Foundations have existed in Dubai since 2018 and are an attractive alternative to Trusts in terms of wealth management or protecting assets.
George and Betty Williams established the Williams Foundation in the DIFC, Dubai.
What is a Foundation ?
There are three parties to a Foundation – the Founder, Council and Beneficiaries.
A Foundation is an independent legal entity but has no shareholders, members or partners. It can however, own assets in its own name, similar to a company.
The Founder establishes the Foundation and provides the initial assets. George and Betty are the Founders and transfer their assets to the Williams Foundation.
The Council administers the Foundation’s assets in accordance with its constitution. George decided to sit alongside a professional on the Council.
George, Betty and their children are the Beneficiaries of the Williams Foundation. The Council can add or remove Beneficiaries at any time.
Uses for a Foundation
Whilst the Foundation could be used as a vehicle for various commercial transactions (such as off balance-sheet holding of funds, or securitisation or as a holding vehicle), George and Betty don’t require anything so fancy and will use it simply for succession planning. The Williams Foundation can hold their properties located both within and outside Dubai together with their investments and the shares of their family business. Whilst George and Betty are non-Muslims, their friends also have a Foundation, which is managed according to Sharia principals.
Like a Trust, after George and Betty transfer their assets to the Williams Foundation, those assets cease to form part of their own estates and become assets of the Foundation. This transfer is called an endowment. Further endowments could be made at any time during George and Betty’s lifetime.
After the endowment has been completed, those assets are managed by the Council for the benefit of the Beneficiaries. Whilst the Williams Foundation has George, Betty and their children as Beneficiaries, it would be possible to add a company or any other person as a Beneficiary.
The Williams Foundation can purchase and register property both in Dubai and offshore.
The Dubai Land Department (DLD) charges a standard fee of 4% on transfers. However, because George and Betty are the registered owners of their property and are the Founders of the Williams Foundation, the transfer of their property could be regarded as a gifting transaction – which means George and Betty’s transfer could benefit from a reduced transfer
fee of 0.125%, which George and Betty are very happy with.
Benefits of a Foundation
Asset protection – George and Betty no longer own the assets, which could now be protected against claims by creditors, governments or other family members.
Privacy - The beneficiaries of the Williams Foundation are private.
Flexibility - A Foundation enables families like George and Betty, with assets in multiple jurisdictions, to facilitate their inter-generational legacy planning and wealth protection objectives.
Effective succession planning –The Williams Foundation provides an assurance that George & Betty’s assets will be distributed as per their wishes. The Williams Foundation can continue in perpetuity if required.
Improves family governance – The Williams Foundation can provide an effective corporate governance framework to manage their family business long after George and Betty retire.
Solicitor, Shallon CSP