What do Warren Buffett, Bill and Melinda Gates, Michael Bloomberg, Berry Diller and Diane von Furstenberg, Patrice and Precious Motsepe, Mark and Priscilla Zuckerberg have in common?
They are billionaires. They have joined The Giving Pledge campaign and given the pledge to dedicate the majority of their wealth to philanthropy. They are part of the world’s wealthiest individuals and families that have chosen to direct their wealth towards solving problems. Recognising that they had an opportunity to improve the lives of many, they have registered foundations to do so, giving away vast amounts of their wealth.
As a foundation can fulfil philanthropic intentions so it also satisfies the need to protect and facilitate the transfer of wealth between generations as well as the desire to retain family harmony. Founders can also register foundations in order to hold structures or separate activities. In fact, one of the attractions of a foundation is its flexibility. The founders can determine its strategy for investment and distribution, specifying who should benefit and how. Foundation rules are private so each foundation can have its own rules drafted accordingly.
The involvement in a foundation can be very appealing on an emotional level as well as financially. In this respect, key advantages of an Isle of Man Foundation include asset protection, tax planning and limitation of liability.
A foundation is flexible and adaptable whilst successfully protecting the wishes of its founder, if registered in the Isle of Man could also provide a number of other advantages such as:
- It is a separate legal entity, whereby assets are beneficially owned by the Foundation;
- Anybody of a legal age can be appointed as a member of Council (although care should be taken when constructing the council);
- It has its own private rules and can sue in its own right – it is interesting to note that a foundation can do anything and is not restricted to what is stated in the rules (other than engaging in commercial trade that is not specified in the rules);
- It can continue indefinitely;
- It is possible to have a combination of interests for beneficiaries, non-charitable purposes and charitable purposes;
- It does not have to hold any assets at the outset;
- It is fully recognised by Government;
- It is quick and easy to set up just registering on a public register so it is possible to evidence its existence, which can be important for contractual and banking relationships;
- It looks like a company but acts like a trust;
- Its tax treatment may be beneficial; a foundation is taxed as a company, the corporate tax rate for the majority of activities is zero %.
An Isle of Man Foundation must be registered by a Class 4 (Corporate Services) license holder, like Abacus. Only a minimal amount of detail is required for the registration and only the foundation instrument is publicly filed.
It is important to ensure that legal entities, like foundations, always benefit from governance as strong as the ones used for traditional investment activities. As a regulated experienced services provider, Abacus can assure corporate governance in order to prevent any doubts on a foundation’s reliability, integrity and transparency.
If you’ve got a good idea for a good deed and you need any assistance, by all means let us know. Doing some good is easier than it looks.
“Making a difference in people’s lives – and seeing it with your own eyes – is perhaps the most satisfying thing you’ll ever do. If you want to fully enjoy life – give. And if you want to do something for your children and show how much you love them, the single best thing – by far- is to support organisations that will create a better world for them and their children. Long term, they will benefit more from your philanthropy than from your will.” (Michael Bloomberg’s Commitment to Giving)
Written by Marta Bellamoli, Marketing Co-ordinator