Guide:
Offshore Trusts vs Offshore Foundations

Creating an offshore lifestyle strategy through legal structures around the world has become an essential tool for wealthy individuals and families. One of the best-known legal tools for safeguarding assets is setting up an offshore trust or offshore private foundation. With highly developed laws and sophisticated legislation, offshore jurisdictions offer unparalleled services to meet the demands of global citizens seeking financial freedom, asset protection, global tax optimization, and creating a legacy for future generations.


TRUST

A trust is a fiduciary relationship between 3 to 4 parties – the settlor, trustee, beneficiaries, and some cases, a protector – where a legal agreement is established. This legal agreement is known as the Trust Deed where the settlor transfers assets to the trustee and defines, thereby relinquishing any legal ownership. The objectives, as well as the terms and conditions, are then defined on how the assets are to be managed and distributed to the beneficiaries.

See structure

FOUNDATION

A private foundation is a unique legal structure that encompasses the benefits of a corporation as well as the asset protection features of trust. A foundation is a separate legal entity where the founder transfers the legal ownership of the assets to the foundation. The council manages the assets in accordance with the by-laws set by the founder while the protector controls and oversees the foundation. Similar to the trust, foundations do not have shareholders and instead list beneficiaries.

See structure


Benefits

WHY?

Offshore trusts are widely popular and a powerful tool for asset protection and estate planning. Private foundations, which individuals and families are often not very familiar with, offer many benefits similar to an offshore trust. Clients set up offshore trusts or foundations for various reasons including:

  • Protecting assets in divorce proceedings
  • Protecting assets from any legal disputes on the founder or beneficiaries
  • Diversifying wealth in a multi-jurisdictional strategies
  • Philanthropy activities
  • Avoiding probate processes in the event of the founder´s death
  • Reducing inheritance and estate taxes
  • Creating multi-generational dynasties
  • Confidentiality and privacy

In the case of legal disputes, many offshore jurisdictions will significantly reduce the possibility of asset seizure or freezing of assets without proper due process due to the extensive statutory framework offered to protect the assets placed within the trust or foundation. Per law, foreign judgments are not recognized and local courts will enforce the following to bring a dispute against the trust or foundation, which in turn makes it very difficult for creditors to proceed:

Statute
of limitations

Many offshore jurisdictions impose short statute of limitation such as a year or 2

High
bonds

Most offshore jurisdictions will first require a substantial cash bond to bring suit within their jurisdiction

Physical
presence

Majority of offshore jurisdictions will require a claim to be physically submitted within their local courts, through a local attorney

DIFFERENCES

While both legal structures are proactive legal tools for asset protection and estate planning- there are a few differences to consider before establishing a trust or foundation including:

  • Objectives or purpose of the trust or foundation
  • Size of the trust
  • Level of risk of litigation
  • Financial feasibility
  • Political and economic stability of the jurisdiction
  • Tax laws win the chosen jurisdiction
  • Court systems and processes for legal disputes
  • Duration of the trust
  • Language and communication
  • Related services such as banking needs
  • Re-domiciliation

Investors can also consider the key differences in choosing an offshore trust or foundation:

Trust

  • Typically found in common law jurisdictions
  • Legal agreement
  • Trust deed does not need to be registered
  • Trustee manages the assets in accordance to the by-laws and has a fiduciary duty to the beneficiaries
  • Legal ownership of assets are held by trustees whereas the beneficial ownership is held by the beneficiaries

Learn More about Trusts

Foundation

  • Typically found in civil law jurisdiction
  • Legal entity: can sue and be sued
  • Foundation charter is filed in the public registry of the jurisdiction
  • Council members do not have a fiduciary duty to the beneficiaries but to the foundation itself
  • Legal ownership is held under the foundation entity

Learn more about Foundation


Jurisdictions

Trust

See chart comparison

Foundation

See chart comparison


Process

1. While many offshore jurisdictions offer similar advantages and benefits, there is no one-jurisdiction-fits all. Our advisors will discuss your needs and goals and ask you the right questions to help determine which jurisdictions are right for you.

2. Defining the objectives of the foundation or trust will help establish which legal structure is right for you. Our advisors will assist in setting up the foundation charter or trust deed in accordance to the founder´s wishes.

3. Choosing a local resident agent is key in establishing a well-defined foundation that adheres to local laws and offers the foundation the most protection and privacy. As this is an on-going relationship, it is advisable to set up an offshore foundation with a reputable and trusted firm.

4. Each jurisdiction will have their own set up process and set of due diligence processes. Requirements typically include fulfilling KYC (Know Your Client) by proving your identity with proof of address, and providing the necessary information to draft the paperwork for the trust of foundation.

5. Once the required documentation is received, the provider can then file the foundation charter, creating a legal entity in the public registry or proceed with the creation of the trust deed. The regulations of the foundation or trust are privately issued.

6. The founder´s assets are transferred to the foundation or trust thereby transferring legal ownership of the assets to the foundation or trustee.

7. The protector controls the foundation or trust along with the assets and overseas the affairs of the foundation. The council manage or trustee s fulfils any duties in accordance to the by-laws.

8. Expenses including annual maintenance fees as well as any tax expenses incurred by the assets must be paid and maintained. Financial statements are required to be maintain, though filing of the statements are not required.

While many offshore jurisdictions offer similar advantages and benefits, there is no one-jurisdiction-fits all. Our advisors will discuss your needs and goals and ask you the right questions to help determine which jurisdictions are right for you.

Defining the objectives of the foundation or trust will help establish which legal structure is right for you. Our advisors will assist in setting up the foundation charter or trust deed in accordance to the founder´s wishes.

Choosing a local resident agent is key in establishing a well-defined foundation that adheres to local laws and offers the foundation the most protection and privacy. As this is an on-going relationship, it is advisable to set up an offshore foundation with a reputable and trusted firm.

Each jurisdiction will have their own set up process and set of due diligence processes. Requirements typically include fulfilling KYC (Know Your Client) by proving your identity with proof of address, and providing the necessary information to draft the paperwork for the trust of foundation.

Once the required documentation is received, the provider can then file the foundation charter, creating a legal entity in the public registry or proceed with the creation of the trust deed. The regulations of the foundation or trust are privately issued.

Clients may require additional services such as corporate bank accounts, virtual offices, secretarial services, etc.The founder´s assets are transferred to the foundation or trust thereby transferring legal ownership of the assets to the foundation or trustee.

The protector controls the foundation or trust along with the assets and overseas the affairs of the foundation. The council manage or trustee s fulfils any duties in accordance to the by-laws.

Expenses including annual maintenance fees as well as any tax expenses incurred by the assets must be paid and maintained. Financial statements are required to be maintain, though filing of the statements are not required.


Our Services

Foundation & Trust
Formation

We assist with advising possible jurisdictions to suit your business needs and goals along with the set up process.

Continued
Support

We assist with annual maintenance as well as providing on-going support.

Related
Services

We assist with related services such as offshore incorporations and offshore banking.


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