International trusts, foundations and modern estate planning: what actually matters now

I've been watching something happen in estate planning conversations over the past eighteen months that fundamentally changes what families should be thinking about.

For decades, the answer to wealth protection and succession planning was predictable. You'd establish an international trust, settle your non-UK assets into it, and those assets stayed outside the inheritance tax net indefinitely.

That framework worked because the rules were clear. If you weren't UK domiciled, certain tax treatment followed automatically.

Then 6 April 2025 arrived.

The UK replaced its long-standing domicile-based regime with a residence-based system. If you've been UK tax resident for ten of the last twenty tax years, the inheritance tax treatment of trusts changes substantially. That changes everything about how families should approach this planning.

But here's what's more important than the rule change itself: the conversation has evolved. Families aren't just asking "how do we reduce tax?" anymore. They're asking something deeper. "How do we ensure wealth transitions the way we want it to? How do we preserve it? How do we make sure it serves the next generation, and the one after that?"

That shift has opened up conversations that were previously dormant. Trusts are still relevant. But they're no longer the only answer. Foundations, family investment companies, holding structures, family office arrangements - these are becoming part of how sophisticated families actually plan.

The question isn't "should we have a trust." The question is "what does our wealth structure actually need to do, and what's the right framework for that?"

Before the detail, the points that matter most:

• Since 6 April 2025, UK inheritance tax on a trust's non-UK assets depends on residence, not domicile. If the settlor is a long-term UK resident, broadly someone UK tax resident for 10 of the last 20 tax years, those assets are in scope.
• Long-term UK residence doesn't end the day you leave. It carries on for between three and ten tax years, depending on how long you lived in the UK.
• Trusts set up before 30 October 2024 by settlors who weren't UK domiciled keep some protection. That includes a £5 million cap on ten-year and exit charges in each ten-year cycle. Assets added since then don't qualify.
• A foundation is a separate legal entity that owns its assets. A trust is a relationship run by trustees. The DIFC and ADGM both offer foundations, and the UK is likely to tax one much like a trust.
• Neither structure is better in general. The right one follows from where your family lives, what it owns and what the wealth needs to do, and tax is only one part of that.

How international trusts work, and what changed in April 2025

What trusts actually are

Let me walk you through this because the foundation matters.

A trust is fundamentally a legal separation. You transfer assets to someone else (a trustee) who becomes the legal owner. The beneficiaries - your family, your chosen beneficiaries - hold the beneficial interest. The trustee manages the assets according to the trust deed and the law of the jurisdiction where the trust is established.

That separation is the entire point. It means assets exist outside your personal ownership but continue to serve your family's interests. A trust holds whatever you put into it: cash, investment portfolios, real estate, shares in private companies, insurance-based investments. The trustee's job is to manage those assets, follow the trust document, make distributions when appropriate, and act in the interests of the beneficiaries.

Trustees carry real responsibility. They're expected to act prudently, maintain proper records, manage assets responsibly, and seek professional advice when required. For larger family structures, that often means ongoing collaboration between trustees, lawyers, accountants, investment managers and private banks. A trust that works is rarely static. It's a living governance framework that evolves alongside the family.

That's how trusts have worked for centuries. They originate from English common law and remain one of the defining features of legal systems across the UK, Commonwealth countries, the United States and most offshore financial centres.

But here's the distinction that matters more than people realise: trusts work well in common law jurisdictions where people understand them intuitively. In civil law countries - which is most of the world - ownership is viewed very differently, and trusts can be less familiar.

That distinction becomes critical when your family, your assets and your beneficiaries are spread across multiple legal systems.

What changed in April 2025, and why it matters

Before 6 April 2025, UK inheritance tax planning was built around domicile. If you weren't UK domiciled, and your assets sat in an international trust outside the UK, they could remain outside the inheritance tax net indefinitely. The planning was relatively straightforward.

That's no longer the case.

The UK now uses a residence-based system. The key question is simple: have you been UK tax resident for at least ten of the previous twenty tax years? If yes, your inheritance tax exposure changes, including the treatment of trusts.

