Let's Discuss Asset Protection in Panama

Panama Private Interest Foundations

The Panama Foundation is more than just a tool to fund a philanthropy organization or center.

“Foundations are the favored asset protection tools
of the Super Rich such as the Rockefellers and Rothschilds”

A Panama Private Interest Foundation is sort of a combination of a will, a trust and a corporation best of all, in a sense. Panama Foundations are more versatile and can accomplish more than Trusts plus they are anonymous. It only takes 2-3 business days to form a Panama Foundation. Panama Corporations can be formed in the same 2-3 days even if the Corporation is to be owned by the Foundation. No one owns a Panama private Interest Foundation, so you are not the owner of the Foundation, no one is according to the statutory laws of Panama. A Panama Foundation can own the shares of a Panama Anonymous Bearer Share Corporation, thus removing you from being any sort of owner of the Corporation. Now since the Corporation is owned by the Foundation and you own neither it creates a most beneficial scenario for some people. Add to this you are not the founder of record of the Foundation (we supply a founder), you appear in no public registry or database in regards to the Foundation and the Foundation can even be so created that you are not even a beneficiary, you can just be the protector which is a private position never appearing in any database or public registry. You are not a beneficiary of the Foundation which some governments could view in a similar way to the beneficiary of a trust, not an owner of the Foundation and not really a true person of control, just a protector who protects things to make sure the wishes of the foundation are fulfilled. Foundation protectors do not initiate transactions just oversee them to make sure they are consistent with the wishes of the Foundation thus they are not persons with true control over the Foundation, they just have veto power. Read below to learn more and questions are always welcome. This is serious material that needs to be studied before one can truly appreciate all the thought that went into the legislation creating the Panama Private Interest Foundation with all its subtle and not so subtle advantages that make this the most outstanding asset protection tool in the world today.
Summary of Panama Foundation Benefits:

• Protects assets (real estate, bank accounts, stocks, bonds, art and collectibles, corporations, boats planes, cars) from financial enemies and potential financial enemies. A Panama Foundation can own one or more Panama Corporations. This means you can operate an anonymous Panama Corporation which is not owned by you, it is owned by the Foundation. Foundations have no owners. A Panama Private Interest Foundation is a court tested method to keep assets immune from the personal debts of the person starting the Foundation. It prevents forced heir ship. The Panama statues relating to Foundations are based on the Lichtenstein model – “Stiftung”.
• According to Panama law, the assets of a Panama Private Interest Foundation are not considered to be subject to sequestration or embargos. This means that the assets can not be frozen as a protective measure before a full trial is gone through. The meaning of sequester is as follows from the legal dictionary: a legal writ authorizing a sheriff or commissioner to take into custody the property of a defendant who is in contempt until the orders of a court are complied with, or a deposit whereby a neutral depositary agrees to hold property in litigation and to restore it to the party to whom it is adjudicated to belong to. The exception to this rule would be if the Foundation itself (not the founder, not the protector, not the council members, not the beneficiaries) did something illegal like for example it illegally broke a lease on a real estate transaction and refused to pay the rent owed, then the Foundation assets could be frozen to the extent of the amount owed under the contract if a judge so ordered and a bond was posted. If the Foundation itself does not directly commit the illegal action then the assets of the Foundation are not subject to freezing or seizure. This gives one great peace of mind when funding their foundation and we suggest to our clients that the Foundation never do anything that could lead to any litigation, think of it as a holding entity. Welcome to Panama.
• The foundation can have instructions to dispose of assets in a certain way in the event of you encountering serious legal or other difficulties like being sued, being forced into bankruptcy, being kidnapped and held for ransom, being blackmailed or the victim of extortion, or if in any way you are incapacitated or your ability to function freely is inhibited in whole or in part, etc. There can be secret instructions for a specific person to deal with assets in such an event as the founder sees fit. These secret instructions can appoint a temporary protector in the event you are under such duress with specific instructions as to how he should proceed with the foundation and its assets. This would remove the ability for you to move the foundation assets around, period. This is now something you can not do until you can demonstrate to the person inserted as the temporary protector that the conditions acting as the trigger for the empowerment of the new protector are no longer in place or no longer operative and you are no longer under duress and then as per your instructions you will be the Protector again with all the power returned to you.
• Panama Foundations have no owner thus there is no registry in existence that records Foundation ownership in Panama. The Foundation can be a shareholder or owner of a corporation. Thus your Foundation could be the owner of an anonymous Panama bearer share corporation which you use to conduct business. Then you could say you are not the owner of the corporation. Since a Panama Foundation really has no owner you would be telling the truth and in the unlikely event the Foundation came up you could also say you do not own that as well.
• Foundations can be used to provide for the financial well being of family members according to your explicit instructions. Once could say my foundation income will go to my surviving spouse but in the event the spouse remarries then the foundation proceeds will go to my eldest child. This would be enforceable in Panama. The Foundation can protect closely held businesses, providing for continuity into second and third generations by preventing property-splitting; to protect and provide for minors or disabled persons or those incapable of managing their own assets; to manage payments of income or distribution of assets to family members or to provide for their education, housing, or maintenance.
• The Foundation can manage profit sharing or pension plans for employees, to hold shares, participate in or have an interest in private or public companies; it is a vehicle for the collection of royalties. It can engage in commercial transactions where the proceeds of such are dedicated exclusively to the non-commercial purpose or objectives of the Foundation. Very useful point.
• You could have a formal written agreement appointing you as the investment manager or business manager for the Foundation. This agreement would be signed by the Nominee Council members and would be notarized and apostilled if needed. The agreement could spell out your compensation including benefits like use of foundation auto, travel expenses, general expense account, use of foundation apartment or house, use of foundation boat, medical benefits to be paid directly by the foundation to the health care provider or doctor including elective surgery like plastic surgery, paid legal expenses direct from foundation to law firm, etc.
• According to Panama law, the assets of a Panama Private Interest Foundation are considered to be "non-embargable", and "non-sequesterable", which means that the assets can not be frozen under any circumstances.
• The Panama Foundation needs no business license.
• The annual tax for the Foundation is fixed at $300.
• The Foundation can serve as a last will and testament.
• The Foundation can effectively guard against disputes amongst heirs.
• The Foundation can carry on scientific, philanthropic, religious, humanitarian or educational purposes.
• The Foundation can have bank accounts.
• The Foundation income is tax free under Panama law.
• Royalties, copyrights, trademarks can be assigned to the Foundation.
• You can assign assets to a Panama Foundation in return for an annuity.
• The Foundation can be an investment vehicle for real estate, stocks and bonds. It can hold bank accounts, boats, planes, artwork, collectibles or other assets with highly specific instructions as to how such assets should be dealt with under varying circumstances, all custom designed to meet your specific needs.

