Updated
GL-P-06
Glossary · Structures and trusts
Private Foundation
A stand-alone legal entity with no shareholders that holds and manages assets for the benefit of beneficiaries. Similar to a trust but with clear legal personality; popular for succession and asset protection.
01 / In 30 seconds
The short answer
- What it is
- A legal entity in its own right with no shareholders, holding assets for the benefit of beneficiaries
- How it is similar
- To a trust, but with clear legal personality
- Why
- Inheritance, asset protection, family planning
- Important
- Like a trust, it requires transparency and tax accounting
- Can you prepare
- Yes: choose between a foundation and a trust for your purpose
02 / In plain words
What Private Foundation means
A private foundation is a legal entity in its own right that has no owners or shareholders in the usual sense. It is created to hold and manage assets for the benefit of beneficiaries under rules set by the founder. In function it is close to a trust, but unlike a trust it has its own legal personality — like a company.
It is this “solidity” that appeals: a foundation has its own legal shell, it owns assets itself, enters into transactions and outlives its founder. That is why private foundations are popular for inheritance, asset protection and long-term family planning — especially where the trust, as an Anglo-Saxon arrangement, works less well (civil law systems).
As with a trust, a foundation is not a tool of concealment. Beneficiaries are disclosed, and income is often taxed under anti-avoidance and CFC-like rules. The choice between a foundation and a trust depends on the jurisdiction, the goals and the legal system; both are built transparently and with the tax consequences calculated.
A case from practice
A family in a civil law country chooses a private foundation instead of a trust: the foundation, as a separate legal entity, owns the family assets and passes them to the children as beneficiaries under set rules. The structure is disclosed to the bank and the income accounted for under the tax rules — the inheritance proceeds in an orderly way.
Why foundations are used
- Inheritance and transferring capital
- Asset protection
- Long-term family planning
- An alternative to a trust in civil law
- Holding family assets
- Structuring property
03 / What it covers
How a foundation is structured
Nature
- A separate legal entity
- No shareholders
- Its own legal personality
Assets
- The foundation owns them itself
- For the benefit of the beneficiaries
- Under the founder’s rules
Why
- Inheritance
- Asset protection
- Outlives the founder
Transparency
- Disclosure of beneficial owners
- Tax accounting
- Not concealment
04 / How it works
How to create a foundation
Define the purpose and assets
Choose the jurisdiction (foundation/trust)
Establish the foundation and transfer the assets
Disclosure and tax accounting
A working structure
05 / Key facts
What you need to know
01
A foundation is a legal entity in its own right with no shareholders
02
Similar to a trust, but with clear legal personality
03
Popular in civil law systems
04
Used for inheritance and asset protection
05
Requires disclosure of beneficiaries and tax accounting
Common mistakes
- Treating a foundation as a tool for concealing assets
- Not disclosing the beneficiaries to the bank and the tax authority
- Choosing a foundation where a trust is better (and vice versa)
- Not calculating the tax consequences
- Establishing a foundation with no real management
06 / Expert advice
How to prepare in advance
The choice between a foundation and a trust depends on the jurisdiction, the legal system and the goals. A foundation is built for its purpose (inheritance, asset protection) and transparently: the jurisdiction is chosen, the structure established, the tax consequences calculated and preparations made to disclose the beneficiaries. Then the foundation solves planning tasks rather than creating risks.
What we do for you. We help choose between a foundation and a trust for your jurisdiction and goals and build the structure transparently, with the taxes calculated. That way family assets are protected and passed on under your rules, without questions from the bank or the tax authority.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
A foundation is a legal entity with its own legal personality; a trust is a relationship without a separate legal entity. Foundations are more often chosen in civil law, trusts in Anglo-Saxon law.
No. Beneficiaries are disclosed, and income is often taxed under anti-avoidance rules. A foundation is a planning tool, not a concealment tool.
Formally no one, in the sense of shareholders: the foundation owns the assets itself, for the benefit of the beneficiaries under the founder’s rules. That is how it differs from a company.
For inheritance, asset protection and long-term family planning, especially where a trust works less well.
Often, yes — on the beneficiaries or under CFC-like rules. The tax consequences are calculated in advance for your residence.
It depends on the jurisdiction, the legal system and the goals. We choose for your situation and build it transparently.
INITIAL ASSESSMENT
Tell us what outcome your family needs
We will design a solution for your case, choose the country and the right status, and take the whole process through to the result.
