A foundation is a discreet, flexible and very good planning tool in the context of estate planning. A foundation has its own legal personality, in contrast to a trust.
Noble goals could underlie the establishment of a foundation such as various good causes. The foundation can be used to manage the assets for the benefit of scientific, philanthropic, educational and humanitarian purposes. You can then transfer assets into the foundation which will serve to financially support any well-described good cause. Basically, a foundation cannot carry out any commercial activities (but it can passively hold the shares of a commercial company, of course).
A foundation is excellent if you love discretion. For example, it’s a good idea to use a foundation as a holding entity of your shares in an offshore company, even more discreet and even better protected. In other words, you can also hold or maintain an anonymous shareholding in a company by using a foundation as a holding entity. It’s an alternative to bearer shares, which now have been abolished in various countries.
Each foundation has a founder who establishes the foundation and a foundation council which has the responsibility to (1) carry out the objectives of the foundation and to (2) manage and administer the assets of the foundation according to its charter and regulations. The powers and responsibilities of the foundation council are determined in the foundation charter and/or the regulations. Depending on the wishes of the founder, the foundation charter and/or regulations may limit or expand the powers of the foundation council. The founder may appoint a protector to supervise the actions of the foundation council (in order to check whether the actions are in line with the charter and regulations) prior to or after his/her death.
A foundation has no shareholders (read no owners) but only beneficiaries who benefit from the assets transferred into the foundation. These beneficiaries (in most cases the founder and his family or charities) are traditionally appointed in the private regulations. Keeping in mind that a certain beneficiary could die unexpectedly in the future, other beneficiaries (a second reserve layer) can already be identified, there are many options.
Typically, a foundation pays no taxes. However, each year there’s a small modest annual renewal fee to be paid.
Potential creditors have the right to contest the transfer of assets into a foundation in the case they think the founder or any third party transferred the assets into the foundation to defraud them. However, potential creditors have to act fast because their rights lapse at the end of a specified time span, counting from the date of the transfer of the assets into the foundation. A foundation is therefore safe from tsunamis of claims and is the ideal legal entity for divorce fights.
Do not hesitate to contact us if you would like to know more about foundations as a potential solution for your specific situation.