Set-up an Offshore Private Interest Foundation

 

Offshore Foundation?

The concept of the foundation has been around for years, used by wealthy philanthropists to finance their private causes and more recently used for estate or wealth planning.

The foundation is a legal entity which holds, distributes and protects assets. The foundation is generally used for asset protection, wealth management and wealth distribution, or estate planning.

Foundations are usually established by individuals, families or a group of individuals and may fall into one of four main types of foundation categories:

  1. Private interest foundations;
  2. Corporate foundations;
  3. Charitable foundations or
  4. Special purpose foundations.

Offshore Foundations in Tax Havens

Offshore foundations are the same as regular foundations, except that they are registered in a tax haven jurisdiction and benefit from to less administrative formalities, more lenient formation requirements and are not taxed at all — no matter the purpose of the foundation.

Offshore foundations are seldom used for day to day business activities, and generally earn their revenue from contributions and donations or from other passive income (through investment activity). The offshore foundation can own companies, bank accounts and own other revenue generating entities through which day to day business, investment or trade activities can be conducted as well.

Ideally, the offshore foundation which owns shares in an offshore company is the paramount possible form of asset protection and best tax planning vehicle.

Offshore Foundation Formation

An Offshore foundation or any other foundation is formed by an individual, individuals or companies (known as the founder or settlor) through the official documents (known as the Foundation Charter, or the Declaration of Establishment of the Memorandum of Establishment). This is the official document governing the foundation with the instructions for the management body. The founder or any other persons may transfer assets of any kind to the ownership of the foundation (which is the foundation itself). The foundation is managed by individuals or corporate body (known as the foundation board or council), The foundation holds the assets for the benefit of a previously appointed person(s), or groups of persons (known as “The Beneficiary”). The assets of the foundations normally include money, property (estates or intellectual rights), stocks and shares, and/or any movable or immovable assets.

Offshore Foundation for Asset Protection/Management:

Under an offshore foundation, the legal ownership of assets is separated from the beneficial owner (ultimate beneficiary). Until such time that the wishes of the foundation are achieved and the assets are distributed to the beneficiaries, the recognized legal owner of the assets is the offshore foundation. Under this setup the beneficiaries are protected by a body of legal rules, which require a management board or council to follow to strict instructions as to how to manage the foundation.

That is why an offshore foundation is definitely a unique tool for asset protection. The assets that are transferred to offshore foundations are no longer part of the property owned by the founder and cannot be claimed by creditors, litigators, etc. Assets in a foundation can be of any kind, real tangible or intangible. Regardless of the type of the asset, it can be protected during financially unstable times, for example, if the settlor is facing bankruptcy, or financial discourse due to divorce or a professional negligence claims. If ever the founder is certifiably insolvent, the assets placed in the foundation structure offshore are not subject claims.

We recommend our clients look at asset protection as a preventative measure- set up your offshore foundation before claims are made against you. It is for this reason in the offshore legislation that the concept of “asset protection foundation” was introduced. The foundation protects the assets it holds from future attacks of claimants or creditors.

If it can be proven that the foundation was set up by the founder during the time of the claim, some assets may be subject to claims. Hence the reason we recommend forming asset protection vehicles before security is actually needed.

Offshore Foundation for Tax Planning:

Offshore foundations can be an exceptional tax planning tool and when correctly structured, the foundation will produce significant savings in income tax, capital gains tax, inheritance tax, and stamp duty.

Because the beneficiary of the offshore foundation is not a legal owner of it, the income and capital gains are taxed in accordance with the rules of the foundation. In this case offshore foundations are tax free entities.

Offshore Private Interest Foundations For Inheritance/Estate Planning:

One safe way to ensure your assets, estate and wealth are distributed according to your specific wishes, and not subject to costly and timely probate processes, is to form a foundation. If you want to ensure a standing arrangement to fund a specific cause or persons or set aside money for your heirs education and future, the offshore foundations can be used for such planning purposes.

Offshore Foundation Confidentiality:

The details of the offshore foundation are not public, nor are the contents of the foundation, unlike that of a will where all information of the will is publicly available.

Further, since the details of beneficiaries and the specifics on the assets in a foundation are private, there is no information for disclosure to the tax authorities, which can be costly in countries that enforce inheritance taxes and other similar taxes.