Introduction
Traditionally, wealthy individuals have been able to establish family trusts
and personal investment companies in offshore, tax-free centers, such as the
British Virgin Islands, the Cayman Islands, the Channel Islands and the
Bahamas. In doing so, they have been able to minimize their income and
estate tax burden, as well as providing asset protection and security for
future generations.
For many people used to civil law concepts, however, the notion of handing over ownership and control of personal assets to a third
party trustee is very hard to accept.
The Curaçao Private Foundation provides those clients with the ideal
alternative estate-planning vehicle.
What is a Private Foundation?
A Private Foundation is the civil law equivalent to the trust, offering
private individuals a flexible framework within which to make provision for
their families whilst at the same time protecting assets from future
creditors.
A Private Foundation has certain characteristics in common with a typical
company. It is, for instance, a separate legal entity established and
registered with the Chamber of Commerce in Curaçao . It also has a board of
directors responsible for its day-to-day management. As a separate legal
entity, it also owns its own assets, much like a company. Finally, neither
the Founder, nor the beneficiaries, nor any of the members of the board have
any personal liability for the debts or liabilities of the Private
Foundation.
Unlike a company, however, a Private Foundation does not have shareholders
or members. Instead, control and oversight of the Private Foundation's
activities are vested in its Founder. Again, unlike a company, a Private
Foundation can make provision for succession to assets belonging to the
Private Foundation.
Advantages of a Private Foundation
There are a number of advantages in using a Private Foundation:
Family provision
A client may have concerns about his children inheriting the bulk of his
estate at too young an age; or may have a disabled or disadvantaged child,
who may be unable to provide sufficiently for itself. A Private Foundation
is the ideal structure to preserve the capital value of the Founder's
assets, whilst making adequate provision for his children.
Continuity after death
On his or her death, a client's estate will be tied up in slow, expensive and bureaucratic probate procedures in any number of
jurisdictions worldwide, which could deny dependents access to assets and may even be damaging to the deceased's various business
interests. By transferring assets into a Private Foundation, the founder can provide for continuity of ownership after his death
and a smooth transition of management with the minimum of disruption, expense and aggravation.
Tax benefits
In many cases, it is possible to use a Private Foundation to minimize the
Founder's and the beneficiaries' income or estate tax burden in their own
places of residence. Private Foundations are also exempted from any form of
taxation in Curaçao .
Asset protection
When a Private Foundation is established, the Founder will transfer
ownership of his intended assets into the name of the private foundation,
after which the assets no longer form part of the Founder's estate. Provided
assets were not transferred in order to avoid known or anticipated
creditors, those assets will be legitimately protected from later creditors
of the Founder.
Founder's Rights
A Private Foundation is established by deed executed by the Founder before a
notary in Curaçao . Upon establishment, a Founder appoints the board of
directors, which, in turn, can appoint the beneficiaries of the Private
Foundation.
Typically, the deed establishing the Foundation also contains specific Founder's rights, including any right to the enjoyment of the Private
Foundation's assets during his/her lifetime, and any power the Founder wishes to retain over the appointment and removal of the board of
directors. The extent of the Founder's controls will be dependent on the Founder's tax situation and specific wishes.
All of the Founder's rights are transferable.
In addition, the Founder can provide the board of directors with a letter of wishes with respect to the appointment of beneficiaries
and giving guidance on how the assets transferred to the Foundation should be managed. This can be done either in the form of a written
request or by appointing someone to act as a supervisory board member.
Board of Directors and Supervisory Board
The Board of Directors is responsible for the management of the Private Foundation in accordance with the purposes specified in the Foundation's
constitution.
Although not strictly required, PMP recommends that a local, Curaçao
resident, managing director is appointed to serve on the board of directors.
Additional directors can be appointed. The selection of the board of
directors will be very important. The Founder should ensure that the
directors are capable of representing the best interests of all the
beneficiaries, and that the composition of the board is not biased toward
one or more specific beneficiaries or class of beneficiaries.
In appropriate cases, family friends or professional advisors can be appointed to sit on the board as supervisory directors to oversee the
activities of the Board of Directors on behalf of the Founder.
How do I incorporate a Private Foundation?
The first stage is to contact PMP (Curaçao) N.V. and complete our Foundation
questionnaire. Before the structure is set-up, PMP together with the
Founder's preferred qualified tax advisors or lawyers, can assist in the
drafting of the Private Foundation and can act as the initial Founder for
the purposes of establishing the structure locally. Once established, we can
transfer our Founder's rights across to the client. The incorporation
process takes as little as two days to complete.
Contact PMP (Curaçao) N.V.
If you are interested in establishing a Curaçao private foundation, or
would like further information, please contact our offices via email
(info@pmpgroup.biz) or call us at (+599) 9 737 0754.
Disclaimer:
The information contained in this memorandum is of a general nature only and should not be construed as legal or tax advice.
Readers should obtain appropriate professional advice before setting up any structure. If required, PMP can refer readers to a panel
of reputable tax- and legal advisory firms.
Private Foundation