Planning for succession and inheritance is always a top priority for business and family heads. It’s the implementation which is a challenge and the succession plans tend to be put on the side or back burners.
Considering the global spread of assets of individuals and businesses over diverse geography and exposure to different tax and succession laws, it is imperative to plan for the transfer of assets to the next generation with minimum of tax exposure.
Traditionally trusts were one of the earliest tools used for Succession Planning. Many countries (including offshore locations) enacted laws and systems to support the trust structure. This helped in creating confidence amongst the settlors, trustees and beneficiaries of the trusts thereby making the trusts structure as a favorite tool for Estate Planning.
Trusts have their own limitations in as much being a quasi-relationship, they do not have a separate legal existence to act on their own. As newer structures evolved Foundations gained popularity esp. in countries such as Liechtenstein, Panama, Mauritius etc. with more countries adding to the list.
Foundation is a good structure for holding family assets and estate planning. It is a separate legal entity and can be managed by the Founder through his nominated council members. There is an ease of distribution to the beneficiaries as per the Founder’s wishes.
UAE constantly evolves and strengthens its legal systems to support businesses. Considering the large value of investments by families in businesses and assets in the region, regulators such as ADGM, DIFC, RAK ICC have enacted laws and regulations governing Foundations. We see more and more use of this structure in UAE as they are getting popular for holding Real Estate Assets, Family Wealth (such as held through portfolio investments), Shares of Holding Companies (holding shares of operating entities in UAE and the region).
Owners of business should consider how use of Foundations can be beneficial for holding family assets and as Estate Planning exercise for preserving and passing on Family wealth to the next generation in a tax efficient manner.
To learn more about Foundations in ADGM, DIFC and RAKICC, you may get in touch with us at info@betaconsultants.ae
