TRW & Co · Private wealth
Foundations and Trusts in the UAE
Choosing between foundations and trusts UAE regimes offer comes down to control, privacy, beneficiary rights and recognition abroad. DIFC and ADGM foundations are entities run by a council; common-law trusts rely on trustees; an onshore federal trust also exists. This guide compares them and explains when each fits.
Key pointThe decisive questions are usually outside the UAE: how beneficiaries' home countries will tax the structure, and whether banks and registries will accept it. Settle those before choosing between a DIFC or ADGM foundation and a trust.
At a glance
Foundations have personality
DIFC and ADGM foundations are separate legal entities that own assets in their own name and are run by a council of at least two members.
ADGM keeps names private
ADGM holds councillor, beneficiary and guardian details as a confidential disclosure, while the DIFC public register names founders and council members.
Low ADGM entry threshold
An ADGM foundation's charter must provide for initial assets of USD 100 or its equivalent in another currency.
Tax transparency option
Under Article 17 of the Corporate Tax Law, a qualifying family foundation can apply to the Federal Tax Authority to be treated as tax transparent.
Onshore trust option
A federal trusts law, reissued in 2023, lets trusts register with an emirate authority and acquire legal personality.
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Families choosing between foundations and trusts UAE structures offer have four main options: a DIFC foundation, an ADGM foundation, a common-law trust in the DIFC or ADGM, and the onshore federal trust. Foundations are companies-like entities with their own legal personality, run by a council; trusts are relationships in which trustees hold assets for beneficiaries. The right choice depends on control, privacy, how banks and foreign tax authorities will treat the vehicle, and where disputes will be heard.
This article compares the regimes on governance, beneficiary rights, confidentiality, philanthropy and tax, and explains when each is the better fit. It builds on our practice page on foundations and trusts in the UAE, and links to our detailed guides on DIFC foundations and ADGM foundations.
Foundations and trusts UAE: the short answer
- Foundations are entities. DIFC and ADGM foundations have separate legal personality, own assets in their own name and are run by a council of at least two members.
- Trusts are relationships. In the DIFC and ADGM, a trust has no legal personality; trustees hold legal title. The onshore federal trust is different: once registered, it acquires legal personality.
- Control is designed, not assumed. Founders can sit on the council or reserve powers, but too much retained control can undermine asset protection and foreign tax outcomes.
- Privacy differs. ADGM keeps councillor and beneficiary details off the public register; the DIFC register shows founders and council members by name.
- Tax is mostly neutral but not automatic. A qualifying family foundation can apply to be treated as tax transparent for UAE corporate tax.
The legal framework
There is no single federal code for foundations and trusts UAE-wide. Each regime has its own legislation, registrar and court.
ADGM
Abu Dhabi Global Market introduced the UAE's first foundations regime with the ADGM Foundations Regulations 2017, enacted in August 2017. For trusts, English common law and equity apply directly under the Application of English Law Regulations 2015, supplemented by English statutes and the ADGM Trusts (Special Provisions) Regulations 2016, as ADGM explains on its trusts page. Disputes go to the ADGM Courts.
DIFC
The Dubai International Financial Centre followed with the Foundations Law, DIFC Law No. 3 of 2018, and the Trust Law, DIFC Law No. 4 of 2018, both since amended. The DIFC's family business and private wealth offering also includes a Family Wealth Centre. Disputes go to the DIFC Courts, and both laws allow disputes to be referred to arbitration.
Onshore and other centres
A federal trusts law, first introduced in 2020 and reissued by Federal Decree-Law in 2023, created an onshore civil-law trust. The 2023 law introduced registration with a competent authority in each emirate, after which the trust has legal personality and holds title to its assets. The RAK International Corporate Centre also offers foundations under its own regulations, often used for holding structures. The official federal texts are on the UAE Legislation portal.
