UAE expats increasingly explore holding companies, trusts and foundations for wealth succession

UAE expatriates are increasingly looking at holding companies, family trusts and foundations to structure, protect and transfer their wealth, as the country develops a more sophisticated family-wealth ecosystem.

The three structures serve different purposes. Holding companies are primarily used to consolidate ownership of businesses and investments, while trusts allow assets to be held and managed by trustees for beneficiaries. Foundations, which have separate legal personality, can hold assets and establish long-term governance and succession arrangements.

A holding company is fundamentally an ownership and corporate structuring vehicle. A trust is a legal relationship through which a trustee holds assets for beneficiaries. A foundation, meanwhile, combines some characteristics associated with corporate entities and private wealth structures: it has its own legal personality, can own assets and can continue beyond the founder's lifetime.

The issue is gaining importance among entrepreneurs and internationally mobile families with businesses, real estate, investment portfolios and beneficiaries spread across different countries. Advisers say the appropriate structure depends on the nature and location of assets, succession objectives and the tax residency of founders and beneficiaries.

UAE jurisdictions including DIFC, ADGM and RAK ICC offer foundation structures that can be used for asset holding, governance and succession planning. ADGM's foundation regime provides for separate legal personality and the ability to hold assets in its own name.

The UAE's Corporate Tax regime has also added another consideration for family foundations. Qualifying family foundations may apply to the Federal Tax Authority for treatment as an Unincorporated Partnership, subject to meeting the applicable conditions.

For families with assets outside the UAE, advisers also need to consider foreign tax, reporting and succession rules, including the jurisdictions where founders and beneficiaries are tax resident.

The development comes as the UAE strengthens its position as a destination for international entrepreneurs and family businesses. DIFC says its family ecosystem includes more than 1,250 family-related entities, while ADGM and RAK ICC have developed dedicated regimes for foundations and trusts.

Anshul Agarwala, Senior Consultant – Accounts, Tax and Audit at Avyanco, said families should first assess what they own, where their assets are located, who should benefit and who should control them before selecting a legal structure.