Private InterestFoundation
Private Interest Foundation (Panama / Liechtenstein)
- What it is
- A private foundation — a separate legal entity for holding family assets
- How it differs from a trust
- A foundation is a legal entity with its own legal personality; a trust is a relationship under an agreement
- Who owns the foundation
- No one: a foundation has no members or shareholders, only beneficiaries
- What it is used for
- Succession planning, asset protection, holding interests in companies
- What to remember
- Beneficiaries are disclosed to regulators and banks, as with a trust
In plain words
A private foundation (Private Interest Foundation) is a separate legal entity created to hold assets in the interests of a defined class of persons. Such structures exist in the legislation of a number of countries and are often chosen as an alternative to a trust in civil law jurisdictions.
The main difference from a trust is its legal nature. A trust is a relationship between the settlor, the trustee and the beneficiaries; no legal entity comes into being. A foundation, on the other hand, is a separate legal person: it owns assets itself, enters into contracts and opens accounts. At the same time a foundation has no members or shareholders — no one owns it in the usual sense.
The foundation is managed by a council acting under its charter and regulations, and the beneficiaries receive benefits on the established terms. Such structures are used for succession planning, asset protection and holding interests in companies. As with trusts, the modern context matters: beneficial owners are disclosed to regulators and banks, and the tax regime is determined by the beneficiaries’ country of residence.
What private foundations are created for
How a foundation is structured
- A separate legal entity
- No members or shareholders
- Owns assets itself
- Foundation council
- Charter and regulations
- A protector, if any
- Class of persons under the regulations
- Terms for receiving benefits
- Disclosure to regulators
- Bank compliance
- Registers of beneficiaries
- Tax regime
How the structure is created
- 01Define the purpose of the structure
- 02Check the tax consequences
- 03Establish the foundation and approve the charter
- 04Transferring assets
- 05Management and reporting
What you need to know
- A foundation is a legal entity; a trust is a contractual relationship
- A foundation has no members or shareholders
- It is managed by a council under its charter and regulations
- Beneficiaries are disclosed to regulators and banks
- The tax regime depends on the beneficiaries’ country of residence
Common mistakes
- Creating a foundation to make ownership opaque
- Not checking the regime in the beneficiaries’ country of residence
- Copying acquaintances’ structures without analysing your own situation
- Not setting out rules for distributing benefits
- Leaving an old structure unreviewed after a move
What this means for a BRIDGES client
Foundations and trusts are the subject of a separate review in any serious check. We prepare a clear set of documents on them in advance: what the structure is, who the parties are, where the assets came from and what your role is.
Frequently asked questions
01 /What is a private foundation?
A separate legal entity created to hold assets in the interests of a defined class of persons.
02 /How does it differ from a trust?
A foundation is a legal entity with its own legal personality. A trust is a relationship between the settlor, trustee and beneficiaries, without creating a legal entity.
03 /Who owns a foundation?
No one in the usual sense: a foundation has no members or shareholders. There is a governing council and a class of beneficiaries.
04 /Does a foundation hide ownership?
No. Beneficial owners are disclosed to regulators and banks, just as with trusts.
05 /What is it created for?
For succession planning, asset protection, holding interests in companies and providing for family members.
06 /How does this affect my taxes?
It depends on your country of tax residence: it may require you to declare and may tax benefits received under its own rules.
See also
Read next
This material has undergone editorial review by BRIDGES.
Is there a foundation in your structure?
We will prepare a documented explanation for the check — before the application is filed.