Trusts or foundations for a family: control, beneficiaries, reporting and succession

Families usually consider a trust or a foundation for the same reasons: to keep assets together across generations, to provide for relatives who cannot or should not manage money themselves, and to plan succession in an orderly way. The two vehicles come from different legal traditions, and the tax and reporting consequences depend less on the vehicle than on where the founder and the beneficiaries live.

How each is built

• A trust is a relationship, with no legal personality of its own. The settlor transfers assets to trustees, who hold legal title and manage them for the beneficiaries under the trust deed. Trusts come from common-law systems such as England, Jersey, Guernsey and the Cayman Islands.
• A foundation is a legal entity that owns its assets itself. It is set up by a founder, governed by a council under its charter and regulations, and pays out to beneficiaries. Foundations come from civil-law systems such as Liechtenstein, and several common-law jurisdictions, including Jersey, now offer them too.

Control

Founders often want to keep a say. A trust can include a protector with powers to approve or veto certain decisions, and some jurisdictions allow the settlor to reserve investment powers. A foundation can give the founder a role on the council or rights set out in its documents. Retaining too much control carries two risks: the structure may be treated as a sham or as the founder's own property, and many tax systems will then tax the assets and income as if the founder still held them.

How common-law and civil-law countries see them

Civil-law countries have no domestic trust concept, and their tax rules treat foreign trusts in different ways. Some look through the trust to the settlor or beneficiaries, some tax distributions as gifts or income, and France applies specific reporting obligations and, in some cases, an annual levy on trust assets. A foundation may sit more comfortably in a civil-law system because it resembles a local entity, yet it can still be treated as transparent or as a company depending on its terms. In the UK, trusts have their own regime, including inheritance tax charges on entry and every ten years for most trusts, and registration with the Trust Registration Service.

Reporting

Neither vehicle offers secrecy from tax authorities. Under the Common Reporting Standard, trusts and foundations are either reporting financial institutions or are reported on by their banks, and the settlor or founder, protector and beneficiaries are generally identified. Most European countries also maintain beneficial ownership registers, although public access has been restricted following a 2022 court ruling.

Succession and forced heirship

Many civil-law countries, including France, Spain and Italy, reserve a share of an estate for children and sometimes a spouse. Germany gives close family a monetary claim instead. Assets placed in a trust or foundation can be challenged by heirs whose reserved share has been reduced, often within a time limit. Jersey, Guernsey and other jurisdictions have firewall legislation that prevents foreign forced heirship claims from being enforced against their trusts, which protects the structure locally but does not stop proceedings, or tax consequences, in the country where the family lives. The EU Succession Regulation lets a person choose the law of their nationality for their estate, which can help, but it does not govern tax.

Before you sign

• Map where the founder, each beneficiary and each asset are, now and likely in the future.
• Decide how much control the founder genuinely needs, and test the tax effect of keeping it.
• Check forced heirship exposure in every country where family members live or may inherit.
• Confirm the entry, periodic and exit tax charges in the founder's country.
• Plan for registration and reporting from day one.

If you are thinking about a trust or foundation, call us before you sign the deed or charter. The first 30-minute consultation is free, your dedicated consultant is available 24/7, and every request is answered within 24 hours.

General information, not advice. Tax rules change and depend on your facts. Greyridge Global coordinates and delivers cross-border tax and corporate work through appropriately licensed professionals in each jurisdiction. Legal, tax, immigration, fiduciary, and regulated services are provided by qualified advisors engaged for your matter. Nothing on this page is tax or legal advice.