Harnessing the Power of DIFC Foundations for Effective Succession Planning

Succession planning plays a vital role in ensuring the smooth transition of wealth across generations. In the Middle East, a jurisdiction that’s been garnering attention for its robust structure and flexibility is the Dubai International Financial Centre (DIFC). Specifically, the most popular vehicle for succession planning is a Foundation. One of its unique features is the ability to secure a Founder’s wishes, even after their death, offering a viable option for those seeking an efficient and flexible succession planning tool.

Understanding DIFC Foundations

A DIFC Foundation is a stand-alone legal entity, separate from its Founder. It holds assets endowed to it, and administers them as per the stipulated objectives detailed in the Foundation’s Charter and By-laws. The management of a DIFC Foundation is entrusted to its Council, which is obligated to act in the best interests of the foundation and in accordance with the Founder’s wishes. A DIFC Foundation is capable of owning any sort of property, including real estate property anywhere in the UAE or the world.

In certain circumstances, a Guardian is also appointed to ensure the Council executes its duties effectively. Notably, a Founder can reserve to themselves certain powers like amending, revoking, or varying the terms of the Foundation’s Charter or By-laws or terminating the Foundation itself.

The Role of Founder’s Wishes in Succession Planning

A remarkable feature of the DIFC Foundation is the Founder’s ability to leave Letter(s) of Wishes, guiding the Council on distributing the Foundation’s assets among Qualified Recipients. These wishes offer direction but are not legally binding, allowing the Council the discretion to act in the best interest of the Foundation’s objectives, especially in circumstances where the Founder is no longer around to rectify situations where their wishes cannot be implemented exactly how they ordered.

The wishes can indicate distributions to one or more Qualified Recipients, in any proportions and at any time as deemed appropriate by the Council. This flexibility allows the Founder to outline their wishes for asset distribution, ensuring their vision and objectives are maintained long after their passing.

Protection of Minors and Individuals under Incapacity

The DIFC Foundation also provides a robust framework for the protection of Minors and individuals under incapacity. The assets can be allocated to the minor’s parents, Guardian, or to the minor if they have attained the age of eighteen. Similarly, for any other Qualified Recipient under an incapacity, the Foundation may pay the assets to a court-appointed manager of the individual’s affairs.

Adding Qualified Recipients

Additional flexibility offered by DIFC Foundations lies in the Council’s ability to add one or more persons as Qualified Recipients, subject to certain conditions and limitations. This provision allows the Founder to include additional beneficiaries who were not initially contemplated, subject to the terms of the Charter and By-laws.

Conclusion

A DIFC Foundation offers a unique mix of features – a blend of flexibility, control, and continuity that makes it a powerful tool for succession planning. With its legal personality, an ability to safeguard the Founder’s wishes, and the provision to protect and add Qualified Recipients, the DIFC Foundation provides a holistic platform to carry forward the Founder’s legacy in a well-structured manner.

However, setting up a DIFC Foundation and using it effectively for succession planning requires careful consideration and expert legal guidance. We recommend reaching out to us for a consultation call to understand how a DIFC Foundation can be tailored to meet your specific succession planning needs.