Foundation
Reviewed by A self-standing legal entity with no members or shareholders that holds and manages assets for defined purposes or for the benefit of beneficiaries.
A (private) foundation is a self-standing legal entity with no members or shareholders that holds and manages assets for defined purposes or for the benefit of beneficiaries. It is often regarded as the civil-law counterpart of a trust, but, unlike a trust, it has its own separate legal personality.
For internationally mobile families a foundation can be used to structure the holding and transfer of assets to beneficiaries under set rules, and it interacts with inheritance tax, beneficial-ownership disclosure, and the tax rules of the countries of residence.
Foundations are common in civil-law countries, whereas trusts prevail in common-law systems; the recognition and tax treatment of a foundation depend on the country where it is established and on the residence of those involved.
FAQ
How does a private foundation differ from a trust?
A foundation is a legal entity that owns assets in its own name, while a trust is a fiduciary arrangement without separate legal personality, with a trustee holding the property. Foundations belong to civil-law systems, trusts to common-law ones.
Does the founder keep control of assets placed into a foundation?
Ownership passes to the foundation, and the founder's influence is bounded by its charter, by-laws and the law of the place of establishment. Retaining too much practical control is a risk: tax authorities may disregard the separation.
Why use a foundation when the family and its assets span several countries?
It allows assets to sit in a single structure and pass to beneficiaries under pre-agreed rules instead of being split across competing succession regimes. Recognition and tax treatment still depend on the jurisdictions involved.
What happens to the foundation if I change tax residency?
Your new country applies its own controlled-foreign-company, look-through and anti-avoidance rules, and the foundation's accounts are reportable under automatic exchange of information. Assess the consequences before the move, not after it.
Will a foundation complicate due diligence under an investment programme?
Holding assets through a foundation is lawful and not an obstacle in itself, but due diligence will require disclosure of the control chain, the beneficiaries and the source of funds. Opaque structures mainly lengthen the review.