Building a foundation (when a trust simply wont do)

02 Nov 2021

Although the use and benefits of a Trust are well respected in the USA and UK, in civil law jurisdictions (such a France or Germany) this is not always the case and so the benefits derived from this type of entity are not available. In these circumstances a Foundation may provide the answer.

Foundations are widely used and understood in Europe as a means to separate a person from assets they wish to leave to others. However, unlike a Trust, a Foundation is formed through a legal incorporation which gives it a separate legal personality, allowing it to hold assets and enter into contracts in its own name. Similarly, liabilities of a Foundation belong to the Foundation rather than its council (similar to director of a company) which can increase the attractiveness of a Foundation to those involved.

Benefits

In comparison to Trusts some of the other benefits enjoyed by Isle of Man Foundations include:

• Foundations are formed through a formal process with a government registry, therefore there is no question as to their legal existence and constitution. Trusts can suffer from attacks that challenge their very existence.
• A founder can be involved in the activities of the Foundation by becoming a member of the Foundation Council.
• An Isle of Man Foundation does not require the Foundation Council to be comprised of locally licensed individuals.

Key features

• A Foundation can be formed without any named beneficiary, although a procedure can be put in place to appoint beneficiaries in the future. During the life of the Foundation the right of beneficiaries can be altered should circumstances change.
• Foundations are established by a document which sets out its name, the objects for which it is formed, the name and address of the council member (s) and the registered address of the Foundation.
• Assets are dedicated into it by a founder.
• The Foundation has rules which must establish a council to administer the foundation’s assets and carry out its objects. The rules also detail how the administration must take place by the council. including the appointment, retirement, etc. of council members, the manner in which decisions are to be made.
• A Foundation, like a company, benefits from perpetual succession and must have a registered agent and the appointment of an enforcer is optional, unless the Foundation has been established to carry out a specified non-charitable purpose. This is similar to the requirement for a purpose Trust to have an enforcer.

If you would like to learn more about Foundations and whether or not it would be an appropriate choice for your circumstances, please contact

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