The main options compared
The table compares the features families usually weigh when choosing between foundations and trusts UAE regimes provide.
| Feature | ADGM foundation | DIFC foundation | DIFC or ADGM trust | Onshore federal trust |
|---|---|---|---|---|
| Legal personality | Yes | Yes | No; trustees hold title | Yes, on registration |
| Governing body | Council of at least two | Council of at least two | Trustee(s) | Trustee(s) |
| Supervisor | Guardian optional while a founder survives; compulsory after | Guardian mandatory for charitable or specified purposes; optional otherwise | Protector optional; enforcer for purpose trusts | Trust protector role recognised |
| Public register | Councillors and beneficiaries held confidentially by the Registrar | Founders, council members and any registered agent shown by name | No public registration of the trust itself | Registered with emirate authority |
| Minimum assets | Initial assets of USD 100 or equivalent | No statutory minimum figure; initial capital described in the charter | None | Not specified here |
| Courts | ADGM Courts | DIFC Courts | DIFC or ADGM Courts | Onshore courts |
When a foundation fits
A foundation usually suits families from civil-law backgrounds, including much of the Gulf and continental Europe, who find the idea of an entity easier to accept than a trust. It also suits structures that will hold operating company shares or UAE property, because banks, land departments and company registries can deal with the foundation directly as the owner. Founders who want to remain involved through a council seat or reserved powers, within sensible limits, tend to prefer it.
When a trust fits
A common-law trust often suits families whose advisers, banks and beneficiaries are in the UK, Singapore or other common-law countries, where trusts are familiar and their tax treatment is well settled. It also suits families who want a professional trustee to make decisions at arm's length. Many families end up using both: of the foundations and trusts UAE practitioners set up, a frequent pattern is a foundation at the top of the structure with a trust or private trust company beneath it.
Cross-border recognition
Whatever the vehicle, test it against the countries where assets and family members are. Some legal systems do not recognise trusts at all, and foreign courts may apply their own succession rules to land located there. For assets in India, Bangladesh, the UK or elsewhere, take local advice on whether foundations and trusts UAE law recognises will be respected, and whether local title should be held through a company instead.
Governance and control
The council of a foundation acts like a board. In both centres council members owe statutory duties of good faith, care and skill, and must declare conflicts. A founder or a company may sit on the council. A guardian supervises the council: in the DIFC, a guardian can require the council to account for how it has administered property and pursued the objects, and the by-laws can give the guardian approval rights over specified actions.
Founders can also reserve powers, such as the power to amend the charter, appoint and remove councillors or add and exclude beneficiaries. This is the main lever of control, and the main risk. A founder who keeps every decision may find that a foreign court or tax authority treats the assets as still belonging to them.
Trusts put control in the hands of the trustee. That suits families who want independent professional management, but founders who want to stay involved often prefer a foundation. Some families combine the two models, for example by using a foundation to own a private trust company that acts as trustee.
Beneficiary rights and information
Beneficiaries of a foundation do not own its assets. In the DIFC, beneficiaries are "qualified recipients", whose rights are whatever the by-laws give them; a person with sufficient interest can make written requests for financial statements and information about how the property is administered. In ADGM, the by-laws may give some or all beneficiaries a right to copies of the charter, by-laws and accounts on request, and a right to petition the court to prevent a change of purpose or dissolution.
Trust beneficiaries in the DIFC and ADGM have the equitable rights developed by English and common-law courts, including the court's supervisory jurisdiction over trustees. The practical lesson for founders is to decide deliberately how much information each generation will receive, and to write it into the documents rather than leave it to later dispute. For contested matters, see our article on inheritance and private client disputes in the UAE.
Philanthropy and purpose structures
Both centres allow purpose structures, but they differ. A DIFC foundation may be established for exclusively charitable objects or for specified non-charitable objects, and must then have a guardian; a charter with an exclusively charitable object cannot later be amended to swap in a non-charitable one. The ADGM Foundations Regulations exclude a charitable purpose from a standard foundation's objects, although ADGM promotes public interest purpose foundations, so the framing of a philanthropic structure there needs care.
