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Foundations

The preferred vehicle for wealth management for generations

Foundations

Why registering a Foundation

Main benefits

Provide yourself the legal structure to reduce your tax liabilities and protect your assets from needless claims and lawsuits.

A Private Interest Foundation (PIF) can protect your estate from legal disputes after your death to ensure that your estate will pass to your chosen beneficiaries without undue complications.

Private Interest Foundation

Private Interest and Family Foundations have been the preferred vehicle for wealth management for generations of Europeans. Private Interest Foundations have been developed to offer its holders and their assets superior protection.

The benefits offered by these types of foundations differ from trusts in significant ways, which may not be known or fully understood by many in the western world.

Provide a fiduciary
structure

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Assets become legally independent

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Exempt from payment
of any taxes

Benefits of a Private Interest Foundation

A PIF takes the best elements of a trust and an offshore company, or IBC, to create a legal entity to passively hold the assets of those who formed it.

A foundation has no owners, so assets of the foundation, such as corporations, shares of stock, real estate and bank accounts are held for the foundation’s beneficiaries (e.g. your heirs). Traditionally, they were used to protect the wealth of the family and to make sure that its assets were passed on to succeeding generations.

Because there are no owners of a foundation, reporting requirements are not necessary in many countries. For example, foundations are not specifically recognized by US tax Law, which allows you to decide the way in which your foundation is declared, and it may be structured in a way that allows it to legally avoid the reporting requirements of the IRS.

One way of doing this is to structure it as a charitable foundation rather than just as a family foundation. Using a private interest foundation for private international church, humanitarian, philanthropic or other charitable activity is quite a well-established concept and we have a healthy number of clients that have pursued this path.

+ What makes a Private Foundation unique?
  • Complete customized by-laws that go into great length to detail the operation of the foundation, define who gets what and when, as well as establish whether the foundation will continue indefinitely (and, if so, who would take over).
  • Customized charter to reflect the unique mission of the charitable, church or humanitarian nature of the foundation.
  • Freedom to pursue spiritual, humanitarian, charitable purposes of the foundation in complete privacy.
+ 3 key positions in the Foundation that need to be considered
  • The founder, which for privacy purposes can be our nominee company, if desired. (The founder is the same as a settlor in a trust).
  • The council, which for the same reason can be our nominee company, if desired. (The council is the same as a trustee in a trust).
  • Just as with a trust the protector appointment is a private agreement and should be decided by the client. The protector can have certain powers such as dismissing and appointing new council and is a check-and-balance feature common to both.
There are ways to ensure that a private interest charitable foundation can also meet the goals that would be normally desired for a private interest family foundation, as their two principal aims are not mutually incompatible.

Uses and advantages of a Private Interest Foundation

With regards to uses that can be given to a PIF we can find the following:

Family support:

  • For Tax purposes
  • For the protection and management of assets
  • For educational purposes

Testamentary purposes:

  • For life annuity purposes
  • For charitable purposes
  • To receive and manage capital and titles
  • For the purpose of serving as guarantee or collateral
  • For the management of insurance

We must comment that several or all uses mentioned above can be given to a particular PIF, there are no restrictions as to the objects or uses one PIF can be given. For example, one PIF can be created to protect assets, but also with a testamentary use or in any case, with all the above- mentioned uses. However, a PIF cannot, generally (just in a few jurisdiction), engage in commercial or for-profit activities as a day-to-day activity.

Other advantages

PIF’s may be successfully used to achieve the goals you or your clients have set out for, with the following advantages:

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They provide a fiduciary structure for the orderly transfer and disposition of assets to beneficiaries upon the death of the Founder, keeping control of the assets during lifetime.
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They may be established to have effects from the date of their constitution or after the death of the Founder.
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Foundations are established to carry the specifics goals set out in the Foundation Charter and may additionally undertake sporadic commercial activities, exercise rights pertaining to their holdings, own property, contract obligations and take part in administrative or judicial proceedings.
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The assets of the Foundation become legally independent and do not form a part of the private estate of the Founder. Such assets are not sizeable and may not be subject to any precatory action or measure, unless such action or measure pertains to obligations incurred or damages arising from the fulfillment of the Foundations objectives.

Private Interest Foundations are exempt from payment of any taxes, contributions, duties, liens or assessments of any kind arising from the acts of constitution, amendment or extinction of the same, as well as acts of transfer or encumbrance of the Foundations assets and the income arising thereof, when related to:

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Assets localized abroad.
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Money deposited by natural or juridical persons whose income does not derive from a local source is not taxable in the jurisdiction for any reason.
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Shares or securities of any kind issued by corporations which income is not derived from a local source, or which are not taxable for any reason, even when such shares or securities are deposited in the jurisdiction.
A foundation is formed by a person known as the founder (who may be either an individual or corporate body) who provides (through an “endowment”) the assets to be administered by the foundation. The foundation’s assets are to be administered through contractual, rather than proprietary, principles. Unlike a trust, a foundation is a separate legal entity. It is managed by a council of members. A foundation can hold assets, enter into agreements with third parties. On the face of it a foundation is similar to a corporation. However, unlike a corporation, a foundation does not have any shareholders. A foundation can have beneficiaries, similar to a trust, or it can have purely charitable purposes. Contrary to trust beneficiaries, who have equitable rights, the beneficiaries of a foundation have contractual rights in relation to the assets of the foundation. A founder may retain some control over the foundation’s assets through reserving certain powers under its rules. Powers that are commonly reserved include powers relating to the investment strategy of the foundation and the appointment or removal of beneficiaries. The founder may also be given the power to revoke the foundation.
Atrium & Associates is engaged to providing our clients with the best possible consultation and legal services. We have been helping our clients protect their interest and assets since 1998. We are committed to building trust and creating long-term relationships, and we strictly observe attorney-client privilege.

Where to register a Foundation

Belize

Cook Islands

Isle of Man

Malta

Nevis

Panama

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