The Safe-Haven Structure Can Become a Governance Problem

A founder in his early forties sells his company for a double-digit million sum. He has two children under ten and starts looking at a Liechtenstein foundation before the sale proceeds have even settled. He worries about taxes, political change and the possibility that he may leave his home country one day.

Other wealthy families are asking similar questions. Since 2025, Germany has seen more foundations established to protect private wealth than for charitable purposes. Foundations, trusts and holding companies appeal because they separate assets from the founder personally and allow ownership to continue beyond one generation. They also require someone else to make decisions once the founder no longer does.

Liechtenstein shows how much the environment around these structures has changed. The country had more than 50’000 foundations in 2008. By the end of 2025, fewer than 9’000 remained. Tax investigations, changes to foundation law and automatic exchange of information removed much of the secrecy once associated with the jurisdiction.

Families still use Liechtenstein foundations for succession and long-term ownership. Banks, trustees and tax authorities now expect clear information about who established the structure, where the assets came from and who ultimately benefits.

How much control does the founder keep?

A founder may want the assets removed from his personal estate while continuing to decide how they are invested and distributed. Tax law can make that difficult.

Under German foreign tax rules, a founder who retains control over a foreign foundation may continue to have its income attributed to him. Giving the foundation greater independence changes the tax position, but the founder then has to surrender real authority to its council. Transferring the assets may also trigger gift tax. In unfavourable cases, German rates reach 30 to 50 percent.

The documents therefore have to answer a practical question: which decisions still belong to the founder?

An entrepreneur accustomed to approving every acquisition, investment and large payment may find that harder than expected. A properly independent foundation council may eventually reject an investment, delay a distribution or interpret the founder’s instructions differently from the way he would have done himself.

Keeping informal control after formally transferring it also creates problems. If the founder continues to direct every decision from behind the structure, the separation between him and the assets becomes harder to defend.

Rules written for children can last for decades

Young children make the drafting particularly awkward. Parents know what an eight-year-old needs. They know much less about the decisions that child will make at thirty-five.

Some founders respond with detailed distribution rules. Money may be released for education, housing or defined family purposes while the bulk of the capital remains under professional management. Such restrictions protect children while they are young, but the same wording may still govern adults who have started companies, moved to another country or developed their own investment plans.

Trustees and foundation councils need enough discretion to deal with situations the founder did not foresee. Wider discretion puts more responsibility on the people administering the structure. They may have to decide whether to finance a beneficiary’s business, allow a large property purchase or make an exception to a rule written twenty years earlier.

Families often add a protector, investment committee or family council to divide those powers. Someone then needs the authority to appoint and remove those people, resolve disagreements and decide whose view prevails.

The extra layer only earns its place if it solves a defined problem.

The bill is easy to see. Family disputes arrive later.

Legal fees, transfer taxes and annual administration appear early in the process. Families can calculate them before establishing the structure.

The harder costs emerge years later. Two beneficiaries may disagree over distributions. One wants more investment risk while another wants to preserve capital. A family business may still account for most of the estate, leaving trustees to decide whether to diversify or preserve the founder’s ownership strategy. A beneficiary who moves abroad may bring new tax and reporting requirements with them.

Trust deeds and foundation statutes give administrators a framework. They do not make those decisions for them.

A family holding mainly listed securities may need a fairly conventional investment mandate. A structure that owns an operating company requires rules for voting rights, board appointments, dividends and any future sale. Families sometimes discover only after succession that the people responsible for protecting the wealth have never agreed on what they are expected to protect.

Asset protection is too broad a label

One founder wants business liabilities kept away from personal assets. Another worries about divorce or inheritance disputes. Parents may want to delay access to capital until children have more experience. A family planning an international move faces another set of problems around tax residence and succession.

A trust governing distributions to beneficiaries has a different purpose from a holding company separating a family’s operating business from its investment assets. A foundation designed to preserve control of a company through several generations needs different rules from one holding a diversified securities portfolio.

Choosing the jurisdiction first often leads to unnecessary complexity. A family hears that Liechtenstein, Jersey or another jurisdiction is suitable for asset protection and begins designing around the vehicle.

The work should start with the assets and the decisions that someone will eventually have to make. Which property needs protection? From what risk? Who should control it? Who needs access to the money, and under which circumstances?

Only then does the choice of trust, foundation or holding company become specific enough to assess.

Secrecy is a weak reason to build the structure

Cross-border wealth structures now operate under much tighter reporting rules than they did twenty years ago. Automatic exchange of information, beneficial-ownership rules and anti-money-laundering requirements mean that banks and professional advisers regularly ask about source of wealth, beneficiaries and control.

International structures still serve legitimate purposes. They can keep assets together after a founder dies, provide continuity when family members live in different countries and prevent young beneficiaries receiving unrestricted control of a large estate.

They are far less suitable for families whose main objective is to make ownership difficult for authorities to see. The administration also lasts as long as the structure does. A large family may eventually have a foundation or trust at the top, holding companies underneath it and separate vehicles for property or operating businesses. Directors, trustees, accountants and lawyers may be working across several jurisdictions.

Sometimes that is necessary. Sometimes the family is still maintaining an entity because nobody has revisited why it exists. The founder usually remembers why a company was incorporated twelve years ago or why one branch of the family received a separate trust. His children may inherit the organisation chart without the reasoning behind it. Regular reviews therefore need to ask whether each entity still performs its original job, who has authority over it and what happens if a trustee, director or protector resigns or dies.

Decide what the money is supposed to do

A founder usually approaches asset protection through risk. He wants to avoid family disputes, tax uncertainty, political instability, inexperienced heirs or the fragmentation of wealth after death.

The structure still needs instructions for normal life. Should the portfolio provide income to several generations? Should most of the capital remain invested? Does the family intend to keep an operating company? Will beneficiaries receive money for housing, education or new businesses? How much discretion should trustees have when circumstances change?

Those decisions shape the structure more than the reputation of the jurisdiction. The founder with two young children does not need to know today what careers they will choose or where they will live. He does need to decide who will control the sale proceeds while they grow up, who will make decisions if he cannot and how much authority he is prepared to hand over when he signs the documents.