Offshore Trust vs. Private Foundation Comparison

This comprehensive compare and contrast table of the trust and foundation helps you decide which device better responds to your demands. Our goal is to help you see the facts, features and characteristics of these offshore entities in a side-by-side format.
Offshore Private Foundation | Offshore Trust | |
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Legal Background |
Originating from Civil Law |
Originating from Common Law |
Jurisdictions We Recommend: |
Nevis, Panama |
Nevis |
What is it? |
A foundation is a legal entity with some features of a corporation and a trust.
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A trust is a legal obligation or relationship between the settlor (the person who creates the trust) and the trustee (the person in charge of the trust) and the beneficiary (the person who receives benefits from the trust). |
Types of Foundations and Trusts |
There are three main forms of foundations:
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There are four main types of international trusts:
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Purposes and Uses |
The purposes of a foundation may be drawn up as broadly as the Founder wishes, but generally used for:
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The purposes of a trust may be drawn up as broadly as the settlor wishes, but generally used for:
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How is it Established? |
The Nevis or Panama Foundation is established when a founder (the person who gives the assets) registers the particulars of the Foundation charter (Panama) or the Declaration of the Memorandum of establishment (Nevis) at the Public Registry. Unlike the trust, there is no immediate requirement to transfer the assets to the foundation for it to be valid. |
In Nevis, the trust is established when the settlor (the person creating the trust) prepares a Trust Deed also known as Deed of Trust or Declaration of Trust and transfers assets (of any kind) to the trustee for the benefit of the beneficiary. In order for the trust to be valid, the assets must be transferred to the trust. |
Elements (may vary by jurisdiction) |
Founder, management body, beneficiary, foundation charter, assets/property, secretary, registered agent and office, By-laws, guardian, supervisory board |
Settlor, trustee, protector, beneficiary, trust deed, assets/property, registered agent and office
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The Founder:
The Beneficiary:
The Foundation Charter ( Panama) / Memorandum of Establishment with Consent Schedule (Nevis): This is the official document forming and governing the foundation. This document may contain:
The charter may be amended during the life of the foundation. The documents kept by the registrar are private and cannot be inspected, copied or viewed by anyone, unless that person is authorized by the council or board member. The Certificate of Establishment (Nevis, Panama): The document issued by the registrar showing proof of existence. Contains only the date of registration, name of foundation, agent name and address and registration number. Assets:
The minimum value of endowment for Nevis and Panama Foundations is US$10,000. Secretary:
Registered Agent / Registered Office : All international foundations and trusts need to have a local registered agent and a local address. By-laws: This is an optional and private document that specifies how the foundation is to be managed. This is not filed for public scrutiny. The By-Laws of a foundation may include instructions for the management board that pertain to the management, distribution or application of assets. Guardian or Protector or Supervisory Board: Guardians are optional safeguards’ or positions in the foundation. They serve as watch dogs’ of foundations and may be granted more powers than the management board. It is a position that can be held by the founder (so that the founder retains ultimate control). |
The Settlor:
The Trustee : The person(s) or company managing the trust. Generally, the trustee has a fiduciary (a legal, financial and ethical) responsibility to the beneficiaries, and a trustee has a broad range of powers. The trustee can buy, sell and invest on behalf of the trust, although his role can be limited by the settlor.
NB If the settlor of a trust is a trustee, asset protection coverage diminishes or gets lost since the settlor reverts to becoming the legal owner of the assets. In Nevis at least one of the Trustees must be a trust company in Nevis or an ordinary Nevis company. The Beneficiary:
The Trust Deed /Deed of Trust /Declaration of Trust: The official document that creates the trusts. It may contain:
Assets: The assets/properties that are transferred to a trust can take on any form, real or intangible. Examples of trust assets are: cash, real estate, copyright, patents, jewellery, art, insurance policies, or shares in a company. The details of the assets must be specified, e.g. emerald ring. There is no minimum amount of assets to be placed in a trust at inception or to remain in the trust during its existence, but we recommend a minimum investment of US$10,000 Secretary: There are no requirements for a secretary for the Nevis trust Registered Agent / Registered Office: All international foundations and trusts need to have a local registered agent and a local address. Letter of Wishes/Memorandum of Wishes : In addition to the trust deed, the settlor can write a private letter of wishes which spells out exactly what the trustees can do. This is a private letter between the trustee and settlor. The Protector: Protector is optional. The protector is an officer with the power to direct the trustee in matters relating to the trust. Protectors can be given powers to appoint or dismiss trustees, or overrule their decisions. The protector can be a settlor, trustee or a beneficiary of the trust. Though this set up is not recommended for asset protection because ownership of assets reverts to the settlor. |
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Powers & Legality: |
A foundation is a legal entity formed by registering a document called the Foundation Charter or Declaration of Establishment. As a legal body, it can be sued or can sue, enter into contracts and agreements with companies or persons, open bank accounts and conduct commercial activities. |
Under common law, a trust is NOT a legal person in its own right. Therefore, the trust cannot be sued or take legal action as a corporation or a foundation can. A trust can open a bank account. |
Revocable or irrevocable? |
Foundation may be revocable or irrevocable. |
The revocability of the trust is up to the Settlor, but a trust will be deemed irrevocable if it is not expressed as revocable. |
Who has legal ownership of assets? |
The assets owned by the foundation are independent of the founder. Once they are transferred to the foundation, these assets no longer belong to the founder, but belong to the foundation only. This means that the endowment cannot be seized, or subject to any claims or legal actions on the founder, or the beneficiaries. |
The trustee is the manager of assets, held for and on behalf of beneficiaries. Once they are transferred to the trust, these assets no longer belong to the settlor. This means that the endowment cannot be seized, or subject to any claims or legal actions of the settlor or the beneficiaries. |
Who is accountable? |
The foundation council members answer to the foundation. |
The trustees ultimately answer to the beneficiaries or trust protector. |
How is the entity managed? |
The foundation is managed by a board or council made up of one or more persons; corporate bodies are permitted. |
The trust may have a protector, but the trustee and settlor have overall charge of the assets as defined by the trust deed/letter of wishes or the memorandum of wishes. |
What about commercial and investment activity? |
Foundations are not really intended to carry out day-to-day- commercial activities, but it can undertake investment and commercial activity as set out in laws of the foundations.
