UAE Foundations

The United Arab Emirates is increasingly recognized as a leading global center for wealth management. Consequently, a growing number of high-net-worth individuals and families are seeking sophisticated strategies to safeguard, grow, and pass on their wealth. Among the most adaptable and resilient solutions gaining significant momentum within the UAE's prominent financial hubs are foundations. Despite their increasing adoption, misunderstandings surrounding these structures persist, often dissuading those who stand to gain the most from their benefits.

This article seeks to provide clarity on UAE foundations: where they can be established, the reasons behind their effectiveness in wealth preservation, and their distinctions from other wealth management tools like trusts and companies. Leveraging the expertise of Al Tamimi & Company and referencing relevant data, we aim to dispel common misconceptions and illuminate why a foundation could be the optimal choice for your long-term legacy planning.

This influx of wealth is reflected in government revenues and economic indicators. For the fiscal year 2025, the UAE's federal government projected revenues of AED 71.5 billion, a 9% increase from 2024, driven by higher investment returns and service fees. Notably, investment returns alone are expected to reach AED 17.49 billion, underscoring the scale of assets managed and the importance of effective wealth preservation structures.

Within this context, foundations have emerged as one of the most adaptable and resilient solutions for wealth management in the UAE's prominent financial hubs. The adoption of foundations is on the rise, especially among HNWIs and family offices, who are increasingly seeking structures that provide asset protection, succession planning, and confidentiality.

Understanding UAE Foundations: A Modern Solution for Wealth Preservation

The concept of a foundation is not new, but its adaptation to the UAE's legal landscape is both recent and innovative. In essence, a foundation is a distinct legal entity-ownerless, perpetual, and governed by a council rather than shareholders or partners. This unique structure allows assets to be held and managed according to the founder's wishes, often for generations.

One of the most persistent myths is that foundations are solely for charitable or philanthropic purposes. While foundations can indeed serve as vehicles for giving, the UAE's legal frameworks in the Dubai International Financial Centre (DIFC), Abu Dhabi Global Market (ADGM), and Ras Al Khaimah International Corporate Centre (RAK ICC) expressly allow for both charitable and private purposes. This means a foundation can be established to manage family wealth, hold shares in a business, own real estate, or even facilitate succession planning-making them highly versatile.

Jurisdictions: Where Can You Set Up a Foundation in the UAE?

The UAE offers three principal jurisdictions for establishing foundations, each with its own strengths and regulatory nuances:

• DIFC (Dubai International Financial Centre):
  The DIFC was the first in the region to introduce a comprehensive foundation regime, aligning with international best practices. Foundations in the DIFC are governed by a clear legal framework, benefit from a robust regulatory environment, and can even own real estate in designated areas of Dubai, thanks to a memorandum of understanding with the Dubai Land Department.
• ADGM (Abu Dhabi Global Market):
  ADGM offers a similarly modern regime, with the added benefit of allowing foundations to own real estate in Abu Dhabi. The ADGM's approach emphasizes privacy and asset protection, making it a favored choice for international families and business owners.
• RAK ICC (Ras Al Khaimah International Corporate Centre):
  RAK ICC provides a flexible, cost-effective option for those seeking to hold assets offshore or structure investments internationally. Its regulatory requirements are less stringent, which can be attractive for clients with simpler needs or smaller asset bases.

Each jurisdiction offers strong legal protections, tax exemptions, and confidentiality, but the right choice depends on your specific objectives, the nature of your assets, and your long-term plans.

Foundations vs. Trusts and Companies: What Sets Them Apart?

Another common source of confusion is the distinction between foundations, trusts, and companies. While all three can be used for asset holding and wealth management, their legal characteristics are fundamentally different.

A trust is a legal relationship in which a trustee holds assets on behalf of beneficiaries, based on the terms set out by a settlor. Trusts are not separate legal entities, which can sometimes complicate matters of ownership, liability, and recognition in civil law jurisdictions.

A company, on the other hand, is a separate legal entity with shareholders or partners who ultimately control its assets and operations. This structure may not provide the level of asset protection or succession planning flexibility desired by families or individuals seeking to preserve wealth across generations.

A foundation combines the best of both worlds: it is a separate legal entity (like a company), but it has no shareholders or partners. Instead, it is governed by a council, often guided by the founder's wishes as set out in the foundation's charter and by-laws. This structure enables the foundation to hold assets in its own name, operate perpetually, and provide a high degree of control and protection for the founder and beneficiaries.

Asset Protection and Succession Planning: The Core Strengths of Foundations

A major advantage of the UAE foundation is its ability to ring-fence assets from personal liabilities, creditor claims, and even certain family disputes. Once assets are transferred to a foundation, they are no longer part of the founder's personal estate

This provides a powerful layer of protection, especially in cases of divorce, business risk, or forced heirship under Sharia law.

