Panama Foundation

The Panama Foundation is an ideal example of the various types of corporate entities that have been designed to assist persons and other corporate entities to protect their assets and provide for effective estate planning. The Panama Private Interest Foundation was designed with the same features as those of the Private Interest Foundations found in countries such as Liechtenstein, Luxembourg and Switzerland. Panama Private Interest Foundations are different from Panama Charitable Public Foundations which are used solely for charity purposes.

Panama Foundations offer an excellent means of asset protection. The assets held in the Panama Private Interest Foundation are fully protected by the foundation since they are the property of the foundation and no one else. Panama Foundations do not have “owners” and are completely independent; that is, they stand on their own. The person or corporation that is regarded to “own” the Foundation is considered a Beneficiary, rather than the “owner” of the Foundation, since the legal make up of the Panama Foundation does not provide for an owner. The person who controls the foundation, that is, the Protector, merely oversees that the assets of the Foundation are being properly handled by the Foundation Council, which is elected for administrative purposes and is required to present an account of the Foundation’s finances on an annual basis. Based on the latter, no one can make any claim on the assets held within the Foundation. Rather, upon the termination of the period of time for which the Foundation was set to last (duration period), the assets are transferred to the Foundation’s Beneficiaries, who sort of “inherit” those assets, and this provides for effective international estate planning. The assets held in the Panamanian Foundation can range from personal belongings of great value, funds, trusts, property, corporations, bank accounts and trusts.

The Panama Foundation’s ability to hold such assets provide a second advantage which is that of exemption of gift, transfer, inheritance, estate and stamp taxes, which normally would apply in non tax haven countries. This allows the assets in the Foundation to increase in value over a period of time, while enabling the Foundation’s Beneficiaries to inherit the full value of the assets, without being subjected to any sort of reporting requirements by the government of Panama. Due to the fact that Panamanian Foundations are able, under the Panama Private Interest Foundation Law, to engage in commercial activities such as mutual fund, stocks, bonds and money market investments from time to time, the assets in the Panama Foundation are further enabled to increase in value without having to remain at the “start-up” amount or capital that was originally put into the foundation. The activities undertaken by the Foundation must be for the benefit and profit of the Foundation.

Panaman Foundations also provide for complete confidentiality since they are separate from their Beneficiaries. The Panama Foundation Law allows for the appointment of a Nominee Foundation Council so as to provide anonymity for the real members of the Council since the law itself requires for the filing of the names and addresses of the members of the Foundation Council at the Public Registry. This feature enables bank and investment accounts to be opened by the Foundation without having to reveal the identities of the Beneficiaries as many banking institutions require the personal information of the members of any legal entity or corporation.

By being able to specify through the Foundation Charter the conditions under which the assets held in the Foundation are to be distributed or transferred to its beneficiaries, there is the possibility of safe guarding one’s own interests. For example, a mother who has decided to make her children the beneficiaries of the Panama Foundation can stipulate in the Charter that in the event of their passing, conviction of criminal activity or any other reason, to make a member of her family such as a cousin, aunt or even best friend would become the beneficiary. The same concept can be applied by a spouse with respect to divorce or, in the case of bankruptcy or dissolution of a corporation that was made the beneficiary of the foundation. Additionally, the Charter can be amended accordingly as may be seen fit and in the best interests of the foundation, thus making the foundation a very flexible structure. The clauses of the Foundation are stipulated by the Protector who ultimately controls the Foundation, although for incorporation purposes, the role may be played by the foundation’s registered agent who prepares the Charter only as instructed by the real protector.

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