05 Jan Comparison Between Trust and Foundation
This article compares two mechanisms for managing wealth in the UAE: Trusts and Foundations.
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.
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:
- Abu Dhabi Global Market under the Foundations Regulations 2017
- Dubai International Financial Centre under the Foundations Law DIFC Law No. 3 of 2018
- RAK International Corporate Centre under the RAK ICC Foundations Regulations 2019
Trust and Foundation Comparison
Here is a brief chart that compares and contrasts trusts and foundations in the UAE.
|The beneficial ownership is vested in the beneficiaries.
A trustee has legal ownership.
|Owns its own assets
|ADGM, DIFC & UAE onshore
|ADGM, DIFC & RAK ICC
|Vested in the trustee
|Vested in the council
|Types of assets that can be put into an entity
|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.