Why Form an Offshore Foundation
Offshore foundations can be described as a trust in a corporate shell. They adopt their own legal personality and are in most cases considered the corporate alternative to a trust. However, it can only be formed in certain jurisdictions that provide the necessary foundation law.
As mentioned, an offshore foundation is considered as a highly effective corporate alternative to an offshore trust and is typically established for charitable purposes however non charitable foundations may also be created. There are many reasons why individuals, family members and organizations may decide to form one, some of which are detailed below:
- High levels of asset protection
- Heightened privacy and confidentiality
- Tax planning
- Charitable causes
- Considered a legal entity and can sue third parties
- The assets are protected against creditor claims towards the foundation owners
- Foundations can open bank accounts under the name of the foundation and can own multiple corporations
- Avoidance of forced heirship rules in certain jurisdictions
- Effectively offer a centralized system to manage assets
- Tax free donations
The main uses of an Offshore Foundation
The primary uses of an offshore foundation are for the protection of personal and corporate wealth. Estate management and tax planning can also be achieved and allows for the most efficient and profitable outcome for your wealth in a legitimate and secure environment. Not only do they protect the property it holds but it prevents forced heirship rules from coming into place and staking claims on the foundation's assets.
Foundations are a widely used for:
The types of assets which can be held in an offshore foundation include but are not limited to;
- Pension fund schemes
- Employee share option schemes
- Charity groups
- Art collections
- Stock option schemes
- Insurance plans
- Shares and stocks for private and public corporations
- Portfolios of investment plans
- Real estate
- Intellectual property
- Bank deposits
- Life assurance policies
Foundations, like trusts, keep a high level of confidentiality for all parties involved and this is a very much desired feature for potential offshore investors. Furthermore, they are generally quick and easy to create and allow for tax deductable donations, hence why they are so popular among charitable organizations.
How an Offshore Foundation is created
An offshore foundation requires the following four main parties; “founder”, “protector”, “beneficiary” and “council members”. The founder is the individual or group who establishes the foundation and transfers the property into it. The protector (like in a trust) acts as a supervisor for the application and maintenance of the foundation, ensuring strict compliance while the beneficiaries are the individuals who are benefiting directly from the foundations operations. Lastly, the council members are those who implement and supervise the foundations activity and purpose. There is however, no requirement for a foundation to have trustees, members or shareholders, allowing for the formation to be a less complex process and created in a timely manner.
Depending on the type of foundation you wish to create and the selected jurisdiction it will be established in, the set up procedure will vary accordingly. However in principle, the above mentioned four parties will always be required to create a fully functioning offshore foundation.