For a trust, the person tested is the settlor, the person who put the assets in. Non-UK assets in the trust stay outside UK inheritance tax only while the settlor isn't a long-term UK resident. HMRC checks that status each time a charge could arise, not once when the trust is set up. HMRC sets out the test in its guidance on inheritance tax if you're a long-term UK resident.

Leaving the UK doesn't end that status straight away. Long-term residence carries on for between three and ten tax years after you leave, depending on how long you lived there. We set out the rule year by year in our piece on UK inheritance tax residence rules for Dubai expats.

What this actually means is that trust planning can't be viewed as a one-time exercise anymore. Residence patterns matter. Future migration plans matter. Evolving legislation matters. The structure that made sense five years ago might not make sense today, and it might change again.

That forces a different conversation. Instead of "set it and forget it," families need solutions that evolve alongside their circumstances, remain aligned to where family members actually live and work, and stay responsive to changing rules.

What happens to trusts set up before 30 October 2024?

Trusts set up before 30 October 2024 by a settlor who wasn't UK domiciled keep some protection, but not all of it.

Non-UK assets that were excluded property on that date stay outside the gift with reservation rules. So the settlor being able to benefit from the trust doesn't, on its own, pull those assets back into the settlor's estate on death.

Ten-year and exit charges are a different matter. These charges now turn on the settlor's long-term residence status when each charge falls due. For qualifying trusts, the charges are capped at £5 million per trust in each ten-year cycle, backdated to 6 April 2025. HMRC explains the cap in its policy paper on capping inheritance tax trust charges for former non-UK domiciled residents.

The protection doesn't cover UK assets, or anything added to the trust on or after 30 October 2024. A trust that's been left alone since it was set up can be in a better position than one that's been topped up since. It's worth knowing which one yours is.

Tax treatment depends on your individual circumstances and the rules can change. Nothing here is personal tax advice.

Are trusts still relevant?

Absolutely. They remain one of the most effective tools available for succession planning, asset protection and family wealth preservation.

But the reason for establishing a trust today might differ from the reason that made sense ten years ago. Tax was often the primary driver. Increasingly, it's governance, succession clarity and asset protection from personal ownership risks.

The most effective planning doesn't revolve around creating a structure and leaving it untouched. It revolves around building frameworks that evolve. Solutions that remain aligned to where families actually are, not where they were when the structure was created.

Trusts continue to play an important role. They're simply one part of a much broader planning landscape.

Trusts and foundations: how they compare

The conversation is expanding: what about foundations?

For many internationally mobile families, the estate planning conversation no longer stops at trusts. Increasingly, foundations are becoming part of the discussion.

Trusts have long dominated wealth planning in common law jurisdictions. But foundations have been used throughout civil law jurisdictions and international financial centres for decades as an alternative vehicle for succession planning, asset protection and family governance. Liechtenstein, Jersey, Guernsey and Panama have offered foundation structures for years.

More recently, foundations established within the DIFC and ADGM have increased awareness amongst expatriate families and business owners living in the Middle East. Today, families across the Gulf regularly discuss foundations, regardless of where their underlying assets ultimately sit.

As a result, foundations have become one of the most common wealth structuring vehicles for internationally mobile families.

What a foundation actually is

On the surface, a foundation looks similar to a trust because many of the objectives are the same. That's where the similarity ends.

The legal structure is fundamentally different. A trust is a legal relationship between a settlor, trustees and beneficiaries. A foundation is a separate legal entity that owns assets in its own right. Once you transfer assets into a foundation, the foundation itself becomes the legal owner.

Rather than trustees, a foundation is governed by a council, board or governing body operating under a charter, constitution or regulations that you create. In many ways, foundations combine features of both trusts and companies, but they're distinct from either.

That distinction matters because it fundamentally changes how the structure operates, how it's governed, and how it interfaces with different legal systems.

Side by side, the main differences look like this:

Does a foundation avoid UK inheritance tax?

A foundation doesn't avoid UK inheritance tax on its own. UK law has no category for foundations, and its definition of a settlement is wide. So UK tax specialists generally expect a foundation to be treated as a trust for inheritance tax.

