Updated
GL-P-06
Glossary · Structures and trusts
Private Interest Foundation - Private Interest Foundation (Panama / Liechtenstein)
01 / In 30 seconds
The short answer
- 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
02 / In plain words
What Private Interest Foundation means
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.
A case from practice
A client had a family foundation created a generation earlier. Due diligence required an explanation of the structure, the beneficiaries and the origin of the assets. The set of documents was gathered before filing — and the matter was closed without further requests.
What private foundations are created for
- Succession planning
- Protecting family assets
- Holding interests in companies
- Providing for family members
- Long-term preservation of capital
- Reviewing a client’s existing structures
03 / What it covers
How a foundation is structured
Legal nature
- A separate legal entity
- No members or shareholders
- Owns assets itself
Management
- Foundation council
- Charter and regulations
- A protector, if any
Beneficiaries
- Class of persons under the regulations
- Terms for receiving benefits
- Disclosure to regulators
Checks
- Bank compliance
- Registers of beneficiaries
- Tax regime
04 / How it works
How the structure is created
Define the purpose of the structure
Check the tax consequences
Establish the foundation and approve the charter
Transferring assets
Management and reporting
05 / Key facts
What you need to know
01
A foundation is a legal entity; a trust is a contractual relationship
02
A foundation has no members or shareholders
03
It is managed by a council under its charter and regulations
04
Beneficiaries are disclosed to regulators and banks
05
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
06 / Expert advice
How to prepare in advance
Such structures are created with specialist lawyers and always with a tax analysis for every country where the beneficiaries live. If a foundation already exists, a full set of documents on it is prepared by the time of applying for a programme: the charter, the regulations, the composition of the council, the origin of the assets and the client’s role in the structure.
What we do for you. 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.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
A separate legal entity created to hold assets in the interests of a defined class of persons.
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.
No one in the usual sense: a foundation has no members or shareholders. There is a governing council and a class of beneficiaries.
No. Beneficial owners are disclosed to regulators and banks, just as with trusts.
For succession planning, asset protection, holding interests in companies and providing for family members.
It depends on your country of tax residence: it may require you to declare and may tax benefits received under its own rules.
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.
