What is a foundation?

Wealth management can feel overwhelming, and the more successful you are, the more complicated it becomes. Tools like trusts and foundations offer powerful ways to manage and protect your assets – and, when the time comes, pass them to the next generation.  

Like trusts, foundations are used to manage and protect assets over the long term. However, unlike trusts, foundations are legal entities that own assets outright, rather than holding them on behalf of named beneficiaries. 

Before proceeding with a wealth management plan, it’s essential to understand how both structures work and what they do. In this guide, we’ll explain how foundations can help you or your family support a cause and establish your legacy – now and in the future. 

Read our guide to trusts here. 

Important: The information in this guide is general in nature, not legally binding, and should not be considered financial or investment advice.    

Key takeaways: 

• Unlike trusts, foundations are distinct legal entities, own their assets outright and operate independently of beneficiaries. This gives them legal clarity and long-term stability. 

• From public and private to operating and grant-making foundations, each type of foundation serves different goals, including charitable giving and long-term family wealth planning. 

• Where and how you establish a foundation can impact its governance, tax position, and global reach. Expert guidance ensures your foundation aligns with your values and goals. 

  
  

What is a foundation? 

A foundation is a legal entity set up to pursue a specific purpose. That purpose might be charitable, educational, religious, or private – but it’s always clearly defined in the foundation’s governing documents. 

Unlike charities or nonprofits, which typically raise money from the public, foundations are usually funded by a single individual, family or corporation. This distinction is important. While all foundations are nonprofits, not all nonprofits are foundations. Foundations often act as long-term vehicles for giving, governance or wealth preservation, rather than organisations that directly campaign or raise public funds. 

What types of foundations are there? 

Foundations come in a few different forms, depending on how they’re structured and what they aim to do. 

Public foundations 

These receive support from multiple sources, including the general public. They often serve as grant-making bodies – for example, community foundations that distribute funds to local charities and initiatives. 

Private foundations 

Funded and controlled by a single person, family or business, private foundations are often set up for philanthropic or long-term wealth planning purposes. They tend to be governed by a small board or council and may exist for generations. 

Operating vs non-operating foundations 

An operating foundation runs its own programmes – for example, schools, hospitals or cultural institutions. 

A non-operating foundation (also called a grant-making foundation) primarily distributes funds to other organisations, rather than running its own activities. 

What are foundations used for? 

Foundations are remarkably flexible. Founders can choose different structures and purposes for their foundations, in line with their unique goals and values. This flexibility also extends to a foundation’s governance and lifespan — they can be designed to operate indefinitely or for a set period, depending on the founder’s intentions. 

Below, we’ll briefly touch on four of the most common reasons foundations are set up. 

Philanthropy 

Foundations can support long-term charitable or social causes. Unlike one-off donations, a foundation creates a structured, enduring way to give. 

Legacy and family governance 

Families use foundations to express shared values and pass them on through generations. They’re often part of a broader governance strategy that includes family councils, succession planning, and shared decision-making. 

Asset protection and estate planning 

Because a foundation is a separate legal entity, it offers a way to hold and manage assets outside of individual ownership. This can help with estate continuity, creditor protection, and long-term oversight. 

Tax efficiency In certain jurisdictions, foundations may benefit from favourable tax treatment – especially when they are set up for charitable or public benefit purposes. 

How foundations work 

As we mentioned earlier, foundations differ from other structures like companies or trusts. Here are some of the features that make them unique: 

• Legal independence. A foundation is a standalone legal entity. It isn’t owned by shareholders, trustees, or beneficiaries. 

• No beneficiaries. Unlike a trust, a foundation doesn’t exist for the benefit of specific individuals. Instead, it pursues a defined purpose – whether public, private, or mixed. 

• Governance structure. Most foundations are governed by a board or council. There may also be a founder (who sets the original intent), and sometimes a guardian or supervisor to oversee key decisions. 

• Perpetual or time-bound. Some foundations are designed to last indefinitely. Others are set up to operate for a specific period or until a goal is achieved. 

Where are foundations typically established? 

Foundations can be set up in their founders’ home countries. However, they are often established in overseas jurisdictions, usually for reasons related to legal certainty, tax planning, privacy or flexibility. 

Four of the most popular foundation jurisdictions include: 

1. UAE (DIFC and ADGM foundations) – increasingly used for wealth structuring across the Middle East and beyond. 

2. Liechtenstein – one of the oldest and most respected foundation frameworks in the world. 

3. Panama – widely used in Latin America for both philanthropic and private foundations. 

4. Jersey and other Crown Dependencies – favoured by UK-connected families and international advisors.

    

When choosing a jurisdiction, it’s important to consider tax laws, regulatory standards, disclosure requirements, and how well the jurisdiction supports cross-border financial services. Talking to an experienced wealth manager can give you a clearer picture of these factors and what they mean for you. 

What’s the difference between a trust and a foundation? 

Trusts and foundations are both vehicles for wealth planning, but they are distinct from each other in specific ways. Earlier, we explained that unlike trusts, which operate on behalf of beneficiaries, foundations are legal entities which own the funds deposited into them – but there are two other ways in which they’re different from trusts: 

• Control and clarity. Foundations often have a clear purpose and a well-defined governance structure, which can make them simpler to manage and maintain in the long run. 

• Tax and regulation. The way trusts and foundations are taxed and regulated varies by jurisdiction. Some jurisdictions don’t recognise foundations at all, while others treat them as equivalent to companies or charities. 

  
  

In the end, there’s no reason you need to choose between a trust or a foundation. Many high-net-worth individuals establish both trusts and foundations, splitting assets between structures to create a bespoke solution for the transfer of wealth.  

How do you set up a foundation? 

The process for setting up a foundation varies from jurisdiction to jurisdiction – but in general, founders take these structured steps: 

1. Define the purpose – What do you want the foundation to achieve? 

2. Choose the jurisdiction – Where will it be registered, and under what legal framework? 

3. Draft the governing documents – These set out the foundation’s purpose, governance, and operation. 

4. Appoint the board or council – This group manages the foundation’s affairs. 

5. Register and fund the foundation – Once approved, the foundation can begin operations and receive assets. 

   
   

For step two, we recommend consulting with an expert before committing to a jurisdiction. The key is to carefully consider the tax implications, governance requirements, and legal framework of each country to determine the best fit for your foundation's unique purpose and long-term goals. 

How we work with foundations 

Foundations often operate internationally – but traditional banking doesn’t always keep pace. That’s where we come in. 

At Interpolitan Money, we help foundations manage and move capital securely, no matter where they’re based. We work directly with founders, boards and professional advisors to deliver financial infrastructure that matches your cross-border needs. 

Our services include: 

• Multi-currency accounts offering over 55 currencies 

• Fast, transparent cross-border payments 

• Support for complex structures, including private and philanthropic foundations 

• White-glove onboarding and dedicated relationship managers 

  
  

Looking to establish or bank a foundation? Talk to us today and discover how we simplify cross-border financial operations for globally focused foundations.