Understanding foundations and their role in the Cayman Islands

Thinking about the best way to look after your wealth, plan for your family's future or even support a cause you care about? Foundations are a really useful option to consider. 

Simona Watkis, Head of Private Client Cayman, explains what foundations are all about. We'll break down how they work, how they're different from trusts, the key benefits they offer and what makes them unique in different parts of the world. We'll also explore why choosing a foundation in a place like the Cayman Islands can be a smart move for many.

What is a foundation?

A foundation is a legal entity typically created to hold assets for a specific purpose, such as family wealth preservation, succession planning, charitable activities or asset protection. Unlike trusts, foundations are structured similarly to companies—they have their own legal personality, allowing them to enter contracts, own assets, and sue or be sued.

How does a foundation differ from a trust?

• Legal personality: Foundations have separate legal identities, unlike trusts, which rely on trustees to hold assets.
• Control and governance: Foundations operate under a council that governs assets based on a charter and rules, whereas trusts rely on trustees governed by trust deeds.
• Ownership of assets: Foundations own assets directly, whereas in trusts, assets are held by trustees on behalf of beneficiaries.
• Beneficiaries vs. purposes: Foundations can exist without beneficiaries and purely for specific purposes, while trusts typically must have identifiable beneficiaries or specific purposes.

What are the key benefits of foundations?

• Asset protection: Foundations offer enhanced asset protection as assets are legally separate from founders and beneficiaries.
• Flexibility and control: Founders can retain significant control by defining the rules and governance in the foundation’s charter.
• Privacy: Many jurisdictions, including the Cayman Islands, provide confidentiality protections, safeguarding the details of foundations.
• Perpetuity: Foundations can exist indefinitely, providing stability across generations for family wealth or long-term charitable objectives.

How do foundations differ across jurisdictions?

While the core concept remains consistent, foundations can vary significantly depending on jurisdiction:

• Cayman Islands: Known for robust privacy protections, flexibility in structure, and suitability for international families and businesses.
• European Jurisdictions (e.g., Liechtenstein): Typically emphasise clear governance rules, strict regulatory oversight, and suitability for structured family wealth management.
• Civil Law Jurisdictions (e.g., Panama): Foundations in these jurisdictions offer straightforward structures ideal for asset protection and international transactions.

Why choose a Cayman foundation?

Choosing a Cayman foundation offers substantial benefits:

• Strong, clear, and flexible legislation tailored for international clients.
• Excellent reputation for asset protection and wealth preservation.
• Regulatory framework designed to accommodate complex family and business needs.
• High level of confidentiality respected internationally.
   

How can Ocorian help?

At Ocorian Cayman Trust, we specialise in structuring foundations and trusts tailored to your unique needs, ensuring effective asset protection, clear governance and long-term wealth management.
 

Contact our team today to find out more.