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Article category: Foundations

  • UAE Foundations: A Structured Approach to Asset Management & Succession

    What Is a UAE Foundation?

    • A legally incorporated entity combining elements of a company and a trust
    • The founder establishes the foundation and transfers assets into it
    • Council members manage the assets per the governing documents
    • Beneficiaries receive benefits as prescribed — anyone can be a council member
    • A foundation can exist and operate perpetually

    Key Benefits of a Foundation Structure

    Tax Transparency: A foundation with individual beneficiaries may qualify for tax-transparent status, offering tax treatment similar to that of a UAE resident individual.

    Ring-Fencing of Assets: Assets transferred to the foundation are generally protected from the founder’s personal liabilities, with potential legal challenges limited to a maximum of three years.

    Escape Forced Heirship: Foundations are not bound by forced heirship principles of UAE or other jurisdictions, allowing the founder to allocate assets and benefits to specific individuals as desired.

    Avoidance of Probate: Assets held in the foundation bypass the probate process, eliminating associated costs, delays, and legal complexities that would otherwise burden beneficiaries during succession.

    Flexibility: The charter and by-laws can be tailored to allow the founder to retain powers, such as modifying or terminating the foundation.

    Jurisdictional Override: Foundations in ADGM and DIFC are governed by English common law, with the relevant jurisdiction overriding conflicting foreign laws.

    Information Required to Initiate Discussions

    To design the right foundation structure, we need to understand your complete picture: a family map with details of all relevant members, business involvement and roles, philanthropic objectives, your primary objective (orderly wealth transfer, multi-generational legacy, or both), and a complete asset mapping including financial assets, immovable properties, business interests, valuables, overseas holdings, and any personal guarantees or security interests.

  • Understanding UAE Foundations: Beyond the Hype

    The Candid Take

    • UAE foundations are an excellent structure — but not a panacea
    • Most commonly cited reasons (separate legal status, orphan structure) can be achieved by trusts + companies too
    • In common law countries (US, India, UK), trusts — not foundations — are recognised
    • India and US both recognise foreign trusts; similar exemptions are not granted to foreign companies/foundations
    • A country-specific structure often works better than a single centralised foundation

    Why Foundations? A Critical Look

    Foundations have separate legal status — but so do companies. Foundations are orphan structures with no stakeholders — but trusts have the same feature. Foundations combine features of a trust and a company — but a trust holding a company can achieve similar outcomes. So what are the real shortcomings?

    The Recognition Problem

    In most common law countries, trusts — not foundations — are recognised. The US, India, and UK all recognise trusts. Both India and the US recognise even foreign trusts. Transfer to a family trust in India is exempt (subject to conditions). A similar exemption can be claimed in the US for revocable (grantor) trusts. Such exemptions are not granted to foreign companies or foundations. Due to lack of recognition, foundations are likely to be treated as foreign companies in these jurisdictions.

    The Way Forward

    It’s better to follow a country-specific structure rather than a central structure: UAE foundations (DIFC/ADGM) are ideal for UAE assets and assets in most EU nations, while Indian/US/overseas trusts can be used for Indian/US assets. The right answer depends on where your assets are located and which jurisdictions’ laws will govern their treatment.