Offshore Trust vs. Foundations

Differences Between an Offshore Foundation and a Trust

An Offshore Foundation is a commonly used term to refer to a separate legal entity in a Civil Law country without members or shareholders, established under the wishes of a founder that is outlined in a Charter.


Whereas, an Offshore Trust is formed in a Common Law country, for the purpose of placing the assets of property ownership onto the name of a trustee, who holds it for the benefit of its intended beneficiaries.


Offshore Foundation

An Offshore Foundation is used for any number of activities including for personal, commercial or charitable purposes. Though its modern use has been mostly associated with its wealth protection, estate planning, and tax savings benefits. Provided that residents of the offshore jurisdiction were the foundation is located are not receipts or owners of the Foundation, than the Foundation is free from all local taxation.


A Foundation was introduced nearly 100 years ago in Western Europe for estate and asset planning in Liechtenstein. Since then, Foundations have become widespread, and are used in countries all over the world. Foundations are used primarily in Civil Law jurisdictions, where ‘Anglo Saxon Trusts’ are unknown.


A Private Interest Foundations have many of the same functions of a company, however, are afforded the asset protection benefits inherent in Trusts, which has important tax consequences. As the Foundation itself owns the assets, they remain free from taxation until they are distributed.



 Offshore Trust

An Offshore Trust trust is right of property held by one party for the benefit of another. An offshore Trust arrangement often referred to as a ‘trust deed’ is used as a recorded document outlining the specifics of the Trust. The use of Trusts shifts the ownership of property onto a third-party, or trustee, for a beneficiary.

 

A trust is a contract in which an individual (called a Settlor/Creator/Trustor/Grantor) transfers property to one or more Trustees to be held or managed for one or more Beneficiaries. There are many types of trusts in use today for a variety of purposes.

Contractual Trusts were the first recorded trusts, which originated back in the time of the Crusades in the 12th century when knights leaving for the Holy Land would set up trusts and convey their properties into them. Their goal was to protect them from appropriation or seizure while absent or in case of their death to ensure their chosen heirs inherited their estates. Two famous early 19th century 


Contractual Trusts in England were Lloyds of London (1811) and The London Stock Exchange (1802).

The use of trusts has since been used in nearly every field of human activity especially in the field of commerce and trade when used in combination with a corporation or limited liability company. There are two distinct advantages of having a trust, in that they are usually bound by contractual arrangement and can be easily changed and transported to other jurisdictions. 

New Zealand Foreign Trust (NZFT)

A New Zealand Foreign Trust (NZFT) also known as a New Zealand (NZ) Offshore Trust or NZ Non-Resident Trusts has existed since 1988 with legislation going back to the Trustee Act of 1956. Since then, the jurisdiction has formed over eight thousands trusts, providing clients with a number of advantages not normally found within the offshore sector.


Because NZ is a traditional high-tax structured jurisdiction it does not carry with it a stigma normally associated with other offshore 'tax havens', providing many of the advantages in a traditional offshore financial centre, but without the undue scrutiny of foreign governments and financial regulatory agencies.


A NZFT is a legal entity established and owned by a settlor—a non-resident of NZ whose assets are held and under management of a NZ resident trustee. The NZ resident trustee manages the assets in accordance with the details outlined in the trust deed, under the instructions of the settlor for the benefit of an intended beneficiary.


A NZFT has any number of arrangements and applications, as NZ legislation has given foreign trusts the ability to create a flexible management structure and conduct business in virtually any offshore or onshore sectors.


Successive NZ government administrations have supported their foreign trusts, which have been used as a means of attracting international investors, maintaining that their trusts are legitimate wealth management vehicles and lay well within the confines of the international regulatory standards.


A properly structured NZFT is a unique asset protection and business management investment vehicle that offers a number of benefits to foreign investors seeking confidentiality, low-level information disclosure and offshore security. 

Cook Islands Trust

The Cook Islands International Asset Protection Trust is the leading asset protection product in the most secure offshore trust jurisdiction in the world. A Cook Island Trust is for those individuals who would like to preserve their assets in times of uncertainty, against unknown political, economic, or legal forces.


