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29 June 2015

The Private Foundation: an Estate planning and heritage protection tool

The private Foundation offers several advantages for individuals (HNWI) and wealth structuring entities whose purpose is to administer private wealth and can not be used to exercise a commercial, industrial, agricultural or professional activities.

Theses advantages are:

  • Flexibility in the governance and the management: TheFoundation has its own legal personality, has no shareholders nor members, it is considered as an orphan entity. Private Foundations are used to manage and administer an estate for the benefit of one or more beneficiaries or for the benefit of one ore more goals (other than those reserved for non-profit foundations).  The Foundation can own movable and immovable properties, tangibles and intangibles assets, and can carry out holding activities. And the Private Foundation may also issue certificates to its beneficiaries/third parties related to particular assets owned by the private foundation and entitling them to certain rights defined in the private foundation agreement or in the issuance document of the certificates.  The Private Foundation is governed by one or several directors.

  • Confidentiality: Founder, beneficiaries and amounts contributed to the Private Foundation do not have to be disclosed to the public, but will follow the international requirements on the beneficiaries identification in an anti-money laundering context.

  • Autonomy of the will of the founder and protection of the beneficiaries: The founder has a large amount of freedom to draft the constitution acts and extra-statutory regulations, including the designation of the beneficiaries. But, certain restrictions are designed to protect beneficiaries, in particular through provisions regarding the liability of the administrators and liquidators, through the information which must be available at the headquarters of the Private Foundation and by limiting the changes which can be made to the constitution acts.

  • Tax attractivity: the Private Foundation is subject to a non-transparent tax regime. The Foundation is tax exempt on wealth management income and won't be subject to wealth tax. The "beneficiaries", if they are non-resident will not be taxed upon reception of income paid by the Foundation.

The foundation as being an orphan entity can be used in corporate finance and securitisation transaction; each time where a separated vehicle or a deconsolidation is needed to secure a transaction which should be bankruptcy remote. The issuance of certificates can also be used as a useful tool which yield and value are linked with an underlying asset or a portfolio of assets.

 

More information - pleasecontact us

 

Links:

>> Wealth Structuring Advice

>> Asset Holding vehicles

>> International Tax advisory

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