You have made the major decisions. After having lengthy discussions with your advisers and making due diligence visits to various fiduciaries and professionals, you have chosen a foreign jurisdiction. You have also decided to form a trust or a new corporation. You have selected a trustee or a registered agent and perhaps nominee officers or directors. Now what?

U.S. tax considerations

As already stated, because your organization will be formed in a foreign jurisdiction, any donations used to establish it will not be deductible for federal income tax purposes. Nevertheless, any future gifts or testamentary bequests can be fully deductible, without limitation, from both U.S. estate and gift taxes.

If a corporate vehicle is utilized, the transfer of funds or property to form the entity should not subject either the donor or the corporation to income taxation. Nor will the transfer cause any gain to be recognized in the case of the transfer of appreciated property. Assuming that the laws of the foreign jurisdiction make clear that a charitable organization has no shareholders as such, the entity, though labeled a “corporation,” should not run afoul of the U.S. Subpart F rules applicable to controlled foreign corporations.

If a trust is utilized, presumably it will be an irrevocable trust, and the trust agreement or declaration of trust will provide the trustee with specific guidance as to the types and purposes of charitable endeavors that the entity will pursue.