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Services / Advisory / Asset Protection /

Private Foundations

Private foundation is a trust equivalent used in civil law countries (i.e. most European countries). The concept of a private foundation emerged in Lichtenstein more than hundred years ago, and thus an instrument for protecting and planning family wealth appeared.

Unlike trusts, private foundation is a legal entity that can be owner of assets, party to agreements, etc. Despite being a legal entity, a private foundation has no shareholders or equity. One can say that a private foundation is owned by itself.

A private foundation can be compared with other well-known organization – charitable foundation. Like a charitable foundation, a private foundation can dispose its funds, complying with its bylaws and internal procedures, and it has no shareholders. But unlike charitable foundation, the objective of the private foundation is to provide support and aid to particular individuals – the foundation’s beneficiaries.

How is asset protection ensured?

Assets are transferred to the private foundation in the form of donations made by the family head, family members or by companies both related and not related to the family. Thus possession of assets is transferred to a separate structure, which handles them independently afterwards. Still the head of the family can become a member of the board in order to participate in making decisions regarding the foundation. Also, the head of the family can appoint other trusted persons to act as members of the board.

Management of the private foundation can be that complex or simple as the founder wishes it to be. The only requirement is that any important decision is approved by a licensed member of the foundation’s board (usually, a lawyer that holds a licence in the jurisdiction in which the foundation is established).

The head of the family sets rules for possession, use and inheritance of assets, as well as rules for changing the board members. All those conditions are included in the foundation bylaws and are not disclosed to the registrar of companies or any other state authorities.

Therefore, provided duly execution of the foundation documents, creditors (or other persons claiming the property) cannot demand the foundation’s property. Also, the foundation’s assets cannot be claimed by creditors of the foundation’s beneficiaries.

We are always ready to provide you necessary legal advice. We also recommend considering the opportunity of individual investment management.

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