What is an Offshore Foundation?

Foundations are structures to which legal ownership of property (money, shares, gift, land or encumbrance) is transferred.

They are hybrid in nature, containing vital features of the corporation (legal personality) and the trust (created for a purpose or benefit). As such, foundations are particularly useful as asset management and tax planning tools but in fact are multi-purpose.

Basic Framework of Offshore Foundations

Founder

• Identified as the person who sets up the foundation, or on whose behalf it is set up or by whom a property disposition (transfer) is effectuated. Generally, an on offshore foundation can be established by one or more than one founder.

Foundation Council

• Identified as the persons who effectuate the purpose of the foundation as instructed by the Charter; in so doing, the Council distributes foundation’s property, administers assets, signs contracts, transacts and invest on behalf of the foundation. Council members owe a fiduciary duty to the foundation.

Foundation Charter

• Identified as the document in which the governing rules of the foundation are stated.

Beneficiary or Purpose

• Identified as the person or class of persons for whose benefit the foundation is created.
• ‘Purpose’ refers to any cause/purpose for which the foundation is formed (e.g charity).

Guardian or Protector

• Guardians and protectors are generally optional, serving as a protection mechanism to ensure that the council’s actions and decisions comply with the terms and objectives of the foundation.

Why a Foundation, Offshore?

Establishing an offshore foundation essentially means wanting to have personal or business affairs governed under the statutes of a foreign country; ie., not the founder’s country of domicile.

In so doing, founders consent to have the foundation established, regulated and vested with certain rights, interests and features by the governing statute of foundations (offshore/international) of that territory.

One of the main advantages of going offshore to set up a foundation involves the creation of a hedge which guards the foundation and its property from being voided, invalidated or made defective in any manner by reference to the law of a foreign jurisdiction.

Such a strategy allows for conveying property, assigning shares or bequeathing gifts discreetly under tax-sheltered conditions.

Further uses which flow from offshore foundations include:

• Succession planning for personal estate
• Succession planning in terms of business ownership
• Reducing personal net worth to minimize legal damages (compensation) risks
• Eliminating property transfer-related taxes
• Extending horizon for investment opportunities
• Acquiring assets through a ‘person’ other than yourself
• Accumulating portfolio income (annuities, interest, royalties, dividends, returns)
• Avoiding forced heirship

Any of the above-mentioned benefits/uses can be derived from an offshore foundation in furthering the interests of its beneficiary or purpose (charitable, philanthropic, or any other lawful public or private subject-matter).

For advice on an asset protection structure based on your specific needs, please contact us.

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