7 benefits of a UAE foundation

Leevyn Isabel details the key benefits of establishing a foundation in the UAE, explaining how they provide both expats and UAE nationals with a local solution for asset protection, wealth structuring and succession planning.

Although only first introduced to the UAE in 2017, foundations have become an integral part of the UAE's private wealth and wealth structuring landscape and are now present in three of the UAE's free zones (DIFC, ADGM, RAKICC).

What is a foundation?

A foundation is an independent legal entity, they provide the founder with an opportunity to consolidate their wealth in one vehicle at the same time as segregating their personal wealth from their commercial interests that can support wealth structuring by enabling a founder to consolidate wealth within one vehicle while separating personal wealth from commercial interests(although these can also be owned by a foundation) through the transfer of assets to the foundation which owns the assets in its name.

With no shareholders, the foundation is an "orphan" entity and both it, and the assets it holds, are managed in accordance with the foundation's charter in support of a purpose or for the benefit of beneficiaries (often members of the same family). This can make a UAE foundation an effective vehicle for succession planning, family governance and the long-term transfer of wealth.

What are the benefits of a foundation?

At Ocorian, we are seeing a variety of UAE foundation structures being implemented in the UAE to hold trading companies, real estate and liquid investments. We help clients establish and maintain their UAE foundations so they can make the most of the benefits that the foundation vehicle provides as part of a broader wealth structuring and succession planning strategy. These include:

1. Asset protection - The foundation's assets do not belong to the founder and provided certain conditions are met, are not readily accessible to creditors, governments or other family members.

2. Privacy - The beneficiaries of a foundation are private allowing family wealth to be managed more discreetly. This can provide a number of advantages, including:

• reducing the risk of claims or judicial actions from third parties seeking a monetary settlement from the founder or their family;
• improving bargaining power when negotiating business deals or acquiring assets;
• lowering the risk of being targeted by unscrupulous individuals seeking access to family wealth; and
• reducing the likelihood of uncomfortable discussions around pre-nuptial arrangements for the founder or heirs.

3. Flexibility – By separating legal ownership from beneficial ownership, a foundation can help families support their inter-generational legacy planning and wealth protection objectives, particularly where the family is internationally mobile with assets in multiple jurisdictions.  

4. Effective succession planning - Foundations provide assurance that the assets (or their benefits) will be distributed in line with the wishes of the founder under the terms of the foundation, irrespective of succession laws. Even where enforceable wills are possible, they take effect only on death and do not protect assets against bankruptcy, incapacitation, imprisonment and divorce. A foundation can help address these risks while also avoiding lengthy probate issues and supporting greater continuity.

5. Improves family governance - Foundations provide an effective corporate governance framework, similar to a company or single-family office, allowing wealth to be managed in a more structured and professional manner to benefit the founder and their family.

6. Enables philanthropic giving - A foundation can evolve alongside the founder's vision and values and can be used to support causes that matter to the family, including charitable or philanthropic initiatives through ongoing donations.

7. Establishes a legacy - Through a foundation, the founder's goals and long-term intentions can continue in perpetuity, helping preserve both family wealth and family purpose for future generations.

How can Ocorian help?

Regardless of the complexity of a UAE foundation's structure, we enable our clients to pass on the benefits of their assets in full accordance with their wishes while supporting long-term wealth structuring, succession planning and legacy preservation in accordance with all legal and regulatory requirements.

Get in touch with our team to discuss how we can support your private wealth plans through tailored private foundation services in the UAE.