Although the offshore financial sector has recently received a lot of scrutiny from foreign governments seeking to restrict the use of offshore services, the Cook Islands has been kept out of the limelight. The long arm of foreign governments can not reach the Cook Island trusts, nor do the islands uphold foreign government court orders demanding account information or asset seizure. A Cook Island Trust, explains, Jennifer A. Davis, chief executive of the Cook Islands Financial Services Development Authority, 'provide[s] a layer of insurance for something that cannot be insured—the unforeseeable'.


Cook Islands Trust Law

In amending the International Trusts Act in 1989, the Cook Islands were the first jurisdiction to include asset protection features in its trust legislation, a precedent that was soon to be copied by several other highly secure jurisdictions. The amendment was designed to protect clients from frivolous lawsuits at a time when no other jurisdictions in the world could. This piece of legislation remains the foremost asset protection amendment in the world, devised to protect the assets of the client under all manner of circumstances.


The Financial Supervisory Commission in the Cook Islands states that there are nearly 3,000 trusts, all of which offer full anonymity as well a security from creditors and legal suits. The multi-layered trust structure gives both full protection and anonymity for both the beneficiaries and the settlor. Both offshore finance experts and us at cperth.com agree that the Cook Islands have the strongest asset protection trusts in the world, a claim that no other jurisdiction can make.

Panama Foundation with Corporation (IBC) Structure

 A Panama Foundation combined with an International Business Company (IBC) is an offshore legal structure wherein a Panama Private Interest Foundation (PPIF) or a Panama Charitable Foundation (PCF) is formed and put in place to act as a shareholder of the IBC. Ownership of the IBC is thereby divested to another legal entity (the Panama foundation). 


Advantages of a Panama Foundation-IBC Structure

  • Flexibility of ownership and management structure
  • No residency requirements for Directors, Shareholders or Officers
  • Corporate or Trust entities may act as Director, Secretary or Shareholder
  • Re-domiciliation of foreign companies are allowed
  • There are no limitations on corporate ownership 
  • There is no corporate tax, income tax, withholding tax, stamp tax, asset tax, exchange controls or other taxes levied on assets or income originating from outside the country.

Panama Private Interest Foundation

 The Panama Private Interest Foundation (PPIF) is a type of offshore private foundation, carefully designed by the Panamanian Government as an offshore asset protection solution under the laws of Panama. It is based upon the Liechtenstein 'Stiftung' (a family foundation), as well as the private foundation structures of Switzerland and Luxembourg.

The main difference between an offshore private foundation and an offshore company is that a private foundation cannot engage directly in any business activity that is commercial in nature. It may, however, own investments such as real estate, other companies, stocks, bonds, etc.

A Panama Foundation is different from any other legal entity in Anglo-Saxon law as it is not the legal personification of a person or group of persons (as in a corporation) and is not owned by any individuals or entities.

The assets of the Private Interest Foundation in Panama take on a separate legal identity from the personal assets of the Founder, Protector, Council Members or Beneficiaries, protecting the assets of all individuals a party to the foundation. A Letter of Wishes may be drafted to convey the manner in which the assets of the foundation should be handled after the Founder's death.

There are subtle differences between the Panama Private Interest Foundation and a Panama Charitable Public Foundation – or Panama 'Public Interest' Foundation – in that the latter is used for charitable purposes, though both have their unique uses in offshore planning, much of the characteristics of a PPIF are the same for a Panama Charitable Foundation. 

International Fiduciary Structure

Our upgraded International Business Corporation/Panama Foundation combination with Professional Management is often referred to as an 'International Fiduciary Structure' (IFS).


This differs from our typical IBC/Foundation package in that it also offers full management of the company and foundation, and includes a complete set of foundation bylaws, which, among other things, will be your 'living will.' These bylaws (or 'reglamentos' as they are known in Spanish) not only can they detail all your estate planning requirements, but they can also include detailed instructions for the ongoing operation of the foundation, if a multi-generational legacy is planned for.  Also if you have more charitable goals in mind for the foundation those can also be includedl.


The main components of this package are as follows:

  1. A Belize, Nevis, Seychelles or Panama Corporation (or any other IBC type) whose shares are held by...
  2. A Panama Private Interest Foundation, and...
  3. Professional management of the Corporation and Foundation with customized Foundation bylaws