Historical Context

The trust, a centuries-old common law construct, has long been the cornerstone of international estate planning. Modern offshore trust laws, developed primarily in the past century, cemented its role as the predominant choice for families seeking to manage and transfer wealth. In contrast, foundations emerged more recently in private, non-charitable applications, gaining traction in Liechtenstein before expanding to other jurisdictions such as the Channel Islands. These regions introduced innovative regulations that positioned the foundation as a viable alternative to trusts, particularly in succession planning.

Key Distinctions

The choice between a trust and a foundation often depends on jurisdiction and asset location, as well as the residence of settlors and beneficiaries. Trusts, rooted in common law, are not recognized in civil law jurisdictions, where foundations are more widely accepted. Foundations are often described as a hybrid between a trust and a holding company, blending the structural features of both.

1. Control and Governance

   • Trusts: Ultimate control typically resides with a third-party trustee, unless a private trust company is established—an option that significantly increases costs. Trusts, however, can incorporate highly customized controls tailored to a family’s unique needs.

   • Foundations: Governed by a board of councilors, which can include the founder or their representative, foundations provide a centralized structure that enhances direct control over decision-making processes.

2. Cost Considerations
   Both structures incur comparable costs in well-regulated jurisdictions. However, the establishment of bespoke governance mechanisms, such as private trust companies, can lead to higher expenses for trusts.

Suitability and Application

For families seeking to optimize succession planning across international boundaries, the decision between a trust and a foundation depends on the legal and cultural environment, asset types, and desired governance structure. Trusts remain the more established option, while foundations offer a compelling alternative for those operating within civil law frameworks or prioritizing governance simplicity.

For more information or tailored guidance on trusts and foundations, please contact your relationship manager.