Offshore trusts and Offshore foundations.
One of the most common questions asked in a business community is what the difference between offshore trusts and offshore foundations is. In today’s blog we will look at the definitions, similarities and, of course, differences between the two.
Difference between offshore trusts and offshore foundations. In one of our previous blogs we have looked at what trusts are. A trust is an asset protection mechanism, based on the common English law, where the Settler transfers the management of its property to a Trustee for the benefits of the Beneficiary. The assets, that have been transferred to the Trust, cannot be claimed by creditors or any other third parties. There can be onshore and offshore trusts. An offshore trust owns assets that are outside the jurisdiction.
Offshore Trusts are usually created in jurisdictions that recognise trust legislation with legitimate regulation and enforcement of the law on trusts. Otherwise, offshore foundation is the most reasonable alternative that is also designed to protect assets. The types of offshore trusts include Charitable Trusts, Non Charitable or Purpose Trusts; Spendthrift Trusts.
Offshore foundations, emerged from the civil law, are also used as a management tool for asset protection planning and protection of the inheritance. Unlike a trust, it is an independent legal entity, a combination of features of a corporation and a trust that owns the property transferred to it by any person. Therefore, an offshore foundation is not owned by anyone, while a trust has a legal owner, the Trustee.
An offshore foundation requires a management board, as well as a founder, the guarantor and the beneficiary. It is able to open up bank account and enter into contracts. The most commonly used jurisdiction for the establishment of offshore funds are Bermuda, British Virgin Islands, Liechtenstein, Luxembourg, Panama and other offshore funds. The are various types of offshore foundations that include Charitable Foundations; Private (Interest) Foundation; Corporate Foundations
Overall, both offshore trusts and offshore foundations are excellent tools for managing and protecting assets. Established the right offshore jurisdictions they help to accumulate wealth in a tax friendly environment while taking the benefits of high privacy and confidentiality. In the following blogs we will be looking at the topic of the best places to establish an offshore trust or foundation as well as looking at each country in more details.