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Estate Planning by Way of a Foundation

Estate planning is an essential consideration for expatriates living in the UAE. One of the most efficient and secure methods of protecting your assets is by establishing a foundation. A foundation not only offers legal clarity but also provides tax efficiency and protection. This guide explains how a foundation registered with the Ras Al Khaimah International Corporate Centre (RAKICC) serves as a powerful estate planning tool.

1. Challenges with a Muslim Will

Although a Muslim Will is valid under UAE law, it may not always align with your personal wishes. According to Shariah Law, all legal heirs are entitled to a fixed share of the estate. If you prefer to leave everything to, for example, your spouse, every legal heir must sign a consent letter to waive their claim.

However, if even one legal heir refuses to sign, the estate will be divided according to Shariah principles. This uncertainty makes relying solely on a Muslim Will a risky option for complete estate control.

2. Estate Planning with a Foundation

A RAKICC Foundation provides a structured and secure method for distributing assets. Established under the RAKICC Foundations Regulations, 2019, each foundation has a charter that clearly outlines the objectives and the qualified recipients (beneficiaries). These recipients—such as your spouse and children—are entitled to receive income and capital from the foundation as defined in the charter.

Using a foundation eliminates the need for probate proceedings, which can be time-consuming and expensive. It ensures your assets are distributed precisely as you intended.

3. Roles within a Foundation

(i) Founder

The founder is the individual who establishes the foundation. They retain broad powers, including the ability to amend the by-laws, define objectives, manage investments, and appoint or remove council members, beneficiaries, or the guardian.

(ii) Council Members

The council manages the day-to-day operations and strategic decisions of the foundation. At least two members must be appointed, and they may be individuals or legal entities. A chairman can also be designated to supervise foundation activities.

(iii) Qualified Recipients (Beneficiaries)

Beneficiaries are entitled to receive distributions from the foundation. Payouts can be made based on:

• A resolution by the council,

• Pre-defined conditions in the foundation’s charter, or

• Upon dissolution of the foundation.

Founders can assign family members as beneficiaries to ensure assets are directly passed on without court involvement or Shariah-based division.

(iv) Guardian

If the foundation serves a charitable or specific non-charitable purpose, a guardian must be appointed. The guardian cannot be a council member but can be a beneficiary. Their role is to oversee that the council operates the foundation in compliance with the foundation’s charter and RAKICC laws.

Why Choose a Foundation?

A foundation offers strong protection for your family’s future. Whether you’re a Muslim or non-Muslim, it provides:

• A robust legal structure,

• Asset separation from personal liability,

• Full control over investments,

• Confidentiality (assets are held in the foundation’s name, not yours),

• Perpetual existence, even after the founder’s passing.

Foundations can hold a wide range of assets including real estate, bonds, company shares, and bank portfolios, making them a versatile option for wealth and estate planning.

Setting up a foundation with RAKICC is simple, with no personal presence required in the UAE. If you’re unsure about the structure that best fits your needs, consulting a qualified advisor is highly recommended.

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