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

UAE expatriates are increasingly considering holding companies, family trusts, and foundations to manage, safeguard, and pass on their wealth, as the country's ecosystem for family wealth grows more advanced. Each of the three structures fulfills distinct objectives: holding companies consolidate ownership of businesses and investments, trusts hold and manage assets for beneficiaries through trustees, and foundations, which possess a separate legal identity, can hold assets and establish long-term governance and succession plans.

Holding companies are primarily a tool for ownership and corporate structuring, trusts are a legal relationship where a trustee holds assets for beneficiaries, and foundations merge attributes of corporate entities and private wealth structures: they have their own legal identity, can own assets, and can exist beyond the founder's lifetime.

This growing trend among entrepreneurs and internationally mobile families with businesses, real estate, investment portfolios, and beneficiaries scattered across multiple nations is driven by the need for effective wealth management. Experts emphasize that the suitable structure depends on various factors, such as the nature and location of assets, the succession goals, and the tax residency status of founders and beneficiaries.

Several UAE jurisdictions, including the DIFC, ADGM, and RAK ICC, provide foundation structures designed for asset holding, governance, and succession planning. The ADGM foundation regime, in particular, offers separate legal personality and the capability to hold assets in its own name.

The UAE's Corporate Tax regime has introduced an additional factor for family foundations to consider. Qualifying family foundations can apply to the Federal Tax Authority for treatment as an Unincorporated Partnership, provided they meet certain conditions. For families with assets outside the UAE, advisers must also take into account foreign tax, reporting, and succession rules, including the tax residency status of founders and beneficiaries in other jurisdictions.

The development of these structures comes as the UAE solidifies its position as a preferred destination for international entrepreneurs and family businesses. The DIFC reports having more than 1,250 family-related entities within its family ecosystem, while ADGM and RAK ICC have developed specialized regimes for foundations and trusts.

Anshul Agarwala, Senior Consultant – Accounts, Tax and Audit at Avyanco, advises families to first evaluate their assets, where they are located, who should benefit from them, and who should control them before choosing an appropriate legal structure.