In some jurisdictions a foundation is known as a family foundation and in others as a private foundation. Foundations can be used in a similar way to trusts, such as for wealth protection, privacy and wealth planning, but originally only existed in civil-law countries. Nowadays, some common-law countries also offer the option of setting up foundations, for example, Jersey and Guernsey.
In contrast to a trust, a foundation is a legal entity and is often used as an alternative to a will. Although all kinds of assets can be held in foundations, they were historically often used to only keep offshore private bank accounts.
The purpose of a foundation in most cases is safeguarding the assets of the family, as well as privacy protection and wealth planning. However, often only liquid assets are contributed to the structure, with the aim of safeguarding these assets for the next generation, and separating them from the founder’s other assets.
How does a family foundation function?
Foundations fully own the assets contributed to them. They are managed by a foundation board or a foundation council and a multi-family office often acts as the foundation board. The person setting up the foundation (the founder) normally establishes the foundation for a particular purpose, and the bodies of the foundation are strictly bound to this purpose. The founder decides who the (potential) beneficiaries of the foundation are and to which benefits they are entitled. The intentions of the founder are written down in the foundation’s by-laws. The foundation board is only entitled to distribute assets to the beneficiaries of the foundation mentioned in the by-laws. The founder can also appoint an advisor or guardian in order to check the foundation board.
Do you think a foundation may be solution for you and your family? Get in touch for a confidential and complimentary dicsussion. You can contact us here