests while being legally distinct, their integrity is unaffected by divorce, legal action, or enforcement actions against a specific beneficiary. In this sense, a trust fulfills the settlor’s initial goals for the family’s riches and offers true asset protection.

A trust might provide many other inheritance-related benefits because of its flexibility. Our company, which specializes in trust and wealth-management structures, assists both present and potential clients in developing contractual frameworks that best safeguard family assets and guarantee just and efficient beneficiary arrangements. Please get in touch with us if you believe our assistance could be of value.

DISCLAIMER: The above information is provided for informational purposes only and should not be construed as legal advice on any subject matter. The above article was written on the basis of the Hungarian trust legislation in force at the day of publication.