Charitable activity inside the UAE, such as public fundraising or grant programmes, may also need approval from the relevant emirate authority. A family foundation that funds causes abroad should check the rules in each recipient country.
Tax treatment
Under Article 17 of the Corporate Tax Law, Federal Decree-Law No. 47 of 2022, a family foundation that meets the conditions can apply to the Federal Tax Authority to be treated as tax transparent, so that income is assessed in the hands of its founders and beneficiaries rather than the foundation. Ministerial Decision No. 261 of 2024, published on 28 October 2024, updated the rules for family foundations and unincorporated partnerships. Guidance is available from the Federal Tax Authority.
Foreign tax is often more important. A UAE foundation may be classified as a company in one country and as a trust in another, and beneficiaries resident in the UK, India or elsewhere may be taxed on distributions or attributed income. Take advice where beneficiaries live before choosing. TRW & Co coordinates with tax advisers and registered tax agents; we are not a registered tax agent. Our corporate tax in the UAE page sets out the domestic rules.
How to choose and set up a structure
- Define objectives. Succession, asset protection, privacy, philanthropy and family governance pull in different directions. Rank them.
- Map assets and people. List assets by location and type, and the residence and nationality of founders and beneficiaries.
- Choose vehicle and centre. Compare DIFC and ADGM foundations, common-law trusts and onshore options on control, privacy, cost and counterparty recognition.
- Draft the charter and by-laws or trust deed. Set council or trustee composition, reserved powers, guardian or protector roles, beneficiary classes and information rights.
- Take tax advice. Confirm UAE corporate tax treatment and foreign classification for each beneficiary country.
- Register and transfer assets. Register the vehicle, then transfer shares, accounts and property, which may need separate approvals from land departments, banks and company registries.
- Run it properly. Hold council meetings, keep accounts and file changes on time; a neglected structure is easier to challenge.
Transferring assets is usually harder than registering the vehicle. Banks, land departments and operating company registries each have their own requirements, so plan the asset transfers, and their cost, before choosing the jurisdiction.
Illustrative scenario: a founder with three children abroad
This scenario is illustrative and uses generic parties.
A Dubai-based founder holds shares in a mainland trading group, a portfolio in Singapore and apartments in Dubai. Two children live in London and one in Dubai. The founder wants the group to stay together and the children to share income.
A foundation suits the holding role: banks and registries can deal with it as an entity, and the founder can sit on the council with an independent professional, with a guardian appointed to take over oversight later. Because two beneficiaries live in the UK, UK advice on how the foundation and its distributions will be taxed shapes the drafting of reserved powers. The founder also makes a will covering assets left outside the structure, as explained in our article on wills and inheritance for expats in the UAE.
Risks and common mistakes
Disputes over foundations and trusts UAE families set up tend to trace back to a few predictable errors.
Retaining too much control
Founders often reserve every power and sit as sole decision-maker in practice. That can make the structure look like a sham, weaken firewall protection and lead foreign tax authorities to treat the assets as the founder's own. Reserve specific powers for specific reasons, include independent council members, and record decisions properly so the structure operates as designed.
Assuming firewalls defeat every claim
DIFC and ADGM firewall provisions protect dispositions against foreign forced heirship rules and many foreign judgments, but they have limits. The DIFC law, for example, allows a creditor to reach transferred property where the transfer was intended to defraud that creditor and left the transferor unable to pay. Foreign courts may also act against assets or people in their own jurisdiction.
Leaving assets outside the structure
A foundation only governs what it owns. Assets never transferred pass under a will or the default inheritance rules. Families often register the vehicle but never complete the transfer of property, bank accounts or shares. Keep an asset schedule, track transfers, and maintain wills for anything outside the structure.
Ignoring beneficiary expectations
Children who discover a structure late, with no right to information, are more likely to challenge it. Decide what each generation will be told, set information rights in the by-laws or deed, and consider a family charter so the reasons for the structure are understood. Our page on family offices in the UAE covers wider governance.
