Asset Protection And Control: Differences Between A Nevis Multiform Foundation And A Trust

Choosing the right jurisdiction for asset protection and control of your estate is an important decision, but what about the structure? When considering such queries for our financial planning, it is imperative that we understand the difference between trust and foundation so we can make our choice accordingly.

We've consulted with our experts about how to set up a trust for your business, about the characteristics of a trust, what makes them strong and what makes them weak, and, finally, about its elements and players. In that conversation, we've touched upon the trust and foundation.

Differences Between Trust And Foundation For Asset Protection And Control

Trust And Foundation: The Essence Lies In Ownership

The principle of asset protection is separating those assets from your ownership, and, to do this, it's important to count on structures like a trust and foundation. However, not only do these two have their differences, but they also have separate features depending on the jurisdiction.

Today, we'll talk about the island of Nevis, which is part of the Federation of Saint Kitts and Nevis. Being totally straight, we don’t usually hear about Nevis often except when it comes to business or asset protection and control. Its LLC structure is one of the most renowned in the world when it comes to privacy and efficiency, offering solutions that run head-to-head with Delaware or Florida.

In summary, if you're asking yourself how to set up a trust for your business, Nevis should be among your top 5, if not directly in the first place.

Its strongest advantage is that it only recognizes local court rulings, thus discouraging unfair claims and ungrounded plaints. To put it simply, we can say that, if the trust is properly stipulated, it is truly unbreachable. 

Asset Protection: Trust Or Charitable Foundation?

Now, let's analyze these structures under the following categories:

Trust And Foundation: Purpose

Purpose may be the main difference between trust and foundation. A multiform foundation in Nevis has special characteristics and is ideal when the family wants to use the assets. A charitable foundation, for example, can collect donations, create institutions (like a church), or participate in various activities.

On the other hand, the trust is solely about asset protection. The main goal in this case is to separate the assets from their owner, and from that moment, the owner has absolutely no control. The reader should pay special attention to this point, as this could significantly weaken the trust if not properly addressed. 

Asset Protection And Control: The Governing Law

In general, foundations are more common in civil law or civil law countries, while trusts were born from common law. 

Control Of The Assets And Designation of Beneficiaries

In Nevis, the founder of a foundation can manage the assets, which is exactly the opposite of what can be done in a trust. The settler of a trust loses complete control, hence the structure’s protective capabilities. When it comes to beneficiaries, a trust requires them to be thoroughly stipulated, while in a charitable foundation, they can be broader, like the members of the community or a group of people. This is why a charitable foundation is ideal for philanthropic activities. 

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Trust And Foundation: Asset Treatment

Here we find a key difference between the two structures, taking us back to point number one: purpose. While a foundation can exist without assets, a trust can't. A foundation is an entity that owns certain property; on the other hand, a trust is an agreement in which you trust your assets to a third party. This is why a trust cannot exist without assets, because it wouldn't be a trust. 

Ask Yourself: What Is Your Goal?

When asking yourself how to set up a trust for your business or your family's wealth, think about the goal. If you want to protect the assets for some reason, like establishing a charitable foundation, then this may be the right way to go. On the other hand, you should establish a trust if your main goal is to separate assets from the original owner. If you choose the latter, keep in mind that they will be used only as established in the trust deed and on behalf of the beneficiaries.

Disclaimer: this article is published for general informational purposes only; hence, this article doesn't constitute legal advice. Before establishing a trust or a foundation, make sure to consult with certified professionals. 

Charitable Foundation Or Ownership Detachment?

Choosing both a trust and foundation will help you protect the assets. The only difference lies in the purpose and how you want to use it. A charitable foundation will be more flexible with less need to establish the exact beneficiaries. On the opposite corner, we find the trust whose main purpose is to separate ownership and relinquish control. The latter should be chosen if protection is the main concern.

At Mundo, we can help you open a trust and foundation in Nevis, as well as companies in Panama and many other jurisdictions. We offer a wide array of real estate in Panama City and several banking options across the world. We manage everything with our in-house team, relying on trusted partners and agents that have been with us consistently. If you're interested in such services, please do contact us. Our experts will be happy to receive your message.

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