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The Panama private foundation as an asset protection solution

The Panama foundation is a type of private foundation specifically designed as an asset protection tool. Introduced by the Panamanian Government in 1995 (through the Private Interest Foundation Law), it is based on the principles of Swiss, Luxembourg and Liechtenstein family foundations.

The most obvious advantage of the Panamanian private foundation is that it is a distinct legal entity, independently capable of exerting its rights, executing agreements, acquiring property, etc.

On the other hand, the difference between an offshore limited liability company and a private foundation is that the latter does not engage in commercial activity and cannot be used for trading purposes. Nor is it to be confused with a corporation, which has owners and members.

However, a Panamanian private foundation can participate in investment activities: real estate, holding shares, bonds, patents, interests, stocks, etc.

Usually, a Panamanian private foundation is established for a specific purpose, according to which an individual or a group will benefit from the foundation. The Panama charitable public foundation is used for charitable purposes, whereas a Panama private interest foundation will most likely be set up in order to preserve and safeguard the inheritance of assets by family members or other individuals.

Contact Confidus’ lawyers now to find out more about this solution.

Main advantages of the Panamanian private foundation

Incorporating a private foundation in Panama offers the following benefits to its owners.

A property protection solution

If protecting assets and wealth is your primary objective, then you should consider a Panama private interest foundation as an asset protection solution.

A Panama private foundation allows you to hold property and any other assets, registered anywhere in the world, in Panama.

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The effectiveness of this as a property protection solution is dependent on proper structuring, with each component of the foundation playing a crucial role. A foundation consists of the following:

Founder
The founder is responsible for the establishment of the foundation, and may be a private person or a legal entity. Very often, the founder is a trust, a law firm or a trust company service provider. The name of the founder will be on public record. The founder’s basic function is to establish the foundation and submit the required documents; they have practically no power over the foundation itself.
Council
The function of the council is similar to that of the board in companies or corporations. Note that the names and addresses of the council members are on public record, and so as a general rule, professional nominees are appointed to these positions, especially if privacy is a key concern. The function of councils is basically a nominal one — they are responsible for keeping and filing records, but have no influence over the foundation’s assets.
Protector
A Panama foundation and its assets are ultimately controlled by the protector(s). The council is responsible for appointing the protector during the registration process. For additional confidentiality, a notarised protectorate document (signed by the council) is often used in order to keep the protector’s name confidential. Very often, the client him/herself is appointed as the protector. He or she will have ultimate control over all of the foundation’s assets. You may also choose not to appoint a protector at all, or else to have a nominee protector.
Beneficiaries
The beneficiaries are appointed by the protector either through a letter of wishes or the by-laws of the foundation. Both documents are valid indefinitely and do not need to be made available to the public.
Letter of Wishes
The letter of wishes is prepared according to the wishes of the protector and indicates the principles by which property and assets are to be distributed between the beneficiaries, and any other testamentary instructions to be applied after the protector’s death. You can choose to register the letter of wishes publicly or keep it private for anonymity.
By-Laws
Although the letter of wishes is the main document confirming the purpose of the foundation, you may also choose to draft a set of foundation by-laws. This is a legal document drafted by a Panamanian lawyer and signed in front of the notary public. It has the same basic function as the letter of wishes, but is a more formal document. In general, clients prefer to use a privately drafted letter of wishes only, in order to maintain the confidentiality of the protectors and beneficiaries.

Summary

The structure of the Panama private foundation is known for its flexibility, and it is favoured by many clients in Europe and the United States.

The professional foundation set-up process must involve estate/property accumulation planning, protection and distribution. By giving reliable and individualised advice, the professional founders must ensure that the property goes to the right person(s).

If you would like more information about Panama private foundations, take a look at our F.A.Q. section or call our agents now..