Many investors breathe a sigh of relief once they’ve set up a Dubai Foundation. “Finally, my assets are protected, and taxes won’t bother me anymore.” Unfortunately, that’s a dangerous illusion.

You own apartments in London and Dubai, a villa in Oman, your assets sit on brokerage accounts, and your bank accounts are scattered across Europe and Asia? But the real challenge isn’t just growing this wealth – it’s keeping it safe from taxes, regulators, and future family disputes.

Cross-border wealth planning is a chess game. You can’t win it with just one piece on the board. A foundation in Dubai is useful, yes, but it’s not a magic bullet. In practice, solid strategies usually combine three tools: Private Placement Life Insurance (PPLI), Trusts, and Private Interest Foundations. Ignore this mix, and you risk turning your “protection” into a very expensive mistake.

What is Private Placement Life Insurance (PPLI)?

Private Placement Life Insurance, or PPLI, is not your typical life insurance policy. Think of it as a combination of an investment account and an insurance wrapper. Unlike standard insurance, it allows you to invest large sums into assets such as stocks, real estate, hedge funds, or private equity. All of these assets sit inside the insurance policy, which brings with it significant tax advantages, confidentiality, and protection.

Why clients use PPLI:

• Tax efficiency: Investments can grow inside the policy without triggering capital gains tax. In many cases, when the payout goes to heirs, it is also free from inheritance tax.
• Privacy: Asset details within the policy remain private and are not typically subject to public disclosure.
• Protection from creditors: In many jurisdictions, assets inside a life insurance policy are shielded by law.
• Escape from forced heirship: For clients from civil law countries (e.g., France, Germany), PPLI can bypass restrictive inheritance laws.

Limitations:

PPLI is powerful, but inheritance terms are tied to the policy structure and tend to be more straightforward than with a trust.

Best suited for:

• Deferring capital gains tax.
• Passing on international wealth efficiently.
• Protecting assets from creditors.
• Holding diversified assets under a confidential structure.

What is a Trust?

A Trust is a legal arrangement where one party (the settlor) transfers assets to another (the trustee), who manages them for beneficiaries. Trusts are widely used in estate planning and wealth protection because they allow a high degree of control and flexibility.

Types of trusts:

• Revocable Trusts: Can be changed or cancelled during the settlor’s lifetime. Often used to simplify inheritance and avoid probate.
• Irrevocable Trusts: Fixed once created. These provide stronger asset protection and tax advantages.

Why clients use trusts:

• Inheritance planning with flexibility: Trusts allow you to set very detailed conditions for asset distribution.
• Asset protection: Widely recognized and respected in global practice, especially in jurisdictions like Jersey, Guernsey, or BVI.
• Succession planning: Ideal for providing for minors or family members with special needs.

Limitations:

Trusts can be expensive to set up and require professional trustees. Confidentiality is moderate, and tax benefits depend heavily on jurisdiction and tax residency.

Best suited for:

• Complex family succession planning.
• Long-term wealth protection across generations.
• Situations requiring detailed inheritance conditions.

What is a Private Interest Foundation?

A Private Interest Foundation blends features of a trust and a corporation. Unlike a trust, it is a separate legal entity with its own legal personality. It is often used for asset ownership, philanthropy, or inheritance planning, and is managed by a council under the foundation’s charter.

Dubai Foundations are often marketed as an all-in-one solution – but in reality, they have specific strengths and weaknesses.

Why clients use foundations:

• Inheritance planning with flexibility: Through the foundation’s charter, you can set precise and complex conditions for beneficiaries.
• Asset protection: Foundations can safeguard family assets and provide continuity across generations.
• Confidential structuring: They are often used to consolidate holdings and maintain discretion.

Limitations:

• Tax treatment: A Dubai foundation doesn’t automatically provide tax deferral or inheritance tax relief. In high-tax countries, it may even be classified as a Controlled Foreign Corporation (CFC).
• Recognition issues: Dubai foundations may not be recognized in the EU or US, creating potential legal uncertainty.
• Costs and complexity: Annual costs typically range from $5,000 – $15,000, and they require a council, guardian, and internal rules.

Best suited for:

• Consolidating family wealth under one structure.
• Supporting philanthropic goals.
• Inheritance planning with detailed conditions.

What to Choose? Practical Examples

Deciding between PPLI, a trust, or a foundation is never a one-size-fits-all exercise. The right choice depends on three things: your tax residency, the types of assets you hold, and your long-term goals. In practice, the best results usually come from a hybrid structure – a smart combination of tools rather than relying on just one.

Case 1: Spanish Resident

A Spanish citizen with property in the UK and UAE, bank accounts in Switzerland and Singapore, and an investment portfolio at Interactive Brokers set up a Dubai Foundation as the main structure.

The outcome? Not great.

• In Spain, the foundation was classified as a CFC (Controlled Foreign Corporation), which meant its income was taxed.
• In the UK, it didn’t provide inheritance tax relief.

Solution: Adding a PPLI alongside the foundation, with a carefully designed structure, solved the problem – delivering both tax protection and secure succession planning.

Case 2: German Resident

A German client held overseas assets – real estate, investments, and foreign currency accounts. They relied solely on a Dubai Foundation.

The result?

• EU CFC rules kicked in, leading to taxation of the foundation’s profits.
• No tax deferral was achieved.

Solution: Making the foundation the owner of a PPLI worked far better. The foundation provided control and inheritance flexibility, while the PPLI brought tax deferral and protection.

Case 3: Dubai Resident

A UAE resident used a foundation to manage assets across several countries. Inside the UAE, this structure worked perfectly (no taxes). But outside the UAE, there were risks:

• Moderate global recognition of Dubai foundations could cause legal and tax uncertainty abroad.

Solution: The best option was combining a foundation with a PPLI. The foundation ensured management and family governance, while the PPLI provided global protection and tax neutrality.

Conclusions and Recommendations

These examples make one thing clear: relying on a single tool – whether it’s a PPLI, trust, or foundation – is rarely enough for wealthy families with international assets.

The most effective approach is usually a hybrid structure:

• PPLI as the tax-efficient core, ensuring protection and neutrality.
• A trust or foundation layered on top for inheritance planning, asset control, and setting conditions for beneficiaries.

This combination maximizes protection, flexibility, and tax efficiency, while adapting to the client’s unique situation.

Expert Commentary from an International Lawyer

When choosing the right structure, keep these five points in mind:

• Tax Residency: In countries with CFC rules (e.g., Spain, France), opaque structures can trigger personal taxation.
• Global Compliance (CRS/FATCA): Every structure must be properly registered and compliant with reporting rules.
• Legal Recognition: Trusts in established jurisdictions (Jersey, Guernsey, BVI) are widely respected. By contrast, Dubai foundations may face challenges in the EU or US.
• Forced Heirship Protection: PPLI provides the strongest shield against forced heirship rules – critical in civil law countries.
• Complexity and Governance: Each tool requires expertise: trustees for trusts, a council and guardian for foundations, and a qualified insurance provider for PPLI.

Bottom line: For high-net-worth individuals with cross-border assets, the safest path is a well-designed combination – for example, a PPLI held within a foundation or trust. This approach provides the highest degree of global recognition, asset protection, inheritance flexibility, and tax efficiency.