The Difference Between A Trust And A Foundation

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The most established offshore structures, with the best track record of keeping assets safe, are trusts and foundations. In this article I’ll go through an overview of the trust and foundation difference.

In many ways they are very similar. For purely asset protection purposes, it makes the most sense to use a trust. If we take a closer look at the reasons for that, it’s obvious why you should take this route, instead of the other.

The Difference Between A Trust And A Foundation - Infographic

A trust is essentially a document which consists of rules, describing to how assets owned by the trust can be managed. These rules can be customized, and to such a degree that you can make a trust work almost like a foundation.

There are some claims saying that having a foundation in a place like Panama, provides better asset protection than any other alternative. That’s really not true. As with a trust, a foundation allows you to be in control of your assets, but legally not own anything. The benefit being that what you don’t own can’t be taken away from you.

You also have people saying that with a simple offshore foundation, you’ll have generous tax advantages. That’s almost never the case. In most cases to get any tax benefits by having a foundation, you would need to form one that is located domestically. But, then you won’t have the asset protection benefits you were looking for in the first place, if your structure is not located offshore.

With a trust you have all the flexibility that it’s possible to have, when it comes to asset protection. If for whatever reason you get sued, you can even move the trust to a different country, which means your plaintiff would have to spend even more money on going after you. In other words, you’ll have a significant deterrent in place by just having a trust. Doing something like this with a foundation however, can be tricky.

Another myth to consider, when it comes to banking. Foundations don’t give you any added bank account secrecy, compared to using a trust. They both work in very similar ways.

A different problem with using a foundation in a place like Panama, is that the original documents are not in English, but translated from Spanish. And because of that, you can’t verify all legal documents yourself, unless you are fluent in Spanish legal language.

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Fredrik helps high net worth individuals with creating international asset protection strategies. To keep anything from currency, real estate, precious metals and any other kind of investment protected from an unexpected lawsuit.