Private foundations are popular vehicles for wealth management and philanthropic purposes.
A private foundation is a legal entity capable of exercising all the rights, powers and privileges of an individual.
- It can own property.
- It can sue and be sued.
- Like a company it has limited liability.
- But unlike a company, it has no shareholders and does not need to have a commercial purpose.
- It can have charitable or non charitable purposes or both.
Private foundations are often viewed as the alternative to International trusts, particularly for clients from civil law jurisdictions where the law of trusts and equity do not exist.
Southpac Trust establishes private foundations in the Cook Islands and Nevis.
Cook Islands Foundations
Cook Islands foundations are governed by the Foundation Act 2012 and are mostly used for estate planning and/or philanthropy. A foundation is a hybrid of a company and trust, operating like a company but having governance features similar to trusts. Whilst ordinarily found in civil law jurisdictions, a Cook Islands foundation offers an alternative wealth planning vehicle for clients not familiar with trusts and/or who may be looking for asset protection measures not ordinarily offered with foundations from other jurisdictions.
Nevis Multiform Foundations
The Nevis Multiform Foundations Ordinance provides that each Nevis Foundation will have a stated ‘multiform’. This means that the constitution of the foundation states how it is to be treated – whether as a trust, a company, a partnership or an ordinary foundation.
Through the ‘multiform’ concept the stated identity of the Foundation can be changed during its lifetime, thus allowing for there to be greater flexibility in its use and application. Generally, the Nevis Multiform Foundation product can be used for estate planning, charity, financing and special investment holding arrangements.
Why choose one over the other?
Cook Islands foundation law draws upon successful fraudulent transfer rules in Cook Islands international trusts law to protect foundations from creditors of contributors of assets to the foundation. Choosing to go with a foundation rather than an international trust will not reduce the asset protection benefits which the jurisdiction is renowned for.
The hallmark of Nevis foundation law is multiform flexibility. The law allow for a foundation to take the form of a company, trust or partnership. Also, an existing entity may convert to a Nevis foundation. For example a US limited family partnership can convert to a Nevis partnership foundation. For consistency with applicable tax rules in the US however, the Nevis partnership foundation’s by-laws can provide that for tax purposes the laws of the State where the limited family partnership originated from apply to the foundation. A foundation may also be established by will. Nevis company and partnership foundations can be used for commercial trading.