Customer Service



Common law countries have traditionally used trusts

Civil law countries have historically used foundations.



Key Characteristics of a Foundation

A foundation is an incorporated legal entity, separate from its founder, officers and any beneficiaries.


A foundation is established by a founder who dedicates assets to achieve the objects of the foundation.



Assets placed in a foundation become the property of the foundation,


A Foundation Compared to a Trust


Characteristics of Foundations

Foundations offer a number of important and distinctive characteristics, these include:

  • A foundation is recognised by law in the majority of European States, and most South American countries.
  • A foundation has a separate legal personality and can enter into contracts in its own name.
  • A foundation is a registered entity and is therefore relatively transparent, which can be of advantage to financial institutions and authorities when complicated transactions are being entered into.
  • Legal charges can be placed against a foundation and can be recorded.
  • The removal or addition of beneficiaries can be carried out by an amendment to the constitution documentation.
  • A foundation is relatively unlikely to be challenged as a “sham” as it has defined laws and has its own legal personality.

Use of a Foundation for Commercial Purposes

The use of a foundation for commercial purposes can be achieved by inserting one or more underlying companies, with the shares owned 100% by the foundation. This offers all of the protection and advantages of a foundation, while allowing for a wide variety of business to be carried out by the underlying companies.

Additional Benefits of Foundations

  • Orphan Vehicles

During its life a foundation may not have any shareholders and/or any beneficiaries. The founder can form a foundation without a named beneficiary, but a procedure can be put in place to appoint one or more in the future. This can be very useful for financial institutions seeking vehicles where securitisation of assets is an issue.  The foundation can act like a “purpose trust” and then, over time, appoint an intended beneficial interest.

Assets can therefore be held in a transparent manner with no owner, which assists confidentiality, and the rules amended at a later date to add one or more beneficiaries.

Main Potential Benefits

A foundation offers the following potential benefits:

  • Asset protection
  • Effective tax planning
  • No restriction on the assets that can be held or on the corporations holding the assets
  • Potential for tax-deductible donations
  • Potentially reduced tax liabilities on the assets held
  • Structured management.




A Panamanian Private Interest Foundation (PPIF), more commonly known as a Panama foundation, can protect your estate from legal disputes after your death to ensure that your estate will pass to your chosen beneficiaries without undue complications.

The Panama Private Interest Foundation

First introduced in 1995, the Panama foundation, also known as a private interest foundation, is modelled after the Liechtenstein Family Foundation, or Stiftung, which has been the preferred vehicle for wealth management for generations of Europeans. The Panama foundation, though, has been developed to offer its holders and their assets superior protection from prying eyes than the Liechtenstein.  It is a type of entity that is a cross-breed between a trust and a corporation, however, it is neither. A Panama foundation is an entity that is different from any other legal entity known in Anglo-saxon law because it is not the legal personification of a person or group of persons (as with a corporation), rather it is a legal entity that does not have owners (share-holders, participants, or partners), and it traditionally has a specific purpose for the benefit of a general group of individuals.

Benefits of a Panama Foundation

A Panama foundation takes the best elements of a trust and an offshore company, or IBC, to create a legal entity to passively hold the assets of those who formed it. A foundation has no owners, so assets of the foundation, such as corporations, shares of stock, real estate and bank accounts, are held for the foundation’s beneficiaries (e.g. your heirs). Traditionally they were used to protect the wealth of the family and to make sure that its assets were passed on to succeeding generations.

Because there are no owners of a Panama foundation, reporting requirements are not necessary in many countries. For example, foundations are not specifically recognised by US tax Law, which allows you to decide the way in which your foundation is declared, and it may be structured in a way that allows it to legally avoid the reporting requirements of the IRS.

One way of doing this is to structure it as a charitable foundation rather than just as a family foundation. Using a private interest Panama foundation for private international church, humanitarian, philanthropic or other charitable activity is quite a well-established concept and we have a healthy number of clients that have pursued this path.

What makes Panama foundations unique:

  1. Complete customised by-laws that go into great length to detail the operation of the foundation, define who gets what and when, as well as establish whether the foundation will continue indefinitely (and, if so, who would take over).
  2. Customised charter to reflect the unique mission of the charitable, church or humanitarian nature of the foundation.
  3. The flexible nature of Panama’s Foundation Act allows for a private entity to be turned into a quasi-public one without the government meddling and oversight.
  4. Freedom to pursue spiritual, humanitarian, charitable purposes of the foundation in complete privacy.