Restrictions - In general, Private Interest Foundations may not engage in commercial activities like a corporation but they may carry out commercial activities like owning corporations that are actively engaged in commercial business activities, as long as the profits of those activities are used for the purposes for which the Foundation exists. The Foundation can of course engage in passive investments like stock market investments, mutual funds, bank deposits bearing interest, Forex, bonds etc as long as the proceeds are used for the purposes for which the Foundation exists – for the benefit of the beneficiaries and you can of course be a beneficiary of the Foundation. You could also have an investment manager agreement with the foundation signed by the nominee council members, notarized and apostilled stating your compensation and benefits for managing the investments of the foundation. This agreement would be private and would document your role as an employee with the foundation.
Cast of Characters in a Panama Private Interest Foundation - The Foundation has a Founder, a Council, a Protector, and Beneficiaries.

• Founder: The Founder is the person or entity that establishes the Foundation in the Public Registry of Panama. Our law firm provides a Founder for you since the Founder appears in the Public Registry. We provide a Founder who does not know you for your privacy, protection and anonymity. The Founder has no control of any sort over the Foundation and its affairs, and is only recognized as the individual who presented for filing the Foundation articles in the public registry when the foundation was originally registered.
• Council: The Foundation's Council can be thought of as being similar to the board of directors of a corporation. The council members are each recorded in the public registry with their names and identification as council members of the Foundation. The firm you work with appoints a Nominee Foundation Council to fill the council positions like we provide nominee directors for a corporation. The nominee council members do not know who you are to provide privacy and anonymity for you. Along with each nominee council member comes an undated letter of resignation enabling you to replace the council at any time. Nominee council members have no control over the Foundation assets, can not go to the bank and take money out since they are not bank account signatories. If the nominee council members tried to add, change or delete the bank account signatories the Panama bank would directly contact the existing signatories on the account for permission in which case the signatory would call the police and the nominees would go to jail. The nominees know this, Panama banks understand nominees and this is not a scam that will work. Being a nominee does not come with bank signatory privileges or any other form of asset control. A Panama Corporation can take the place of the nominee council members.
• Protector: The Protector is the person or entity who has the real control over the foundation and all of the foundation assets. The Protector is appointed by the Foundation Council at the time the Foundation is created. After the Protector is put into position, the Protector is free to remove and replace the nominee council members whenever they chose to do so without any further permissions or steps needed to be taken. The Protectors appointment can be kept private through a notarized Private Protectorate Document, signed by the nominee foundation council members. This document is not registered or recorded anywhere thus the position of protector is quite private or just about anonymous, not to be found in any government database or registry. As protector you can maintain complete control over your foundation and its assets while maintaining serious privacy. A protector is not mandatory, and one can always use a nominee protector as well. It is possible to insert in the foundation charter or in its regulations that in order for the nominee council members to actually be able to exercise their powers they are required to obtain written authorization from the foundation protector. This means if they tried to do something on behalf of the foundation like enter into a contract they would be required to present the document that names them as foundation council members and this document also limits their ability to act requiring written permission from the protector. In the case of a bank, the bank contacts the existing signatories in the event there is a request to add, remove or change signatories. Same would apply regarding a request to close the bank account.
• Beneficiaries: The Panama Private Interest Foundation does not have owners, it has foundation beneficiaries. The Foundations Beneficiaries are appointed by the Protector through either a simple private written set of instructions which will keep your beneficiaries private out of any registry or database. One could instead use a more formal set of Foundation By-Laws. Either way, the privacy and confidentiality of beneficiaries can be assured. This is important to protect against kidnapping, blackmail, extortion, identity theft, frivolous litigation (if ones assets are concealed they are not so much of a target). The Panama Foundation may be set up so that the protector (that would be you) is the sole beneficiary of the foundation until death, at which time the foundation continues but its purpose alters for the benefit of the other beneficiaries you so designate. You could insert instructions that are highly specific like if a certain beneficiary (say surviving spouse) remarried their benefits may shift to another beneficiary (children). Foundations can continue for 120 years. Panama Foundations restrict the ability for the beneficiaries to fight with each other over the estate and wind up not speaking to each other for the rest of their lives.

