Offshore Foundation

About Offshore Foundation

In today’s global climate, it is becoming increasingly more important to set up an offshore lifestyle strategy. Global citizens are gaining financial freedom and flexibility, freedom of movement, and protecting their wealth through various offshore solutions. Protecting one´s wealth is no longer protecting the assets against litigation but now includes family and estate planning, asset management as well as the growth and diversification of wealth.

A private foundation is a unique legal structure that encompasses the benefits of a corporation as well as the asset protection features of trust. While the offshore trust is a legal contract between the parties, creating a fiduciary relationship, a private foundation is a separate legal entity creating a multi-purpose framework used for asset management and protection, tax planning and optimization, and wealth diversification. Creating a private foundation in an offshore jurisdiction will allow the foundation to thrive while benefiting from advantageous tax incentives and asset protection laws.

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.

Private foundations in offshore jurisdictions offer strict privacy laws as well as strong asset protection legislation. As a foundation is a legal entity, it can hold a variety of investments, banks accounts, real estate amongst others, however, foundations are typically restricted from participating in commercial activities. As the foundation holds legal ownership, the assets are then considered independent of the founder. Similar to a trust, the foundation does not have shareholders but instead listed beneficiaries.

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

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

Private foundations are a great legal tool for asset protection and estate planning as well as tax and financial planning. Private foundations offer flexible structures and can be easily set up. It is best to speak with a financial advisor to determine whether proceeding with a private foundation is the right step for you. However, offshore foundations are advised for high-risk occupations, individuals with a high risk of being targeted by claims, creditors, or legal disputes, and high net worth individuals or families.

Preventative action is better than correction and setting up a legal structure prior to any legal disputes or unplanned events will ensure that the wishes of the founder are carried out accordingly and diligently.

Many offshore jurisdictions can offer very similar benefits, however, many factors must be weighed and taken into consideration when choosing the right jurisdiction for establishing your private foundation:

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

Foundations can be complex in nature and it is advisable to seek professional assistance from financial, tax, and legal experts before proceeding. The main steps include:

  1. Choose your jurisdiction
  2. Choose the legal structure
  3. Choose your professional provider
  4. Fulfill due diligence processes and provide the necessary paperwork for the foundation
  5. The professional provider registers the legal entity, making the foundation legal and operational, and privacy issues the by-laws of the foundation
  6. Assets are transferred to the foundation granting legal ownership
  7. The foundation is managed by the council while the protector controls and oversees the foundation´s affairs
  8. Maintain foundation with annual fees

Structure of an Offshore Private Foundation

The founder creates the private foundation and provides the foundation charter which indicates the main provisions of the foundation. The founder can be a natural person or legal entity such as an IBC or LLC. The founder provides the assets to be transferred to the foundation.

The foundation is then managed by a board or council members which typically consists of 3 or more members- depending on the jurisdictions. The board acts accordingly to the charter and fulfills any duties described in the foundation´s regulations. Council members do not have any fiduciary duty toward the beneficiaries of the foundation. Council members can be a natural person or legal entity such as an IBC or LLC.

The foundation charter is a public document containing the main provision governing the foundation, purpose, and assets. It is served to create a legal entity in the public registry.

The regulations of the foundation is a privately issued document outlining the rules and by-laws of the foundation and designating the council members, beneficiaries, and will of the founder.

The council appoints a protector (or enforcer) of the foundation who controls the foundation along with all the assets held within it and oversees the affairs of the foundation.

The beneficiaries are the individuals who will benefit from the assets held in the foundation. Beneficiaries are not legally responsible or have ownership interest until the assets are released accordingly to the foundation´s by-laws.


Types of Foundations

Defining the objectives and goals of the foundation will assist in determining the right structure to meet your needs. A few common private foundations include:


Benefits

Due to the extensive statutory framework of private foundations, offshore jurisdictions offer, private foundations are a strong legal tool to protect assets from threats or legal disputes. They are also a great tool for creating a multi-generation legacy passing along family assets to future heirs. In addition to bypassing probate processes in the event of the founder´s death, foundations are also used to create a tax planning strategy to reduce estate and inheritance tax.

It is important to note that a foundation is a registered legal entity and as the foundation holds assets in its own name, the foundation is capable of suing and being sued.


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 will help establish which legal structure is right for you. Our advisors will assist in setting up the foundation charter in accordance with 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 ongoing relationship, it is advisable to set up an offshore foundation with a reputable and trusted firm.

4. Each jurisdiction will have its own setup 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 foundation charter and regulations.

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

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

7. The protector controls the foundation along with the assets and oversees the affairs of the foundation. The council manages the assets to fulfill any duties in accordance with the by-laws of the foundation.

8. Expenses including maintenance fees as well as any tax expenses incurred by the assets must be paid and maintained. Financial statements are required to be maintained, though filing of the statements is 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 will help establish which legal structure is right for you. Our advisors will assist in setting up the foundation charter in accordance with 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 ongoing relationship, it is advisable to set up an offshore foundation with a reputable and trusted firm.

Each jurisdiction will have its own setup 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 foundation charter and regulations.

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

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

The protector controls the foundation along with the assets and oversees the affairs of the foundation. The council manages the assets to fulfill any duties in accordance with the by-laws of the foundation.

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


Jurisdictions

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Our Services

Private Foundation
Formation

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

Continued
Support

We assist with private foundation maintenance as well as providing ongoing support.

Related
Services

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


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