Trust Services & Foundation Establishment in the UAE

In the UAE, trust services and foundation incorporation are gradually emerging as critical sectors for wealth and succession management. Although both trusts and foundations have similar uses, they are different in design and utility. These entities help individuals and companies to protect property, minimize taxes, and make provisions for the future. This article aims to identify the nature and purpose of trusts and foundations in the UAE, the differences between the two, the advantages of each, and the procedures for their formation.

Understanding Trusts and Foundations

The term trusts and foundations are simply a legal manner used by individuals or corporations which in common is used to shield property as well as manage or determine the administration of these properties.

• Trust: A trust is a legal relationship between at least three parties; the settlor establishes a trust and transmits property to a trustee, who is responsible for holding the property for the benefit of the beneficiaries who will receive the profit from the property. They include the management of assets, estate, and distributions.
• Foundation: A foundation is an organization of its own that has characteristics of both corporations and trusts and it is a separate legal entity. As compared to trusts, foundations in the UAE are legal persons allowed to own property, enter contractual relationships and sue and be sued in their names. A foundation is governed by a foundation council that controls the foundation’s property for the beneficiaries. These foundations can be long-term saving vehicles, personal and corporate asset protection vehicles.

Benefits of Setting Up Trusts and Foundations in the UAE

Establishing a trust or foundation in the UAE offers various benefits, including:

1. Asset Protection: Like any other trust, asset trusts and foundations shield the assets from creditors, litigation, and any other legal claims. The assets used in these entities are different from the assets of the founder or settlor, thus these offer more protection from external threats.
2. Tax Efficiency: It is important to note that structured trusts and foundations may offer usual tax benefits. The structures provided by UAE are quite effective for various entities who intend to develop an intelligent wealth management plan.
3. Succession and Legacy Planning: Through trusts and foundations, those who create them are able to plan how the wealth that they hold will be transferred from one generation to another as they desire. This systematic process also helps curb family-related issues concerning the management and disbursing of wealth.
4. Privacy: By establishing a trust or a foundation in UAE the entities can protect their properties and assets and ensure privacy whereby the assets would be shielded from any legal issues such as bankruptcy or any other cases where there is a risk of assets being seized.

Establishing a Trust in the UAE

Setting up a trust in the UAE involves several crucial steps:

1. Drafting a Trust Deed: Asset management and distribution are described in the trust deed with the rules governing the institution. It holds the legal relationship between the settlor, the trustee as well as the beneficiaries and sets out the conditions governing the trust.
2. Appointing a Trustee: According to the trust deed, it is the legal right of the trustees to manage the trust’s assets. An experienced trustee can help see that the trust is run fairly and, in the manner, prescribed by the founder of the trust.
3. Asset Transfer: The settlor conveys property (money, stocks, property, etc.) to the trust. This transfer is required to make the trust legal; it also ensures that any assets that are to be held and managed belong to the trustee.
4. Listing Beneficiaries: A beneficiary of a trust has an entitlement to receive income from the said trust or its trust property. The trusts, upon creation, hold certain terms for the distribution of the funds to the beneficiaries

Establishing a Foundation in the UAE

Setting up a foundation in the UAE requires specific legal steps:

1. Devising a Foundation Charter: The document provides the foundation charter that is also filed at the public register for registration. This explains the purpose and scope of the foundation, management, and administration, coupled with investment policies regarding the assets of the foundation.
2. Appointing a Foundation Council: The foundation council is responsible for the effective administration of the total foundation funds and coordination of activities. The council may consist of some members related to the founder’s vision or some companies that may be affiliated with the founder along with the founder.
3. Appointing a guardian: The founder must appoint an entity which might be a legal body or a human who would oversee the operations of the council and accept or reject the decisions taken. The role of the guardian would be to ensure that the appointed council is performing the responsibilities in line with the objectives of the foundation
4. Registered Office Requirement: The law requires foundations to have a legal base in the UAE as that is the way to receive legal non-negotiable recognition, as well as to meet operational requirements.

Key Differences Between Trusts and Foundations

• Legal Status:  A trust is a legal relationship between at least three parties the settlor who establishes a trust and transmits property to a trustee; whereas a foundation is an organization of its own that has characteristics of both corporations and trusts.
• Management Structure: Trusts are managed by trustees, while foundations are governed by a council.
• Privacy: Trusts are private and not compulsorily bound to be declared public. Foundations are technically public organizations but the personal information of the individuals remains confidential.
• Flexibility and stability: Trusts provide flexibility towards discretionary asset distribution, while foundations give long-term stability and legal independence.

Conclusion

Trusts and foundations are important asset protection, tax management, and succession planning vehicles in the UAE. From a family trust to a corporate foundation, these structures make asset security systematic, tax reduction possible, and asset transfer easy. Legacy generation due to certain values and long-term financial goals is achieved through professional advice in creating an enduring legacy. A trust or foundation comes as a good creation for anyone seeking to perpetuate, manage, and accumulate their capital in the interest of future generations.

CDA: Your business set up assistance in UAE

CDA’s well trained professional have been providing multiple business set up in Dubai and related services to the entities in UAE with utmost quality. We are known for providing the personalized services to the client as per their requirements and needs. If you are planning to set up a trust or a foundation in UAE our experts are on standby to assist you in getting all the formalities and establish your foundation or trust. We can assist you in getting the documents sorted and getting approvals from the authorities in UAE. Our experts will ensure that your establishments and assets are protected under the trust or foundation whereby providing privacy and ensuring compliance 

To explore more about our services, contact the team CDA now