01
Trust and foundation divide assets differently
In a classic trust, the settlor transfers property to the trustee, who becomes the legal owner and manages it in the interests of the beneficiary or purpose under the terms of the trust deed. The Foundation is usually an independent legal entity: it owns the assets itself and operates through the council in accordance with the charter, by-laws and purpose.
Protector can coordinate key decisions, but the scope of his powers should not destroy the independence of the trustee.
Guardian / protector monitors compliance with the goal; the foundation itself is the owner of the assets.
02
The choice is not made based on the level of “confidentiality”
- Legal personality
- A Trust is usually not a legal entity; foundation is usually
- Asset owner
- Trustee on your own behalf for trust; foundation - herself
- Main organ
- Trustee / board of trustees; council / foundation board
- Constituent control
- Reserved powers are possible, but require legal and tax verification
- Continuity
- Both structures can survive founder/settler with proper governance
- Disclosure
- Beneficial owners, CRS, banks and local registries are verified separately
- Taxes
- Subject to residence, control, distributions, assets and qualifications in each country
03
Control should be sufficient for the family and not excessive for the law
Letter of wishes, protector, reserved powers, investment committee and family council allow you to customize family participation. But actually retaining full control can impact asset protection, tax qualification, CFC, inheritance dispute and banking KYC. Governance is tested for death, incapacity, beneficiary conflict, divorce, and administrator failure.
Who manages the investment, votes shares and approves distributions.
What actions require the consent of the protector, guardian or founder.
Organ replacement, deadlock, removal, dispute forum and emergency powers.
Who makes decisions after the death or incapacity of a key person.
04
For a Russian resident, the structure begins with the CFC, and does not end with it
A foreign trust or foundation may qualify as an unincorporated foreign structure or a foreign organization, depending on the law and facts. Establishment and control, entitlement to income, distributions, CFC profits, notices, financial statements, personal taxes and treaties are analyzed. The formal absence of shares does not mean the absence of control.
Following the contribution of real estate, shares or an investment portfolio, correction of qualification may require a reverse transfer, consent of the structure authorities and tax consequences in several countries.
05
The bank sees not a beautiful scheme, but an ownership and control file
To open an account, source of wealth, source of funds, deed/charter, by-laws, registers, powers of authorities, tax residency and an explanation of the economic purpose are prepared. CRS and AML analysis determine the controlling persons and the scope of reporting. A structure without a transparent asset history rarely goes onboarding faster than a simple company.
- 01Purpose memo
Inheritance, ownership, investment, charity or protection of a specific risk.
- 02Ownership file
Assets, origin of capital, controlling persons and tax residence.
- 03Governance
Powers: council/trustee, protector, signsatories and investment mandate.
- 04Bank fit
Jurisdiction structure, booking center, custody, payments and investment profile.
06
Structure design checklist
- 01
Determine the purpose of the structure and the events it is intended to protect against.
- 02
Make a map of settlor/founder, organs, protector/guardian and prosperity.
- 03
Check the taxes and reporting of each country before transferring each type of asset.
- 04
Test governance for conflict, death, incapacity and change of administrator.
- 05
Agree on the bank, investment mandate, payments and source of wealth documents.
- 06
Prepare an annual compliance calendar and procedure for updating the structure.