Introduction
In an increasingly complex financial world, wealth protection and succession planning have become top priorities for high-net-worth individuals and families. One of the most effective structures available today is the Labuan Foundation, a legal entity designed to safeguard assets, manage wealth, and ensure smooth succession across generations.
Labuan, Malaysia’s offshore financial hub, offers a robust legal framework for establishing foundations that combine the best aspects of both trusts and corporate entities. In this article, we’ll explore what a Labuan Foundation is, how it works, and why it has become a preferred choice for wealth management — particularly when set up through an experienced trust company like AMS Trust.
What is a Labuan Foundation?
A Labuan Foundation is a legal entity established under the Labuan Foundations Act 2010. It is a separate legal body — similar to a company — but designed primarily for wealth management, charitable, or non-profit purposes.
Unlike a company, a foundation has no shareholders, only a founder, officer, council members, and beneficiaries. This makes it a perfect structure for individuals or families who want to:
- Protect and preserve assets,
- Manage wealth efficiently, and
- Plan for smooth inheritance or charitable giving.
Essentially, a Labuan Foundation acts as a “living legacy”, ensuring that assets are managed according to the founder’s wishes even after their lifetime.
Benefits of a Labuan Foundation
1. Strong Asset Protection
Assets placed in a Labuan Foundation are legally separated from the founder’s personal estate. This means they are protected from personal liabilities, creditor claims, or legal disputes. Once assets are transferred into the foundation, they are owned by the foundation itself — providing a powerful layer of security.
2. Confidentiality and Privacy
Labuan offers some of the strongest privacy protections in Asia. The names of founders, beneficiaries, and council members are not publicly disclosed, ensuring that your wealth management activities remain strictly confidential. This makes Labuan an attractive jurisdiction for individuals seeking discretion in their financial affairs.
3. Succession Planning
A Labuan Foundation ensures seamless transfer of wealth from one generation to the next. The founder can set detailed instructions in the charter or by-laws, defining how assets should be managed or distributed. This eliminates potential disputes and ensures that family wealth is preserved and transferred according to plan.
4. Flexible Structure
Labuan Foundations can serve various purposes — from family wealth management to holding company shares, intellectual property, or even charitable activities. The structure is highly customizable, allowing founders to design it based on personal, business, or philanthropic goals.
5. Tax Efficiency
Labuan’s favorable tax regime applies to foundations as well. Foundations engaged in non-trading activities are exempt from tax, while those involved in trading activities can choose between a 3% tax on audited profits or a fixed tax of RM20,000 per year. This flexibility allows founders to optimize their tax exposure while remaining compliant.