Labuan Private Foundation for Wealth Management and Planning
Asians are familiar with the use of a Trust as an asset holding structure. But not many have knowledge or are aware of a Private Foundation. A private foundation, also referred to as a ‘private interest foundation,’ is a product with specific laws found mostly in civil law jurisdiction and adopted by some common law jurisdictions over the last 2 decades. It is particularly useful as an alternative to a trust.
A private foundation generally has no restrictions on their legal activities. A private foundation is a non-governmental, stand-alone legal entity, and it can be used for private beneficiary or charitable purposes. Its principal fund usually comes from a single source, such as an individual, a family, or a corporation.
Labuan International Business and Financial Centre, Malaysia (Labuan IBFC) is the first common law jurisdiction in Asia to adopt the civil law concept of a private foundation. The Labuan Foundation Act 2010 provides more choices for wealthy Asian families seeking to structure their estate planning. A Labuan Foundation, either in the form of a Labuan Private Beneficiary Foundation or a Labuan Charitable Foundation, can be structured in either the Conventional or the Islamic form which allow more families to further plan for their long-term objectives.
Both forms of private foundations are excellent solutions:
- As an ultimate investment holding structure for companies and shares
- To improve family governance
- To strengthen the cohesion of the family and mutual trust
- To prepare the next generation for their role
- To secure family values and principles for several generations (dynastic structuring)
- As a neutral exit for family members wanting to cash in
- As a safety net for family members in need (bonding)
- For family business succession planning
- For wealth protection and preservation
- To avoid forced heirship rules
- For global families inheritance/ income tax planning
- For family charitable purposes
- For control and management of family asset
Advantages of a Labuan Private Foundation
- Low setup and maintenance cost.
- Flexible lifespan of foundation: can be perpetual or a fixed period.
- Muslims may set up Labuan Foundations that are Syariah compliant or otherwise.
- The founder is protected from foreign claims and the foundation cannot be forcefully liquidated to satisfy claims arising from divorce, lawsuit or debts after 2 years. *
- The founder has unlimited and exclusive powers.
- Ability to be redomicile to another jurisdiction of your choice at any time.
- Provisions stated in the constituent documents are permitted to be amended, when needed.
- Fully confidential as no information can be accessed by the public.
- Legal ownership of assets “remains” within the control of the foundation.
- It is a legal entity fully protected by Labuan Foundations Act 2010.*
Under Labuan Foundation Act Section 61, provides prevention from a foreign claim or judgement being enforced against a validly established Foundation. It cannot be forcefully liquidated to satisfy other obligations after 2 years.
Main Elements and Keys individuals involved in the creation of a Labuan Private Foundation
Foundation Establishment Steps
A Trust Officer will examine each case or family setup carefully. There is no one-size-fits-all setup, as every family is unique. We will advise the best possible structure that may suit you and your family. The timeframe of setting up a Foundation depends on the complexity of the Founder’s wishes and family needs.
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