As the number and value of privately held assets increase, so does the need for their proper structuring and protection. Private asset structuring typically seeks to achieve the following objectives:
When designing an ownership structure, it is important to consider the type of assets, their geographic location, value and intended purpose, as well as a number of other factors. Holding companies, trusts, and family foundations are commonly used for the international structuring of private assets.
One of the tools available for structuring private assets is a family foundation established in the Principality of Liechtenstein. A foundation has legal personality and combines certain characteristics of a company and a trust. However, unlike a company, it has no shareholders and exists as an independent legal entity capable of holding rights and assuming obligations, as well as maintaining bank accounts and owning property in its own name.
This also distinguishes a foundation from a trust, under which legal title to the assets transferred into trust is generally held by the trustee for the benefit of the beneficiaries. The trustee may therefore hold and administer trust assets, maintain bank accounts, issue powers of attorney, and act as a claimant or defendant in legal proceedings in its capacity as trustee.
A foundation constitutes a separate pool of assets dedicated to a specific purpose and endowed with legal personality. When establishing a foundation, the founder contributes assets to the foundation, which are subsequently administered by the foundation council, acting as its governing body, in accordance with the foundation documents and for the benefit of the designated beneficiaries.
Once assets have been validly contributed to the foundation, the founder generally ceases to own them personally. The foundation itself becomes the owner of the contributed assets, while the foundation council administers and disposes of those assets on behalf of the foundation and in accordance with its governing documents. The beneficiaries, in turn, do not generally acquire ownership of or direct control over the foundation's assets solely by virtue of their beneficiary status, but may have rights to receive distributions or other benefits from the foundation.
This separation between the founder, the foundation, its governing body, and its beneficiaries can provide an effective mechanism for the long-term preservation and protection of family assets. Since properly contributed assets are owned by the foundation rather than personally by the founder or beneficiaries, they are generally separated from their personal estates and liabilities, subject to applicable insolvency, creditor protection, clawback, forced heirship, and other mandatory rules.
In addition to financial assets, a foundation may hold various other types of property, including company shares, movable and immovable property, jewelry, and works of art. Liechtenstein law also provides a significant degree of privacy in relation to family foundations. Depending on the type and structure of the foundation, certain information is not publicly accessible, allowing family wealth structures to maintain an appropriate degree of confidentiality while remaining subject to applicable disclosure, AML, tax reporting, and beneficial ownership requirements.
Foundations may be established for various purposes, but private-benefit foundations are generally not intended to conduct commercial activities as their primary purpose. This does not prevent a foundation from holding shares or other interests in companies that conduct commercial activities. Accordingly, operating businesses may form part of a broader ownership structure in which the foundation acts as the ultimate holding vehicle.
Depending on its structure and activities, a Liechtenstein foundation may also qualify as a Private Asset Structure (Privatvermögensstruktur, PVS) for tax purposes. The PVS regime provides preferential tax treatment for qualifying entities that meet the applicable statutory conditions and do not engage in prohibited commercial activities. A qualifying PVS is generally subject to the minimum annual corporate income tax of CHF 1,800 rather than ordinary taxation based on its income. This can significantly reduce the tax burden at the level of the foundation, although the overall tax consequences for the founder and beneficiaries will depend on their respective jurisdictions of tax residence and the nature of the assets and distributions involved.
A family foundation can be used not only for the management and protection of existing assets but also as an effective succession planning tool. It may provide a framework for the long-term preservation and transfer of family wealth across generations while establishing clear rules for the management and distribution of assets.
Liechtenstein law provides considerable flexibility in structuring family foundations and allows their governance arrangements to be tailored to the founder's objectives within the limits established by law. The applicable statutory framework establishes the general legal requirements, while the foundation documents determine the specific governance arrangements, beneficiary rights, distribution mechanisms, and other aspects of the foundation's operation.
Private assets may be exposed to a variety of legal, commercial, and succession-related risks regardless of their geographic location. A properly designed ownership structure can help mitigate these risks and provide an effective framework for the long-term management and preservation of family wealth.
The Solex Group team will be glad to assist you in designing an appropriate asset-holding structure and provide ongoing legal support for its operation.
Keywords: asset protection, family foundation, Liechtenstein, trust, wealth structuring, succession planning.
