For many of our FINAD clients it is not only important to know that their assets are managed in the best possible way. Very often they also approach us with the question of how they can best protect their assets. This is no longer just a question of how to protect your assets from unwanted or unjustified access by third parties. In many cases, it is now also a matter of striving to relieve the next generation of the responsibility and burden that is often associated with asset management. In the same way, the cohesion of assets often plays an essential role. Many people also fear repression of all kinds and for this reason look for ways to structure their assets in such a way as to minimise this risk as far as possible. In this respect, they want at least some of their assets to be managed anonymously and detached from themselves.
Detachment
In order to cover these topics in the best possible way, we have already developed and implemented many completely different concepts for our customers in the past. In doing so, we have – among many other alternatives – from time to time chosen the institution of a non-transparent foundation. One of the main reasons for this choice was the fact that by setting up such a foundation and donating assets to it, you can detach parts of your own assets from yourself. After all, the non-transparent foundation represents an institution with its own legal personality, similar to companies. The special feature of this institution, however, is that, depending on its structure, it has no owners. This can be a very significant advantage, especially in the area of asset protection.
Asset protection
In the past, foundations have already proven on several occasions that they are an effective means of securing the assets dedicated to them against access by third parties. After all, foundations have often been involved in separation disputes and have already proved on several occasions that the assets dedicated to them should not be included in the distribution procedure. In inheritance disputes, too, foundations have very often been put to the test and have been able to secure the assets dedicated to them. The same applies to claims which creditors have made against members of the founder’s family. These were also often not considered.
Many of FINAD’s clients have had very positive experiences with non-transparent foundations in these areas in the past. An essential aspect of this was that the assets dedicated to the foundations can be preserved and secured. This means that it can be used according to the wishes and specifications of those persons who have dedicated these assets to the foundation. In this respect, non-transparent foundations have already been able or have had to prove on several occasions that, if the institution is properly structured, it is not only possible to keep assets together but also to hold them together over generations. Rather, it is also possible to protect it from access by undesirable third parties and thus ensure the desired use of the assets.
Flexibility
A further advantage of the non-transparent foundation, which is much used by FINAD clients, is that they can transfer parts of their assets to jurisdictions to which they themselves do not belong. Our clients have various motives for transferring assets from their own country of residence to another country. This is also possible through the establishment of a non-transparent foundation and the legal personality granted to it. The parts of the assets dedicated to the foundation are subject to a different jurisdiction than the one of the foundation itself. Often the issue of legal certainty also plays an important role here. This not only with regard to civil law and company law provisions. Rather also with regard to tax law issues. After all, the tax law applicable to the assets of the non-transparent foundation itself is generally that of the state in which the foundation has its registered office.
Asset management
The management aspect is also a frequent motivation to contribute parts of the assets to a foundation. This is subsequently managed by the respective foundation board. In this respect it is possible to ensure a high degree of objectivity in the management of the assets dedicated to the foundation. This also relieves the burden on the following generations to deal mainly with the management of the assets dedicated to the Foundation. This leaves the following generations the opportunity to develop more freely and follow their own path.
Asset allocation
With regard to asset succession and difficult distribution scenarios, a foundation can also be a great advantage. Often the assets are not to be divided due to a generational change. Rather, they should continue to be managed and held together in a uniform manner. This can be particularly important in the case of company investments, but also in the case of other “family assets”. Through the foundation this is possible without excluding individual heirs from the earning power of the assets.
Establishment
However, before assets are transferred to a non-transparent foundation, this step needs to be well thought through. After all, a non-transparent foundation not only has advantages and the detachment of the assets also has its price. In this area, you should always check whether you want to gain certain advantages from a non-transparent foundation. These various advantages that a foundation can bring can often also be achieved by other constructions that are less complex. After all, there are many forms of asset protection. In this respect, it pays off to check in advance which form of asset protection is the most suitable.
Great care must also be taken with the implementation itself in order to actually trigger and use the desired positive effects of a non-transparent foundation. It is just as essential to regularly check whether a foundation that has already been established continues to meet and embody the wishes of its founders. In all of this, we are happy to support you as independent and objective consultants with international experience.
from Dr. Georg Burger-Scheidlin, LLM
