Overview Of Labuan Foundation & Trust

Used by wealthy families, individuals and non-profit organisations for a variety of purposes, including:

  • Wealth creation and accumulation
  • Succession planning
  • Asset protection
  • Enhanced confidentiality
  • Asset consolidation and management
  • Pooled family investment planning
  • Anti-forced heirship planning

SIMILARITIES BETWEEN LABUAN FOUNDATION AND LABUAN TRUST

  • Assets may be transferred / donated to both structures
  • May be revocable
  • May be created during the founder / settlor lifetime or on death
  • May be unlimited in duration
  • May appoint Protector or Enforcer
  • Pooled family investment planning
  • No capital requirements
  • Can be established for any lawful purpose

DIFFERENCES BETWEEN LABUAN FOUNDATION AND LABUAN TRUST

TRUSTS

FOUNDATIONS 

Common law origins

Civil law origins

Not a legal entity with separate legal existence

Separate legal entity

Assets, upon being vested in the trust, are legally owned by trustee

 

Assets are legally owned by the foundation. Upon registration of the foundation, the property endowed no longer belong to the founder, but belong to the foundation

Relationship amongst parties is fiduciary

Relationship amongst parties is contractual

     The person(s) who establishes the trust is known as the settlor

     The persons who benefit from the trust are known as beneficiaries

       The person(s) who creates the endowment is known as the founder

       The persons who benefit from the endowment are known as the beneficiaries

No requirement to register trust

Registration of foundation is mandatory

Trust deed is the document that establishes
the trust

 

Charter is the main constituent document of a foundation. A foundation may also have articles with detailed rules governing its administration matters

The appointed trustee is the person responsible to hold the trust assets and administer the trust

 

An appointed body called the Council / Officer is entrusted to carry on the business and affairs of the foundation and pursue its objects. Officers and Council are required to act in accordance with the terms of the charter and articles

Settlor may have certain reserved powers after establishing the trust and vesting the legal title in the trust assets to the trustee

The founder does not retain or acquire any ownership rights in relation to the foundation’s property. Beneficiaries or the persons in whose benefit the foundation was created may include the
founder

 

KEY PARTIES – LABUAN FOUNDATION

 

KEY PARTIES – LABUAN TRUST


WHY THE NEED FOR SUCCESSION PLANNING

  • Avoid probate formalities - Distribute assets to heirs efficiently without or minimising the cost, delay and publicity of probate court
  • May protect your assets from creditors or other claimants if set up properly
  • Control how a beneficiary receives assets
  • Passing down of family wealth and values
  • Family expansion and multiple families
  • Give to charity
  • Cross-border assets and beneficiaries
  • Tax planning and mitigation in some jurisdictions

LACK OF PLANNING – CONSEQUENCES

  • High legal costs and long probate
  • Inaccessibility of assets due to legal process
  • Family dispute and breakdown
  • Family business breakdown
  • Negative publicity
  • Tax exposure in certain jurisdictions