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Foundations

A foundation is a legal entity established under a civil law legal system. It has a legal personality independent of the founder who established it, and can endure beyond the lifetime of that person. Foundations are often used to endow charitable purposes in civil law countries in the way that trusts can be used in common law countries. A few jurisdictions such as Liechtenstein, Panama, Jersey and the Bahamas allow foundations to be established for purely private purposes or for holding and distributing family wealth. A private foundation can therefore be used in a similar way to a trust to hold title to assets and to enable assets to be held for or passed on to beneficiaries.

Foundations can be of perpetual duration or can determine on a pre-arranged date or eventuality.

Foundations can be used to achieve tax-planning benefits, but their use in connection with common law countries needs to be handled with care. In some countries the use of a foundation would not be advisable.

Foundations can be used to own holding companies which may enhance the tax benefits available.

A foundation may be an appropriate alternative to a trust in some situations; in others a trust may be advantageous. Which will be the more appropriate will depend upon a number of factors and a general consideration of the issues involved in a particular situation should be undertaken before a decision to create a trust or foundation is made.