Labuan IBFC offers a plethora of wealth creation and preservation structures in conventional and Islamic forms. These comprehensive private wealth management vehicles range from common law trusts to civil law foundations.
In fact, Labuan IBFC is the only jurisdiction in Asia that offers private foundations as a wealth management solution.
A Labuan Foundation, for example, is a corporate body with a separate legal entity, established to manage its own property for any lawful purpose, be it for charitable or non-charitable purposes. It provides a conduit for dynamic wealth transfer, dynastic planning and inheritance management protected within a tax-efficient legal entity. There is no minimum initial asset required for its establishment and the foundation can exist for a fixed or perpetual duration.
The Labuan Foundation is governed by the Labuan Foundations Act 2010, which provides a strong statutory firewall that protects the foundation with clarity in its functioning. As a separate legal entity itself, the foundation is distinct from its founder, officers and council.
Like a Labuan Foundation, the Labuan Private Trust Company (LPTC), is also a separate legal entity and is established via the Labuan Financial Services and Securities Act 2010 (LFSSA) and registered with the Labuan Financial Services Authority. The trust company is permitted to provide all trust company services accorded to LFSSA such as a suite of trust and administrative services to a closed-end group.
In a nutshell, both Labuan Foundation and LPTC allow the founder/settlor to retain sufficient control over the affairs of the entities without compromising the validity of the foundation. They are given flexibility on the formation of the board of directors or council, comprising of family members or trusted advisors of the family. This allows both wealth management structures to be privy to the requisite knowledge of the family affairs, as well as better understand the needs of the intended beneficiaries.
A family office (FO) can also be established via the LPTC or Labuan foundation, attributing to the uniqueness of Labuan IBFC being a midshore jurisdiction that can offer a flexible yet well-regulated and cost-efficient environment.
Among the advantages for the Chinese affluent to establish a FO via the LPTC or Labuan Foundation are:
- Flexibility in retaining sufficient control;
- Efficient decision-making on closely-held family owned assets by involving multiple trusted advisors so that advice can be obtained in a more timely manner; and
- The continuity that enables the FO to undertake wealth succession with greater certainty. For instance, eradicating the need for future changes in the trusteeship and foundation as it is a perpetual vehicle to manage and transfer family’s wealth to the beneficiaries without binding it to its founder.