Comparison Between Trust and Foundation

Comparison Between Trust and Foundation

This article compares two mechanisms for managing wealth in the UAE: Trusts and Foundations.

UAE Trust

Trusts can be compared to a deposit box for a person’s assets. Trusts can be integral to wealthy families’ asset protection, wealth management, and succession planning strategies. They can also provide tax efficiency, particularly regarding inheritance, estate, and gift taxes.

Trusts emerged centuries ago under English law. As such, trusts are primarily found in countries that inherited English common law; however, in 2021, the UAE enacted the UAE 2020 Trust Law, which introduced an English-style trust arrangement into the UAE’s legal environment. This UAE law provides reassurance for those investing in the country that their assets will be legally protected with these structures.

UAE Foundation

Foundations perform similar roles to trusts and are deployed to protect assets and manage successions. A foundation is a legal entity more analogous to a company, whereas a trust is a legal relationship between the trustor, trustee, and beneficiary.

Unlike a trust, a foundation can hold the founder’s assets in the foundation’s name, offering asset protection measures. As the assets no longer belong to the founder, ring-fencing protection is placed between the founder and their assets against creditors or other family members. Foundations tend to be found in civil law countries.

Foundations in the UAE are available across various jurisdictions in the United Arab Emirates:

Trust and Foundation Comparison

Here is a brief chart that compares and contrasts trusts and foundations in the UAE.

Trust Foundation
Legal background Common Law Civil Law
Legal form Legal arrangement Incorporated entity
Existence In perpetuity Indefinitely
Asset ownership The beneficial ownership is vested in the beneficiaries.

A trustee has legal ownership.

 Owns its own assets
Jurisdictions ADGM, DIFC & UAE onshore ADGM, DIFC & RAK ICC
Control Vested in the trustee Vested in the council
Types of assets that can be put into an entity Any Any
Accountability The trustees ultimately answer to the beneficiary. The foundation council members answer to the foundation.

Want to know more about UAE Foundation and Trust?

If you wish to learn whether a foundation or trust is better for your needs, please speak to one of the best business consultants in the UAE for a free consultation.


No Comments

Post A Comment