The 3 key positions in the foundation need to be considered:

  1. The founder, which for privacy purposes can be our nominee company, if desired. (The founder is the same as a settlor in a trust).
  2. The council, which for the same reason can be our nominee company, if desired. (The council is the same as a trustee in a trust).
  3. Just as with a trust the protector appointment is a private agreement and should be decided by the client. The protector can have certain powers such as dismissing and appointing new council and is a check-and-balance feature common to both.

There are ways to ensure that a private interest charitable foundation can also meet the goals that would be normally desired for a private interest family foundation, as their two principal aims are not mutually incompatible.


Private Interest Foundation History

The concept of a “Foundation” began during the Roman Empire, under the influence of Christianity. As an example, the Catholic Church was considered a divine foundation, and the various sub-organizations within the church had the legal control for administrating its’ patrimony. The original foundations were not created for serving a private need for a specific individual or family, rather they were formed for serving the needs of a community. Several centuries later, the legal entity denominated as a “Foundation” continues to exist and is widely used and accepted around the globe for personal and private needs.

The concept of a “Private Interest Foundation” began when the Principality of Liechtenstein created the “Law of Persons & Companies”, the 20th of January, 1926 (Personen und Gesellschaft Recht – P.G.R.), which created the “Family Foundation”, (for the private benefit of the members of one or more families) and the “Mixed Foundation” (for the private benefit of not only families, but also for other persons or institutions).

Historically, wealthy families in Europe have established Family Foundations incorporated in the Principality of Liechtenstein (a Neutral jurisdiction for purposes of wars, etc.) for the purpose of estate-planning necessities, to ensure the safe transition of assets to the family’s beneficiaries. Today, Liechtenstein Foundations can cost upwards of US$25,000 to incorporate, and up to US$10,000 per year to maintain.

Panama Foundation Estate Planning

The Panama Private Interest Foundation is a legal entity that was developed based on the Private Interest Foundation models from three different jurisdictions including the Principality of Liechtenstein, Switzerland, and Luxembourg. The Panamanian Government carefully designed the Panama Private Interest Foundation with the intentions of creating a more modern, more flexible, and more affordable estate planning vehicle for people from around the globe. The assets of the Private Interest Foundation take on a separate legal identity from the personal assets of the Founder, Protector, Council, or Beneficiaries.

Panama foundations offer clear advantages for international estate planning, providing the ultimate in privacy, anonymity, and protection to the Protectors, Founders, and Beneficiaries of the Panama Foundation. The Panama Foundation is a solution to a global need for an affordable, anonymous, flexible, private, estate planning vehicle that can be used to hold Panama assets such as corporations, trusts, bank accounts, investment accounts, real estate, or any other type of asset around the world.

A Panama Private Interest Foundation comes into existence upon its registration in the Public Registry. No approval from any public authority is required. Law No. 25 of June 12, 1995 regulates Panama Private Interest Foundations.

A foundation in Panama can also be used for estate planning where the founder transfers title to current assets and has the Foundation acquire Panama real estate, Panama assets, and open a Panama bank account and Panama investment accounts.

A Panama Foundation provides international estate planning and asset protection by owning the shares of a .


What’s the difference between a foundation and a trust?

Since the introduction of the Foundations (Jersey) Law 2009, practitioners have contrived to analyse the practical implications for clients’ on the differences between foundations and trusts in order to decide which vehicle would best fit their clients’ needs.

This Briefing by Director Michael Powell aims to give an overview of the main concepts of each and to summarise, compare and contrast the two structures in order to facilitate further discussion with clients or their advisers.

What is a Trust?

The trust concept has existed in common law jurisdictions from as early as the 12th century. The term ‘trust’ is used to describe the relationship which exists when a person (the trustee) holds assets on behalf of another person or group of people (the beneficiaries).

A trust is therefore not a separate entity, but a relationship.  A trust begins when a person (the settlor) transfers assets (the trust fund) to a trustee or trustees, who will hold those assets and preserve or where appropriate enhance their value until such time as all or part of the trust fund is distributed to one or all of the chosen beneficiaries.

Whilst the legal title to the assets is held by the trustees, the beneficiaries have a beneficial interest in the trust fund. The trustees therefore hold the assets on behalf of the beneficiaries.

Although not strictly necessary, a will be governed by a formal written trust deed setting out the administrative and dispositive powers of the trustees, the terms of which are agreed with the settlor and his or her adviser.

There are various types of trust – for example, the settlor may wish for the trustees to pay income to one person during their lifetime, or they may wish to give the trustees discretion to make decisions on paying out income and capital (usually with guidance from the settlor on how they should exercise that discretion in the terms of a letter of wishes).

