Case Studies

STRUCTURING A PRIVATE FOUNDATION –

CASE STUDIES FROM CREATRUST

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Case Study 1

A client owns a securities portfolio he has just inherited. He was married twice and has two children from his first marriage and one other from his second marriage. His objective was to ensure that his portfolio would remain intact and not dispersed among his heirs in order to achieve the best valuation while also maintain the possibility of receiving a periodic income.

 

Creatrust helped the client to structure a Foundation to whom he donated his portfolio and securities are now the property of the Foundation. While the donation is irrevocable, the client is able to remain very involved in the management of the Foundation and is a member of the Supervisory Board. This entity allowed him to nominate beneficiaries as well as modify the beneficiaries list and statutes of the Foundation during his lifetime. As Managing Director of the Foundation the client was able to oversee the management of the Foundation enabling the assets to continue to benefit from his extensive experience.

 

Any gains realised by the Foundation from the assets will be distributed to the beneficiaries in order to generate an income for them during their lifetime, while also providing for an orderly succession and nomination of members to the Supervisory Board. Existing members included the client, two independent experts, a lawyer and a financial advisor.

Case Study 2

A client launched a consulting company in the trading sector. He has now many international clients and is leading 150 employees based all around the world. Our client has two sons eventually interested in the takeover of the company and a daughter who is not interested in her father’s business. Managers of the consulting company were thanked with the allocation of stock options and shares of the company.

 

In order to organise the ongoing development of the company, our client  created a Holding Company aiming at holding the company and creating subsidiaries.

 

To organise the holding and the management of his assets he already owns, our client decides to create a Foundation, which is the vehicle detaining the Holding company, which itself holds the consulting companies. Our client also brings the proceeds of the sale of a first company and assets he inherited in the past. All these assets go to the Foundation.

 

Our client appoints a Board of Directors, composed of himself, his lawyer and a chartered accountant. The Charter of the Foundation provides that beneficiaries are our client and his spouse until their decease. Children are mentioned as beneficiaries, but only after their parents.

 

Our client creates a supervisory board of which is a member and appoints Creatrust as protector of the assets and of their destination. As a protector, we have been entrusted by our client to:

 

  • ensure that the wishes of the settlor are always upheld and the procedure of transfer to the next generation will be carefully applied in the future
  • monitor the board of director’s activities
  • act upon the settlor’s plan should the worst happen or any of the stated eventualities

 

The Foundation regulates the transfer of the company assets in harmony, without letting children intervene in the succession rules, avoiding arguments. All the assets are listed and allocated from the beginning by the founder who reserves the right to modify this list at any time.

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Case Study 3

A client owned a major share (30%) of the works of an artist who had reached the age of 75 years. The client wished to ensure that the collection would not be subject to a forced sale by the artist’s family at time of death, thereby significantly impacting the value of the artist’s work. The client required a tax efficient structure which would allow both the client and the artist to jointly manage the collection until his death, while ensuring the artist’s family would benefit from best execution in the ultimate disposal of the collection.

 

Creatrust helped the client to create a Foundation which brought together the artist’s entire collection plus a securities portfolio brought by the client.  In return, the artist would receive a lifetime annuity from the securities paid quarterly by the Foundation until death. The Foundation issued certificates backed in part by the assets in the Foundation (e.g. the art collection) which could only be realised at time of sale of the art works. The Foundation was established in such a way that the artist had the option to oversee the management of the collection in the Foundation. However, upon the death of the artist, the client would remain the only member of the Supervisory Board.

 

The client’s family was designated as the beneficiary of the gains realised from Foundation whereas the artist’s family receive gains realised from the certificates.

The Luxembourg government issued a draft law on such private foundation in the summer of 2013. But these provisions have not come into effect since the bill has yet to be voted.

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