Foreign Private Foundations

A foreign private foundation for asset protection is a legal entity combining the features of an individual trust and an offshore foreign trust.

A foreign private foundation has rights and obligations that may increase the value of its assets and transact in any currency it chooses. It does not have shareholders or members and can own bank accounts, securities, brokerage accounts, and real estate, among other assets. It may also own shares in any onshore or offshore business. It is created by declaration of its founder, an individual, who can also be its beneficiary.

The foreign private foundation has begun to find widespread favor as a sophisticated alternative for wealth protection and estate-planning strategy. Its structure originated in Liechtenstein, and it is currently found in Panama, the Netherlands Antilles, the Bahamas and other jurisdictions.

Advantages
A foreign private foundation acts somewhat like a trust and operates like a company. Its main benefits include:

• Asset protection from creditors and litigation. Assets cannot be used to satisfy the founders or the beneficiaries obligations, including debts or divorce judgments.
• Beneficiary names are not considered public record
• Anonymity is ensured
• No requirement to disclose beneficiaries, file annual reports or financial statements
• Business transactions in any currency
• Protectors/beneficiaries may be of any nationality
• Forced heirship rules from the founder’s or beneficiaries domicile may not apply

How it Works
A foreign private foundation is a legal entity established through a private or public document, by one or more individuals or corporate bodies called founders. The founder must allocate or endow assets for the foundation to be established. The foundation then becomes a corporate body by registering the Foundation Charter at the public registry.

The requirements for the Foundation Charter include:

• Name of the Foundation including the word "Foundation" in any language and domicile
• Initial capital - in any currency, above U.S. $10,000.00
• Duration of Foundation (perpetuity allowed)
• Name(s) and domicile(s) of the members of The Foundation Council that administers the assets
• Name and domicile of the Foundation’s Resident Agent (must reside in the jurisdiction). If in Panama, must be a lawyer in Panama
• Objectives and goals of the Foundation
• Method of beneficiary selection
• Clause ensuring the right to modify the Foundation Charter
• Manage of state assets liquidation in the event of dissolution

The Foundation Charter Assets do not require the appointment of beneficiaries and constitute a separate estate from the Founder’s personal assets for all legal purposes. Therefore, they cannot be used to satisfy the founder’s or beneficiary’s obligations.

Requirements for The Foundation Council
The members of the Foundation Council may be individual or corporate persons of any nationality. The names and addresses of these persons must be public record. Mercantil CTC may act as the Foundation Council with the following obligations:

• Manage the assets of the Foundation in accordance with the Foundation Charter or its regulations
• Fulfill the purposes of the Foundation, in all agreements, clauses and contracts in accordance with the foundation's purposes not contrary to law, ethics or public order
• Inform the beneficiaries of the Foundation about its economic status as provided by the Foundation Charter or its regulations
• Release to the beneficiaries of the Foundation their corresponding assets as stated in Foundation Charter or its regulations
• Carry acts or contracts that the Foundation, according to the Private Foundations Law and other applicable legal or regulatory provisions, may be permitted to engage into

Optional Foundation regulations may be prepared, including modifications to the Foundation Council requirements and responsibilities.

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