Why Labuan Foundation Better Than Trust on Features and Set Up?
There are five (5) distinctive features between Labuan Trust and Labuan Foundation to answer why Labuan Foundation better than Trust set up. With CRS reporting requirement for ownership and beneficiaries for both vehicles, it is more beneficial to have your very own Foundation which you have full control in management and all affairs, especially on your investments.
Labuan Private Foundation is the ultimate vehicle for your personal wealth preservation for long lasting legacy where you can 100% full control, not only giving you great savings, plus it will also help you to minimize risk of mismanagement!
Maintenance Cost Comparison Between A Trust and Labuan Foundation
The operating cost comparison between Trust and Foundation has a big distinction in a long run! Both vehicles have to the assets transferred to legalise it. The Trustee management fee will grow tandem with the amount of your wealth size. With Labuan Foundation, you are in full control how your assets to be managed, you may do it on own or hired personnel work in your Foundation to assist you to manage or you can extend to form a Family Office to include your family members or trusted persons to be part of your team in the office.
Labuan Private Foundation truly a vehicle which provides great flexibility tandem with your wealth size expand and best of all it the operations cost can be kept low! Foundation generally has annual fixed cost plus small fee payable to Secretary to make changes or services upon your request as opposed to a incremental percentage which depends on your wealth size charged by Trustee for managing your wealth on your behalf.
Why a Foundation is more superior to a Trust based on only thse two key points?
Separate Legal entity
Like a Company, a Foundation is a separate legal entity in that it hold assets in its own name. It can also sue and be sued in its own name. The foundation owned the assets once they are endowed to it.
Foundation Council manages a Foundation in accordance with the terms of the Foundation’s constituent documents, the Charter and Articles, and possibly, a Letter of Wishes by the Founder. Council members is much like a Company’s Board of Directors.
Trust is not a separate legal entity as it is based on “relationship” as the Trust assets are held in the Trustee’s (the person who holds the Trust property on trust) name on behalf of the Beneficiary (the person for whose benefit the Trust property is held).
Trustee is appointed by settlor (owner of the assets) to administer the Trust in accordance to the Trust Deed, the Trustee is subjected to strict fiduciary duties in the performance of his trusteeship. Once the assets transferred to Trustee, the ownership of the Trust assets is thus split between the Trustee and the Beneficiary, with the Trustee having the legal ownership and the Beneficiary holding the equitable ownership. This split ownership presents uncertainty in the event of any possible future attack by any kind including by Beneficiary.
Due to split ownership between Trustee and beneficiaries, many Settlors are uncomfortable with this split ownership and the fact that their assets are held in a third party’s name whose strict fiduciary duties may lead to uncertainty or vulnerability to a Trust structure arise from conflict of interests between the Settlor and the Beneficiary in the event of a dispute in the form of an attack on the sanctity of the Trust structure. In this way the Settlor may feel that he is not in control of the Trust since the assets already transferred to the Trustee’s name.
The Foundation provides long lasting legal structure as it does not have any shareholders or owners. Therefore, its existence can continue uninterrupted or possibly in perpetuity as it is not affected by any changes to the ownership even the founders passed away.
For a start, a foundation can be structured to have a only a few personnel and expandable to a full fledged family office (FO) for generations to take over. This formed legacy of its own.
The flexibility gives founder a peace of mind, need not to worry of the fiduciary duties of a trustee which is can be uncertain.
Comparison Of Will, Trust and Foundation:
|A legal declaration document||Arrangement with Trustee||Legal entity|
|For estate planning||For assets, protection,estate and tax planning||For assets protection,estate and tax planing and succession planning|
|Effective after death||After Trust document created||Effective and the foundation is registered|
|Low fee (fixed)||Varies depends on assets value||Relative low (fixed)|
|No creditor proof||Yes, after 5 years||Yes, after 2 years|
|Upon death, execute by appointed executor||Managed by Trustee and settlor has minimal power||Founder has reserved right and control over the management the Foundation|
|Need to go through probate||No need to go though probate will be settled by Trustee, according to the wishes of the settlor.||No need to go though probate. Foundation can be dissolved and distribute the assets beneficiaries or continue the legacy.|
Feel free to contact us for more information on Labuan Foundation how it can fully benefit you and your family!