Foundations, and why a family might use one

A foundation is a legal person that owns assets in its own name. Unlike a company it has no shareholders, and unlike a trust it is a body with its own legal identity rather than a relationship between a trustee and beneficiaries. What it has instead is a charter and a set of by-laws that say what it exists for, who governs it, and who may benefit.

For a family group, the appeal is usually continuity. Shares held by individuals fragment through inheritance, and each fragmentation adds a shareholder who did not choose to be one. Shares held by a foundation do not fragment, because the holding does not change when a family member does.

The trade is control and formality. A foundation is governed by its council under its own constitution, which means the family is agreeing in advance to a set of rules it cannot casually override later. That is precisely the point, and it is also the reason the drafting deserves more time than the establishment.

Whether a foundation is the right vehicle, and what it means for the family's own tax and reporting position, is a question for the family's counsel and not for an article.