Private Foundation
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.
- 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
In plain words
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.
Why foundations are used
How a foundation is structured
- A separate legal entity
- No shareholders
- Its own legal personality
- The foundation owns them itself
- For the benefit of the beneficiaries
- Under the founder’s rules
- Inheritance
- Asset protection
- Outlives the founder
- Disclosure of beneficial owners
- Tax accounting
- Not concealment
How to create a foundation
- 01Define the purpose and assets
- 02Choose the jurisdiction (foundation/trust)
- 03Establish the foundation and transfer the assets
- 04Disclosure and tax accounting
- 05A working structure
What you need to know
- A foundation is a legal entity in its own right with no shareholders
- Similar to a trust, but with clear legal personality
- Popular in civil law systems
- Used for inheritance and asset protection
- 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
What this means for a BRIDGES client
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.
Frequently asked questions
01 /How does a foundation differ from a trust?
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.
02 /Does a foundation hide assets from the tax authority?
No. Beneficiaries are disclosed, and income is often taxed under anti-avoidance rules. A foundation is a planning tool, not a concealment tool.
03 /Who owns a foundation?
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.
04 /Why is a foundation needed?
For inheritance, asset protection and long-term family planning, especially where a trust works less well.
05 /Is a foundation’s income taxed?
Often, yes — on the beneficiaries or under CFC-like rules. The tax consequences are calculated in advance for your residence.
06 /Which should you choose — a foundation or a trust?
It depends on the jurisdiction, the legal system and the goals. We choose for your situation and build it transparently.
See also
Read next
This material has undergone editorial review by BRIDGES.
A foundation or a trust for your purpose?
We will choose a structure for your jurisdiction and goals and build it transparently, with the tax consequences calculated.