Offshore Trusts and Foundations are those entities organized or placed abroad. As offshoring has become more popular, various countries have begun constructing their laws to be as ambitious as possible and making the requirements to establish and maintain these entities as easy as they can be. As expected, wealthy individuals and companies have begun choosing countries with the most attractive and convenient laws. Though they differ in explanation, there are many correlations between the two corporate entities as they share many of the offshore benefits, financial services and management structures.
What is an Offshore Trust?
An Offshore Trust formed to place assets of property ownership onto the name of a trustee, who holds it for the gain of its intended beneficiaries. An Offshore Trust allows for a piece of property owned by one party for the gain of another. A foreign Trust is the best offshore format for asset protection as it shields the beneficiary from the assets that are placed in the Trust, keeping the structure at arm’s length. Trusts are entities set up under common law to hold assets for beneficial parties by an individual or group of people, to be administered by a trustee in the country of agreement.
Different Types of Trusts
There is a subtle difference between each name, and it has more to do with the specifies the Trust itself, the corporate laws around the entity, and the jurisdiction rather than name or title used. A Trust can refer as:
- Foreign Trust
- Offshore Trust
- Private Trust
- International Trust
- Non-Resident Trust
While these all can have a degree of variance, they all are distinct from a domestic Trust, as they all meant to form as a non-resident entity in a country other than one’s primary country of residence.
What is an Offshore Foundation?
Offshore Foundations are the civil law entity like of the common law Trust and work along much the same lines as a Trust. An Offshore Foundation used for several activities including personal, commercial or charitable purposes. However, its modern use has associated with its tax savings benefits, estate planning, and wealth protection. A Foundation has coincidence of a regular corporation and the asset protection features of Trust. It also benefits being free from all local taxation if it does not conduct any transactions or business locally.
Different Types of Foundations
There are various types of Foundation, each with specific uses and functions. Every kind of Foundation can overlap in their methods and activities, whether it used domestically or internationally. Offshore Foundations are not widely known corporate structure, and that has allowed them to exist without as much scrutiny, for example, offshore trusts of Corporations.
- Private Foundations
- Family Foundation
- Community Foundation
- Charitable Foundation
- Public Foundations
- Corporate Foundation
Differences Between a Trust and Foundation
Some fundamental differences should point out. There are subtle differences, and they largely depend upon the type of Trust and Foundation and the location of the structure.
- Does not need to be registered
- Trust deed is not public, and it can be confidential
- Split between ownership of assets and assets itself
- Assets are to place in the Trust
- The Trust is not a legal entity, and so rights fall upon the trustees
- Needs to be registered to exist
- Foundation itself owns the assets
- Does not need assets to place in Foundation
- Foundation can sue and can be sued in its name
- Foundation Charter is public
Trust vs Foundation Comparison Table
A three-party relation where one party, we call as grantor, settlor or trustor, has another party “trustee” hold assets for the gain of another party, we call the “beneficiaries.” Depending on the trust purpose, one party can hold one or more of the three roles.
A foundation is a non-profit organization, usually gives support to others directly or to other charities. Some foundations engage other activities besides grantmaking.
Common law (England)
Civil law (mainland Europe)
Who Originates the Organization?
The settlor (Trustor)
Board of Directors
Has no owners
How Assets are Titled
as trustee of [name of Trust]
In the name of the Foundation
- Asset protection both offshore and domestic
- Estate planning
- Real estate
- Personal property
- Special needs for those with disabilities
- Independent (Usually funded by individual or family)
- Funded by a corporation but is a separate legal entity.
The Benefits of Offshore Trusts and Foundations
The benefits of having offshore Trusts can look in two different perspectives: preventing liabilities and protecting assets. An offshore Trust protects and even increases assets through the following:
- International Diversification
- Reduced taxes
- Privacy and flexibility
- Business opportunities
some of the benefits having offshore Foundations are the following:
- Barriers to Entry
- The Ability to Build and Accumulate Capital
- Business Restrictions
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