Trusts have formed the basis of succession planning for families for many years, allowing trusted professionals to administer wealth after the lifetime of a settlor and thereby ensure that his or her family continue to be looked after long after they have passed away.

A trust can therefore delay the time at which children become entitled to family wealth – it can prevent significant wealth passing to children or indeed adults before they are responsible enough to use the money wisely.

Separating assets from an individual’s personal wealth may also provide advantages in terms of protection from personal debts and other threats, and can in some cases provide tax savings depending on the laws of the settlor’s resident jurisdiction.

For most, the trust concept increasingly appeals for the reasons trusts were initially created: asset protection, succession and estate planning.

What is a Foundation?

A foundation is a relatively new concept to common law jurisdictions, which have traditionally used trusts for asset holding and succession planning. However, foundations have also been used for the same purpose in civil law jurisdictions since the Middle Ages.

A foundation is an incorporated legal entity which can be used to hold assets and will have a number of uses in wealth structuring and succession planning.  As a concept it is neither a company nor a trust, although it has features of both.

As there are no shareholders or ‘owners’ and there is no requirement to have beneficiaries, we have experienced a growing trend to use a foundation as an ultimate holding vehicle which separates underlying assets from an individual’s personal wealth and therefore falls outside his/her estate for inheritance tax purposes.

Foundations are effectively orphan structures and are likely to be of particular use where charitable trusts, purpose trusts or companies limited by guarantee would have been considered. They can equally be used for charitable or non-charitable purposes, such as succession planning for wealthy families to divest assets which the foundation can hold for the benefit of its beneficiaries.

What type of assets can Foundations hold and who are best placed to use them?

Foundations can hold all types of assets from a single asset to a range of different assets and there are no restrictions on what can be owned by a foundation, other than immovable property situated in Jersey.

Features of Foundations and Trusts

The following information clarifies the major differences between foundations and trusts established under Jersey law:

Legal structure


  • A foundation is a separate legal entity (similar to a company).
  • A foundation can contract and hold assets in its own name.
  • A foundation can sue and be sued in its own name.
  • The foundation holds the legal and beneficial title to the assets.


  • A trust is not a separate legal entity.
  • The legal rights and obligations sit with the trustees rather than the trust itself and the trustee therefore contracts in his/her or its own name on behalf of the trust.
  • Legal ownership of the trust fund sits with the trustees and beneficial ownership with the beneficiaries.
  • The trustees would sue and be sued in their own name, as opposed to action being taken by or against the trust.



  • A foundation must be formally registered with the Registrar at the Jersey Financial Services Commission.
  • Registration will be conclusive evidence that the foundation has been incorporated and has met the requirements of the law.
  • The foundation document (the charter) will be a public document. In practice, most of the information is contained in the regulations of the foundation which is a private document and very little information is included in the charter, which does not publically reveal the identity of the guardian, founder or beneficiaries.


  • There are three basic requirements to establish a trust, stemming from English case law. In order for a trust to be valid it must:
    • Demonstrate that at the time of creation there was an intention by the settlor to create a trust;
    • Identify the trust fund and the beneficiaries.
  • A trust does not need to be registered and no trust documentation needs to be made public.
  • The existence of a trust can therefore remain confidential.



  • A foundation does not need to have any beneficiaries.
  • Beneficiaries of foundations have very limited rights unless the founder wishes to provide for rights to be granted under the foundation’s regulations.
  • Beneficiaries of foundations do not usually have rights to information about the foundation.
  • Beneficiaries of a foundation do not have any beneficial interest in a foundation unless the foundation council or the regulations confer some entitlement on them (such as a right to receive income).


  • In order to be valid a trust must have beneficiaries.
  • The only exception to this is a purpose trust, where there are no beneficiaries but an enforcer is appointed to ensure that the trustees run the trust in accordance with stated purposes.
  • Beneficiaries of a trust have a beneficial interest in the assets, and therefore have legal rights which can go as far as forcing the trustees to take an action through the court or expressing their collaborative wish for an action to be taken which would be difficult for a trustee to refuse unless there were compelling reasons to do so (such as adverse tax consequences etc.)
  • Beneficiaries also have rights to certain information about the trust. They are not entitled to disclosure of information as of right, but have a legitimate expectation of disclosure. A beneficiary’s rights to information are based on the fiduciary duty of the trustees to keep the beneficiaries informed and to provide accounts.



  • A foundation can be established without any initial funds.
  • The founder does not need to advance funds to the foundation, which comes into existence on registration.