- establishing preventive mechanisms to protect assets against loss or unauthorized disposal;
- ensuring an appropriate level of ownership confidentiality;
- optimizing the tax treatment of assets and the income generated from them.
When designing an ownership structure, it is important to consider the type of assets, their geographic location, value and intended purpose, as well as a number of other factors. Holding companies, trusts, and family foundations are commonly used for the international structuring of private assets.
One of the tools available for structuring private assets is a family foundation established in the Principality of Liechtenstein. A foundation has legal personality and combines certain characteristics of a company and a trust. However, unlike a company, it has no shareholders and exists as an independent legal entity capable of holding rights and assuming obligations, as well as maintaining bank accounts and owning property in its own name.
This also distinguishes a foundation from a trust, under which legal title to the assets transferred into trust is generally held by the trustee for the benefit of the beneficiaries. The trustee may therefore hold and administer trust assets, maintain bank accounts, issue powers of attorney, and act as a claimant or defendant in legal proceedings in its capacity as trustee.
A foundation constitutes a separate pool of assets dedicated to a specific purpose and endowed with legal personality. When establishing a foundation, the founder contributes assets to the foundation, which are subsequently administered by the foundation council, acting as its governing body, in accordance with the foundation documents and for the benefit of the designated beneficiaries.
Once assets have been validly contributed to the foundation, the founder generally ceases to own them personally. The foundation itself becomes the owner of the contributed assets, while the foundation council administers and disposes of those assets on behalf of the foundation and in accordance with its governing documents. The beneficiaries, in turn, do not generally acquire ownership of or direct control over the foundation's assets solely by virtue of their beneficiary status, but may have rights to receive distributions or other benefits from the foundation.
This separation between the founder, the foundation, its governing body, and its beneficiaries can provide an effective mechanism for the long-term preservation and protection of family assets. Since properly contributed assets are owned by the foundation rather than personally by the founder or beneficiaries, they are generally separated from their personal estates and liabilities, subject to applicable insolvency, creditor protection, clawback, forced heirship, and other mandatory rules.
In addition to financial assets, a foundation may hold various other types of property, including company shares, movable and immovable property, jewelry, and works of art. Liechtenstein law also provides a significant degree of privacy in relation to family foundations. Depending on the type and structure of the foundation, certain information is not publicly accessible, allowing family wealth structures to maintain an appropriate degree of confidentiality while remaining subject to applicable disclosure, AML, tax reporting, and beneficial ownership requirements.
Foundations may be established for various purposes, but private-benefit foundations are generally not intended to conduct commercial activities as their primary purpose. This does not prevent a foundation from holding shares or other interests in companies that conduct commercial activities. Accordingly, operating businesses may form part of a broader ownership structure in which the foundation acts as the ultimate holding vehicle.
Depending on its structure and activities, a Liechtenstein foundation may also qualify as a Private Asset Structure (Privatvermögensstruktur, PVS) for tax purposes. The PVS regime provides preferential tax treatment for qualifying entities that meet the applicable statutory conditions and do not engage in prohibited commercial activities. A qualifying PVS is generally subject to the minimum annual corporate income tax of CHF 1,800 rather than ordinary taxation based on its income. This can significantly reduce the tax burden at the level of the foundation, although the overall tax consequences for the founder and beneficiaries will depend on their respective jurisdictions of tax residence and the nature of the assets and distributions involved.
A family foundation can be used not only for the management and protection of existing assets but also as an effective succession planning tool. It may provide a framework for the long-term preservation and transfer of family wealth across generations while establishing clear rules for the management and distribution of assets.
Liechtenstein law provides considerable flexibility in structuring family foundations and allows their governance arrangements to be tailored to the founder's objectives within the limits established by law. The applicable statutory framework establishes the general legal requirements, while the foundation documents determine the specific governance arrangements, beneficiary rights, distribution mechanisms, and other aspects of the foundation's operation.
Private assets may be exposed to a variety of legal, commercial, and succession-related risks regardless of their geographic location. A properly designed ownership structure can help mitigate these risks and provide an effective framework for the long-term management and preservation of family wealth.
The Solex Group team will be glad to assist you in designing an appropriate asset-holding structure and provide ongoing legal support for its operation.
Keywords: asset protection, family foundation, Liechtenstein, trust, wealth structuring, succession planning.