The Private Foundation
An excellent tax planning and asset protection tool.
Almost all of us realize the benefit of using a Trust, to plan against inheritance taxes, to protect assets against future creditors or to eliminate probate. In our practice we see that due to probate procedures, sometimes inherit ants are forced to wait as long as 2 years and pay hefty legal fees, before gaining access to a patrimony left behind.
However, despite its many advantages, frequently we choose not to use a Trust, because we do not feel comfortable, giving the control over our family patrimony, to strangers (Trustees).
A Private Foundation could serve as an excellent tool to solve these issues. It offers ample opportunity to retain control, while obtaining all the benefits of a Trust and in certain cases, even more.
A Private Foundation could be considered as the civil law equivalent to an English common law Trust, but unlike Trusts they are treated, as equivalent to Private Limited Companies. In fact they are, self-owning legal entities without ultimate beneficial owner(s), thus exempt from the typical anti-avoidance provisions.
Conceptually, The Private Foundation may be described as the endowment of a patrimony for a specific purpose (object) determined in the document whereby the foundation is created and internally organized known as the Foundation Charter. An appointed body known as the Foundation Council is entrusted to pursuit the objects of the Foundation. The person(s) who creates the endowment is known as the Founder and the persons who benefit from the endowment (traditionally the founder and/or members of his family) are known as the Beneficiaries.
A Private Foundation is a legal entity which you can use, to hold your properties, bank accounts and other assets and keep your identity confidential.
Apart from the keeping your identity confidential, a Private Foundation has the following advantages:
Asset Protection, assets placed in a Private Foundation are generally beyond the reach of creditors who might arise as a result of financial difficulties, divorce proceedings, litigation etc.
Retention of Control, the Private Foundation allows for you to retain control and be able to decide, to whom the control over your assets will pass when you are no longer able to exercise this control.
Lifetime Tax savings, during your lifetime, you will realize substantial income and capital gain tax advantages as the result of using a Private Foundation.
Saving on Inheritance Tax, on death, the inheritance tax which would normally be assessed on the value of your patrimony would generally be eradicated.
Continuity, Private Foundation provides a mean whereby your patrimony can continue to be administered in accordance with your wishes, after death. The weak family member can be protected from others and the spendthrift family member can be protected from himself.
Avoidance of Probate, a Private Foundation provides means whereby, a patrimony can smoothly be passed on to the next generation without disruption, delays, substantial costs, loss of confidentiality associated with the probate procedure which necessarily follows, if a Private Foundation is not used.