What to do next: a checklist
- Write down the family's objectives and rank them.
- Prepare an asset schedule with locations and current ownership.
- Obtain tax advice for each country where founders or beneficiaries live.
- Compare ADGM and DIFC foundations and trusts on privacy, control and counterparty acceptance.
- Decide the council or trustee composition and the guardian or protector role.
- Plan asset transfers and approvals before registering.
- Keep wills in place for assets outside the structure.
TRW & Co advises families on structuring, drafting and governance, and coordinates with registered agents, tax advisers and, where court work is required, locally licensed advocates and registered DIFC and ADGM practitioners. To discuss foundations and trusts UAE options for your family, contact our Dubai team or email info@trw.co.
Frequently asked questions
01What is the difference between a foundation and a trust in the UAE?
A DIFC or ADGM foundation is an incorporated entity with its own legal personality. It owns its assets, signs contracts in its own name and is run by a council under a charter and by-laws. A DIFC or ADGM trust is a relationship in which trustees hold legal title for beneficiaries or a purpose, with no separate legal personality. Banks and registries in the region are often more comfortable with an entity, while advisers in common-law countries are familiar with trusts. The onshore federal trust is unusual because it acquires legal personality on registration.
02Should I choose a DIFC or an ADGM foundation?
Both are well-established common-law options. Key differences include privacy, since ADGM keeps councillor and beneficiary details confidential while the DIFC register names founders and council members; the guardian rules; the treatment of charitable purposes; and service provider requirements, since non-exempt ADGM foundations must use an ADGM-registered company service provider. Location of the family's advisers, banks and other assets, and which court the family prefers, often decide the choice in practice.
03Are UAE foundations taxed?
A foundation is in principle within the scope of UAE corporate tax, but Article 17 of the Corporate Tax Law allows a family foundation that meets the conditions to apply to the Federal Tax Authority to be treated as tax transparent. Ministerial Decision No. 261 of 2024 updated the rules. Foreign taxation of founders and beneficiaries is usually the larger issue, because other countries may classify the foundation as a company or a trust and tax distributions accordingly. Take advice in each beneficiary's country.
04Can a UAE foundation protect assets from forced heirship rules?
The DIFC and ADGM regimes contain firewall provisions stating that a transfer to a foundation is not void or liable to be set aside because of a foreign rule of forced heirship, and limiting recognition of foreign judgments inconsistent with those rules. That is significant protection, but not absolute. Assets located abroad may still be subject to local courts, transfers intended to defraud creditors can be challenged, and assets never transferred into the structure pass under the ordinary inheritance rules.
05Can a foundation be used for charity in the UAE?
A DIFC foundation can be established for exclusively charitable objects or for specified non-charitable purposes, and must then have a guardian. The ADGM Foundations Regulations exclude a charitable purpose from a standard foundation's objects, although ADGM promotes public interest purpose foundations, so the framing needs care. Charitable activity inside the UAE, such as public fundraising, may also require approval from the relevant emirate authority, and cross-border giving should be checked against the rules of recipient countries.
06Is there an onshore trust law in the UAE?
Yes. A federal trusts law was introduced in 2020 and reissued by Federal Decree-Law in 2023. The current law requires registration with a competent authority in each emirate, after which the trust has legal personality and holds title to its assets. Uptake has been cautious, and many families still prefer DIFC or ADGM vehicles because of their common-law courts, established practitioners and familiarity to foreign advisers.
Sources and official materials
- ADGM Foundations Regulations 2017 — Council, guardian, beneficiaries and confidentiality in ADGM
- Trusts in ADGM — English common law trusts and the 2016 special provisions
- DIFC Foundations Law, DIFC Law No. 3 of 2018 (consolidated) — DIFC foundation council, guardian and firewall rules
- DIFC Trust Law, DIFC Law No. 4 of 2018 — DIFC trust law
- Federal Tax Authority — Corporate tax guidance, including family foundations
- UAE Legislation portal — Federal trusts and corporate tax legislation
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