Foundations also excel at succession planning. Unlike a will, which may be subject to local inheritance laws and court challenges, a foundation's charter can set out clear, binding rules for how assets are managed and distributed-often for generations to come. This makes foundations especially attractive for family businesses, where continuity and stability are paramount.

Foundations also excel at succession planning. Unlike a will, which may be subject to local inheritance laws and court challenges, a foundation's charter can set out clear, binding rules for how assets are managed and distributed-often for generations to come. This makes foundations especially attractive for family businesses, where continuity and stability are paramount.

It's crucial to understand the broad spectrum of assets that foundations can hold. Within the UAE, this encompasses various holdings, such as real estate in specified zones, equity in operational businesses, investment portfolios, intellectual property rights, and beyond. This adaptability to consolidate and oversee a diverse array of assets within a unified, resilient framework is a primary driver behind the increasing preference for foundations among numerous families and entrepreneurs.

Debunking the Complexity Myth

A common misconception is that establishing and operating a foundation involves an intricate and cumbersome procedure. However, the UAE's premier financial hubs have simplified this process, offering clear directives and assistance. By engaging seasoned legal counsel, the necessary steps—including drafting the foundation charter and by-laws, appointing the

council, transferring assets, and ensuring regulatory compliance—can be navigated efficiently and customized to your unique circumstances.

Furthermore, the ongoing administration is designed to be straightforward, with annual reporting and compliance obligations structured to promote transparency without creating undue complexities. Consequently, the resulting structure is both resilient and easily manageable, making it a viable option for a diverse clientele.

Foundations Are Not Just for the Ultra-Wealthy

While it's true that many high-net-worth individuals and families use foundations, these structures are increasingly accessible to entrepreneurs, business owners, and those with more modest estates. The cost and complexity can be scaled to fit your needs, making foundations a practical solution for anyone seeking to protect assets, plan for succession, or support charitable causes.

Tax Efficiency and Confidentiality

UAE foundations enjoy a notably advantageous tax regime, with the potential for tax exemptions where certain criteria are met. Recent regulatory updates allow qualifying family foundations to be treated as tax-transparent entities, meaning the foundation itself is not taxed; instead, any tax liability is passed directly to the beneficiaries, which can result in significant tax efficiencies for wealth management and succession planning.

Additionally, foundations established in ADGM and RAK ICC benefit from robust confidentiality protections-details about beneficiaries and assets are not publicly disclosed, ensuring a high degree of privacy and providing reassurance to founders and their families.

Real-World Applications: Foundations for the Future

Foundations are increasingly used in innovative ways. For example, they can serve as holding vehicles for family businesses, ensuring smooth transitions across generations. They can also be used to manage intellectual property, facilitate joint ventures, or support long-term philanthropic projects. The flexibility and resilience of the foundation structure make it suitable for a wide range of applications, both within the UAE and internationally.

Foundations are increasingly used in innovative ways. For example, they can serve as holding vehicles for family businesses, ensuring smooth transitions across generations. They can also be used to manage intellectual property, facilitate joint ventures, or support long-term philanthropic projects. The flexibility and resilience of the foundation structure make it suitable for a wide range of applications, both within the UAE and internationally.

For more on how foundations are shaping the future of wealth management in the region, see our article Foundations for the Future.

While the benefits of UAE foundations are clear, their effectiveness depends on careful planning, tailored structuring, and ongoing compliance. The nuances of each jurisdiction, the interplay with local and international laws, and the need for robust governance make professional legal advice indispensable.

At Al Tamimi & Company, our team brings extensive experience in advising clients on every aspect of foundation establishment, administration, and regulatory compliance throughout the region. We deliver tailored guidance to help clients define their objectives, choose the most suitable jurisdiction, and implement structures designed to provide lasting security, operational efficiency, and peace of mind.

If you'd like to explore this topic in greater depth, consider the following recommended materials

• Foundations Article (Excerpt): For a comprehensive overview, see our Legacy Publication on "Foundations." Family-Business-Private-Wealth-Publication-2024-Digital-1.pdf (tamimi.com)
• DIFC Podcast: Structuring for Success (Featuring Izabella Szadkowska): Insightful discussion on structuring for business and family wealth in the DIFC. Listen here
• Foundations for the Future: Our in-depth article in Law Update, exploring the evolving role of foundations in the UAE. Read here

UAE foundations offer a unique blend of flexibility, asset protection, and succession planning-making them an ideal choice for families, entrepreneurs, and business owners alike. By debunking common misconceptions and understanding the practical realities, you can unlock the full potential of these structures and ensure your wealth is preserved for generations to come.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.