That means the same long-term residence test applies. If the founder is a long-term UK resident, the foundation's non-UK assets are likely to be in scope, whether it's a DIFC foundation, an ADGM foundation or one registered in Jersey.

HMRC looks at each foundation on its own facts, and the answer for income tax and capital gains tax can differ. So it's worth getting the UK position on a specific foundation checked before relying on it.

Why families choose foundations

The reasons are often remarkably similar to why families establish trusts. Families use foundations to facilitate succession planning across multiple jurisdictions, preserve wealth across generations, hold investment portfolios, own real estate and property structures, hold shares in private businesses, protect assets from personal ownership risks, and create long-term family governance frameworks.

In many cases, the greatest benefit isn't tax-driven at all. It's the ability to centralise ownership, governance and succession planning within a single structure. For families with businesses, investments and beneficiaries spread across several countries, that simplicity can be extremely valuable.

The foundation provides clarity. Everyone knows where assets sit. Everyone understands the governance. Everyone can see how the structure is intended to function across time.

Trusts and foundations are not competitors

One of the biggest misconceptions is that families must choose between a trust and a foundation. They don't.

Sophisticated planning often involves both. A trust might be appropriate for specific succession or tax planning objectives. A foundation might provide an overarching ownership or governance framework. Foundations work alongside holding companies, family investment companies, special purpose vehicles, private banking structures and family office arrangements.

The objective is rarely to find a single perfect structure. It's to design a framework that reflects how the family actually lives, owns assets, and intends wealth to transition over time.

Which is better: a trust or a foundation?

The honest answer is neither.

Both can be highly effective when used appropriately. Trusts often work well where families are comfortable with trustee-based governance and where common law structures are well understood. Foundations can be attractive where families prefer a structure that resembles a distinct legal entity, particularly when assets and beneficiaries span jurisdictions that may be less familiar with trust concepts.

In practice, the decision is rarely driven by a single factor. The most important considerations are usually where the family lives today, where future generations are likely to live, the nature of the family assets, family governance objectives, succession planning priorities, and tax considerations across all relevant jurisdictions.

The best solution is rarely the most complicated. It's the solution that actually supports the family's long-term objectives.

The bigger picture: estate planning is about more than tax

One of the biggest mistakes in wealth planning is viewing every structure purely through a tax lens.

Tax matters. But family disputes, poor governance, inadequate succession planning and unprepared beneficiaries have arguably destroyed more family wealth than taxation ever has.

The most successful estate plans tend to focus on three core objectives.

Succession. Ensuring assets pass efficiently and according to the family's wishes.

Protection. Protecting wealth from unnecessary risks, claims and external threats.

Governance. Creating a framework that helps future generations manage wealth responsibly.

Whether that framework involves trusts, foundations, wills, family investment companies, holding structures or family office arrangements is entirely dependent on the family's circumstances. The structure itself is rarely the solution. The solution is having a plan.

I've worked with enough families to know this: the ones who achieve the best long-term outcomes rarely start with a product or a structure. They start with clarity about what they're trying to achieve. Then they work backwards to find the right framework.

That distinction is everything.

AES approaches estate planning the same way, as part of Financial Life Management. The work starts with what the wealth is for, then the plan, then the structures that hold it. AES doesn't draft trust deeds or act as a trustee. AES coordinates the lawyers, trustees and tax specialists who do, and stays accountable for the whole plan.

Where this leaves you

If you set up a trust before October 2024, the first thing worth checking is whether anything has been added since. The second is where the settlor's long-term residence status stands today.

If you're considering an international trust, a foundation, or simply want to understand whether your current estate planning arrangements remain fit for purpose, the right conversation is with someone who'll help you think through all of this. Not someone trying to sell you a structure.

The right answer isn't about choosing a particular vehicle. It's about creating a plan that preserves, protects and transfers wealth in a way that reflects your family's values, objectives and future aspirations.

If you'd like to talk through a trust, a foundation or your wider estate plan, book a 15-minute discovery call.

Common questions about trusts and foundations