Foundations are an integral component when structuring the ownership of family and corporate assets. Foundations have been in existence for over 100 years. A foundation is similar to a corporate entity in so much as it is a separate legal entity in its own right, yet offers protection and continuity derived from the use of trusts. A private investment foundation does not normally engage in commercial transactions, but simply “holds” assets. As a legal entity in its own right, without members, directors or shareholders, a foundation is established to reflect the wishes of the founder, who can be either a natural person or corporate entity. The founder’s wishes are contained in the foundation’s charter and regulations. Foundations can be of more benefit than trusts to residents in common-law jurisdictions. Foundations are recognised in all common- and civil-law jurisdictions.
A foundation is more robust to challenge than a trust. If a judgment creditor attacks the assets of a foundation, the law of limitation applies.
The founder appoints a “protector”, known as the supervisory body, which can be a natural person or body corporate. The responsibilities of the protector are specified in the foundation’s charter, and include, but are not limited to, the supervision of the foundation council.
Contrary to what many people think, estate-planning trusts are not necessarily reserved for just the wealthy. Even if you're not among the
top-100 moneymakers in the country, you may be able to benefit from the tax-saving benefits of certain trusts.
A trust is a three-party agreement in which the owner of an estate (the "grantor") transfers the legal title to assets to somebody else (the trustee) for the purpose of benefiting one or more third parties (the beneficiaries). Trusts may be revocable or irrevocable, and may be included in a will to take effect at death.
For this reason, the government considers the specified assets to still be included in the grantor's taxable estate. Therefore, you may possibly have to pay estate taxes on those assets remaining after your death. In addition, you may have to pay income taxes on revenue generated by the trust during your lifetime.
In general, the assets placed into an irrevocable trust are permanently removed from a grantor's estate and transferred to the trust. Income tax and capital gains tax on assets in the trust can be paid by the trustee on behalf of the trust or the grantor, depending on the type of trust. Upon a grantor's death, the assets in the trust generally are not considered part of the estate and are therefore not subject to estate taxes.
Most revocable trusts become irrevocable at the death or disability of the grantor.
The trust's grantor names a trustee to handle investments and manage the portfolio. In some cases, the grantor can work with the trustee on major decisions, or the trustee can be assigned full authority to act on the grantor's behalf.
A trustee may be an individual such as a relative, friend, an attorney or accountant, or it may be an entity that offers experience in areas such as taxation, estate law and money management.