Trusts & Foundations

As an integral part of its international estate planning practice, Braxton offers trusts and private foundations services to families, lawyers, independent trustees and other professionals.

Foundations and Trust’s function

The function of trusts and of private interest foundations is to legally separate an individual or individuals from their assets for the current and/or future benefit of disclosed and/or discretionary beneficiaries. Legally both a trust and a private interest foundation are self-owning entities with no ultimate controller or owner which is exactly what makes them so attractive to tax planners and those seeking to protect assets from either 3rd parties, fiscal authorities and/or the injudicious actions of those who might otherwise be expected to become direct beneficiaries if assets were to be distributed directly.

Why Set Up a Trust or Foundation?
Trusts and foundations enable individuals, who may prefer not to hold assets themselves, to accommodate such assets in a legal vehicle. It is possible to form a foundation in such a manner as to permit the identity of the de facto founder and of the beneficiaries to remain anonymous. Such foundations are particularly qualified for the management of assets. By means of the implementation of a bylaw, which can be changed or varied at any time, the founder can make provision for the orderly devolution of his worldly goods.

Those estate planning structures allow the grantor to make provision for beneficiaries with discretion and confidentiality. In most international countries there is no requirement for trusts or foundations to be registered with any authority; therefore only the trustee and the settlor need to know of its existence.

Special powers can be given to a Protector to oversee the actions of the trustees or board of directors of the foundations. These may include powers to remove and appoint trustees or investment advisors and a veto over proposed distributions.

Trust and Foundation benefits
Trusts and Foundations are generally tax savings and, specially, asset protection tools for healthy individuals and families.

Tax Benefits

Private interest foundations, whilst not necessarily desirable for those located in civil law jurisdictions such as France or Germany, have very positive benefits for those located in common law countries, particularly the United Kingdom where there is case law which established the veracity of private interest foundations

Foundations in many ways a foundation is often both the better and safer method of protecting assets from 3rd party litigation

Protection of  Assets
Trusts can be established in such a way that they can be used to protect assets from potential 3rd party litigation. These types of trusts are known as “Asset Protection Trusts” or APTs and are primarily used in the United States by professionals such as medical doctors, dentists and lawyers where high indemnity insurance and an extremely litigious environment mean that few successful professionals can afford not to consider establishing an APT. However, it should be noted that such APTs don’t have fiscal benefits and further should always be declared to the Internal Revenue Service (IRS). Comparing with Private Foundations, there are a number of exotic trust forms, like the Purpose Trusts.

In general, a trust or foundation is able to operate in a tax free environment. This means that it is usually possible, with careful planning, to enhance the value of the assets held by a trust or a foundation by accumulating income and capital gains free of tax.

Trusts and foundations may provide a wealthy individual with greater privacy than he or she would have  in his or her home country.  They also serve as a shield to protect the grantor’s assets against unreasonable litigation and unjustified claims.

Selecting between Foudations and Trusts
Trusts and foundations are among the most flexible and efficient legal structures. However, the law of trusts and foundations is a complex field and there are many fundamental issues to be considered, for example onshore legal recognition, domicile, banking secrecy laws, taxation, place of administration, location of assets held by the trust/foundation, residence and citizenship of the beneficiaries and trustees, and the situs and governing law of the trust/foundation. Choosing the right trustees is important because the trustees have significant fiduciary duties to the beneficiaries. Choosing the appropriate jurisdiction is important because the jurisdiction’s banking, privacy and tax laws may impact the effectiveness of the trust or foundation.

Irrevocable Trusts
A trust is irrevocable if it is not possible for the settlor to terminate the trust without the approval of the trustee. Discretionary means that the trustee is authorized to determine if, when and to whom of the beneficiaries distributions will be made. This means the settlor loses control over the trust capital. The settlor can, however, make his whishes known in respect of the beneficiaries in a “Letter of Wishes”, as well as the amount of their acquisitions, the time of acquisition, etc. In addition, he can include specific provisions in the trust deed but still the trustee has the ultimate control over a discretionary trust.

Although trusts and foundations are classic elements in international tax and estate planning,Asset Protection Insurance is An Alternative To Trusts And Foundations.