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Investment activity is permitted, but scope can be limited by jurisdictional laws or the letter of wishes. In Nevis, there is a specific section that outlines the authorized investment activities that the trustee can undertake. Although the provisions are broad, they are specified. |
Limitations/Restrictions |
Other than the limitations placed on the council members in the laws and declaration there are no specific restrictions placed on the foundation. |
Other than the limitations placed on the trustees pertaining to investment activity, there are no specific restrictions placed on the trusts. |
Maximum duration of entity |
A foundation can be established for an indefinite period. But there are cases when the duration of the foundation can be more specific and set to a specific number of years. |
Trusts are established for a definite period, generally 100 years. Charitable Trusts may have indefinite periods. |
Type of assets (that can be put into entity) |
Any kind |
Any kind |
Liabilities |
Foundations have limited liability hence the personal assets of the beneficiaries and members of council are protected. The Founder no longer has legal claim to assets. |
The trustee is wholly responsible for the liabilities of the trust, unless there is a protector who accepts that liability. |
Naming the entity |
The Foundation Name must end with the English word or translated equivalent for “Foundation” or the abbreviation FDN; the name must first be approved by jurisdiction; may include the name of the founder. |
No name restrictions but must include the word “Trust”. |
Information entered on the register/ on public record: |
Only a limited amount of information is placed on public record- the name of foundation, date of establishment, registration number, name of members and the endowment value. |
The trust’s name, name of Trustee and the registered office address (identity of settlor is not recorded)
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Maintenance requirements |
Entities must be renewed each year. A certificate of good standing is available as evidence that the entity is still in existence, has all files up to date, has paid all fees and penalties required under the act. |
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Can I move my foundation to another jurisdiction? Is re-domiciliation permitted |
Nevis or Panama foundations are allowed to move from jurisdiction in which they are set up, and move to another jurisdiction that permits relocation. All three jurisdictions allow relocation and accept continuation of foundations to another jurisdiction. |
Nevis trusts may move to other jurisdictions. |
Are there other requirements (agent and client)? |
Regulation requires the agent’s compliance Know Your Client (KYC) provisions and as such you must provide:
All information exchanged is confidential and there are laws to protect your confidentiality. |
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Advantages of Entities |
Foundations in Nevis can choose to have disputes settled through arbitration rather than go through courts. Clients can have matters resolved in a confidential and efficient way, and have the option to select the method and place of dispute resolution. |
Arbitration settlement -Proceedings (legal but non-criminal) relating to trusts in Nevis are heard in private and no details are published without court permission. |
Anti forced heirship: In some jurisdictions the state determines the settlement in the event of death. Under the foundation laws in Nevis, the state will not be in a position to determine the settlement of assets held in a foundation as the assets do not form part of the decease’s estate. |
Anti forced heirship: In some jurisdictions the state determines the settlement in the event of death. Under trust laws the state will not be in a position to determine the settlement of assets held in a foundation as the assets do not form part of the decease’s estate.
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A creditor who wants to bring a court action against a foundation or its founder or the member or the beneficiary must first purchase a bond (between $25,000 and $50,000) and deposit it with the Minister of Finance/Registry to cover all costs should the action prove unsuccessful. |
Before any creditor can bring actions against a Nevis trust, that creditor must pay a bond of US25, 000 as a security deposit. |
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Nevis Multiform foundations can take on one of several forms (trust, company, partnership and ordinary private foundation) and can convert from one form to another at any time, without cause or penalty. A foundation with intended commercial activity has the flexibility of choosing the best type of entity. |
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All Inclusive Trust Package from — $1,540!
All Inclusive Foundation Package from — $1,340!
All Inclusive Asset Protection Packages from — $!