Protecting your wealth and estate with an Anguilla Foundation

by | Sep 30, 2014

The History of the Anguilla Foundation

The Anguilla Foundation is a versatile platform for Estate Planning and Asset Protection. The Anguilla Foundation finds its roots in the common law trust and, over the centuries, particularly thanks to the Liechtenstein, Austria and Panama models, has evolved into a unique wealth preservation vehicle, combining the benefits of both a trust and a company.

An Anguilla Foundation is distinguishable from a trust, in that it has the rights and duties exercisable by the trustees of a trust (but not by the trust itself) and is capable in its own right of transacting business and of entering into legally binding contracts. It has separate legal personality, the ability to hold assets in its own name and the ability to contract with third parties and to sue and be sued in its own name. But instead of having shareholders, as a company, a foundation holds the assets for the benefit of beneficiaries or purposes.

General Principles

A foundation is administered for the benefit of its beneficiaries and/or purposes in accordance with contractual principles. Such principles are more familiar in Civil Law jurisdictions, where people find it difficult to understand the concept of equitable rights and fiduciary obligations, inherent in the concept of trusts

In contrast to the position under an Anguilla trust, no beneficiary, object or purpose of an Anguilla Foundation has any right “in specie” against the property endowment of the foundation. Subject to the terms of the foundation’s declaration of establishment or by-laws, any assets of the foundation available for distribution to a beneficiary are not capable of being alienated or passed by bankruptcy, insolvency or liquidation, or liable to be seized, sold, attached, or otherwise taken in execution by process of law. Nevertheless, any beneficiary of an Anguilla Foundation may enforce the due administration of the foundation in accordance with the terms of its declaration of establishment and by-laws.

An Anguilla Foundation is irrevocable and not subject to any perpetuity periods. The foundation council may, however, decide to dissolve the foundation, if its purpose can no longer be realised or if there are no assets left in the foundation.

Pros and Cons

The concept of a foundation with separate legal personality is well understood in Civil Law jurisdictions. The main objective of The Anguilla Foundation Act is to enable Anguilla to provide a flexible vehicle for use by clients, especially those based in civil law countries, by offering a modern, lean and workable estate planning concept, with which they are much more familiar than they are with the Common Law trust concept.

Added to that, some of the unique features offered by the Anguilla legislation set the Anguilla Foundation apart as one of the most straightforward, yet sophisticated, foundation models available, and highly suitable for estate planning and asset protection.

Unlike trusts, where changes in trustees often involve highly contentious issues concerning the indemnities to which trustees are entitled, either on retirement or on distributions of assets, no such issues arise in the case of foundations, with consequent cost and time savings.

The legislative framework of the Anguilla Foundation renders it possible to hold assets for beneficial purposes that can be drafted to achieve almost any required result. This could include the mimicking of the non-voting depositary receipts sometimes provided for in foundations created under Dutch law, or a wide variety of other special purpose beneficial provisions.

Entrepreneurs seeking to provide for the welfare of successive generations of their family are frequently concerned to ensure that after their death their business is not broken up or sold. To achieve this, the use of a purpose trust to hold the shares, or possibly to hold a separate class of voting shares, has often been seen as a solution.

Likewise purpose trusts are frequently used to hold the shares in private trust companies established to manage the “family office”, managing the trusts and other personal financial interests for a particular High Net Worth family. In both these cases an Anguilla Foundation is likely to be seen as a more attractive alternative, providing, as it does, the additional insulating layer of corporate personality (the corporate veil).

Harry Wiggin

Harry Wiggin

Webster Law