  • The settlor of a trust must pass some initial trust assets to the trustees in order to form the trust.  Further assets can of course be added albeit generally with professional advice.

Running the structure


  • A foundation has a council to run its affairs.
  • Jersey law states that at least one member of the council must be a trust company service provider based in Jersey and registered with the Jersey Financial Services Commission.
  • There is no maximum number of members that are allowed on the foundation council, but a maximum number can be set in the regulations.
  • A council member must be at least 18 years old, must have mental capacity, and must not be disqualified from acting as a council member or director of a company


  • The trustees of a trust are responsible for the decision making and managing the trust fund.
  • The trustee can be an individual or corporate trustee.
  • There can be more than one trustee but where there are two or more trustees, they must only perform actions where all of the trustees are in agreement (the trust deed may be amended to allow for decisions to be taken by a majority decision).



  • The council has similar duties and functions to the board of directors of a company. The members of the council of a foundation must:
    • act honestly and in good faith with a view to the best interests of the foundation;
    • exercise the care, diligence and skill that reasonably prudent persons would exercise in comparable circumstances.
  • The foundation council has no duty akin to a fiduciary duty towards the beneficiaries


  • Trustees have far wider duties which on the one hand ensure the protection of the beneficiaries, but on the other may prohibit the actions that a trustee may take, or in some instances assets they may hold.
  • A trustee must act with due diligence, as would a prudent person, to the best of the trustee’s ability and skill and observe the utmost good faith.
  • Subject to the terms of the trust, a trustee has a duty to preserve and enhance the value of the trust fund, meaning that a trustee could come under criticism for holding wasting assets which devalue over time.
  • Some of the duties of trustees can be delegated to appropriate parties such as where investment managers are appointed. However, there is still a duty to oversee their performance.

Enforcing the structure


  • All foundations require a guardian as a matter of law. The guardian is responsible for ensuring that the council acts in accordance with the regulations and they act in accordance with their duties and if necessary take action to ensure that the actions required of the foundation council are carried out.
  • The guardian can be the founder, a trusted friend or relative of the founder, or could be a professionally engaged firm to oversee the council.
  • They may be granted powers of veto to approve certain actions of the foundation council and they may even give their approval to an action which is not allowed under the regulations provided it is in the best interests of the foundation to do so.
  • A beneficiary can also take action against a foundation council but their rights are somewhat limited under the law.


  • Protectors may have a power of veto in respect of certain actions so their consent is required to add/remove beneficiaries or make a distribution for example from the trust.

Assets the structures can hold


  • Foundations are able to hold any assets other than immoveable property based in Jersey.


  • Trustees may hold any type of property in trust except Jersey realty.

Rights of the founder/settlor


  • The regulations of a foundation give rights to the founder.
  • The founder can be a council member and also a guardian of the foundation and so have a direct role in the running of the foundation.
  • Alternatively the Founder can have certain rights conferred on him/her under the regulations, such as the right to veto certain actions of the council.


  • The settlor of a trust can reserve some rights to him/herself, but careful structuring is necessary to avoid any potential legal or tax issues.
  • The trustees may confer with the settlor for his/her views on a proposed action but the settlor must not exert too much control over the decision making of the trustees as there is a danger of a sham argument that the trust is invalid.
  • Alternatively, a settlor can appoint a protector to whom certain rights may be granted, such as a right of veto over the actions of the trustees.

Statutory Fees


  • There is a registration fee payable to the Registrar which is currently £200 to establish a foundation (or £400 to be incorporated on the same day).
  • A foundation is also required to pay an annual return fee to the Registrar (currently £150) and an International Service Entity (“ISE”) fee (currently £200) which is a flat fee to exempt it from goods and services tax in Jersey.


  • As a trust is not registered with the Registrar, no registration fee is payable.
  • There are no annual fees payable to the Registrar and a trust does not have to pay an ISE fee.



  • Foundations are taxed as zero rated entities under the Jersey Zero-Ten legislation, which means that they will pay tax at 0% on any income and gains arising outside the Island.
  • There may be a tax on the founder when endowing the foundation, or taxes on distributions from the foundation, dependent upon the recipient’s tax position.
  • Specific tax advice should always be taken.


  • There is no Jersey tax to pay for trusts provided there are no Jersey resident beneficiaries and no income arising from Jersey assets (there is an exception for interest earned on funds held in a Jersey bank account).
  • The taxation of a trust will be dependent on the residence and domicile of the settlor and beneficiaries.
  • Specific tax advice should always be taken.

Leave a Reply