Letter of Instructions: The Letter of Instructions is a simple letter, written by the Protector, which specifies exactly how the Foundations assets should be handled or distributed upon a triggering event such as the death or incapacity of the Protector. The Letter of Instructions should also state whether the Foundation should continue existing, and have a new Protector appointed, or if the Foundation should be dissolved and how the assets should be liquidated upon the death of the Protector. There is no specific format for the Letter of Instructions, and it can be written or changed at any time after the Foundation is formed, per the Protectors wishes. The Letter of Instructions can be held privately with no filing requirement so there is non-disclosure of details with serious privacy for all concerned. Generally, most people prefer to maintain the Letter of Instructions privately, so that the Beneficiaries and Protector remain anonymous and private.
Foundation By-Laws: The Foundation does not need to have By-Laws, since a Letter of Instructions is legally sufficient for fulfilling the Protectors' requested testamentary instructions or wishes. However, one could have a more formal Foundation testamentary document, written and signed by an attorney from our law firm, and notarized by a Panamanian notary. The Foundations By-Laws essentially handle the same function as a Letter of Instructions since the By-Laws specifying how the Foundation should respond upon a specific triggering event such as the death or incapacity of the Protector. The By-Laws should also state whether the Foundation should continue existing, and have a new Protector appointed, or if the Foundation should be dissolved upon the specified triggering event(s). There is a legal precedent that the By-Laws must follow. By-Laws content can be modified at any time at the discretion of the protector. The By-Laws can be held privately for anonymity, or can be registered publicly which is not suggested normally.

Unique Foundation Features and Benefits:

• Anonymity: Like the Panamanian Corporation, the Private Interest Foundation provides anonymity to its beneficiaries as well as to the Founder.
• Arbitration: The Foundation Charter may provide that any controversy arising in connection with the Foundation be resolved by arbitration, thus avoiding the public records of litigation. These provisions may also include the location and the procedural rules to be followed in arbitration.
• Asset Protection: The assets of the Foundation cannot be used to satisfy the debts of the Founder or of the Foundation beneficiaries, such as divorce proceedings, lawsuits, bankruptcy or other liabilities. When assets have been transferred to the Foundation and out of the reach of creditors, any claims of fraudulent transfer to remove assets from the reach of creditors must be made within three years and the court wait to hear such a claim in Panama it usually five years maybe longer.
• Capital Requirements: A minimum of US $10,000.00 of assets must be transferred to the Foundation, although this need not take place immediately following establishment. There is no recording in any registry of the capital amounts other than this minimum transfer, so the sum of total assets held by the Foundation remains totally private.
• Confidentiality: The Foundation Nominee Council Members, Registered Agent (us your law firm) and any other person that is privy to information relating to the activities, assets, transactions or operations of the Foundation are required to keep this strictly secret. In addition to civil liability for actual damages, breaches may result in imprisonment for up to six months and penalties of up to $50,000.00. Panama thrives on Privacy.
• Documents and Records: There are no requirements to file tax returns or a financial statement which means no auditing of such things. Books and accounting records may be held in Panama or abroad, you can even electronically put them up on a server in encrypted form is some part of the world where the location is only known only to you. Discovery is tough if you have no idea where the books and records are. Furthermore, the management and operation of the Foundation is not subject to the supervision of any governmental authority. No snooping, no fishing expeditions, no harassments, no Panama taxation, nothing vital in public records, anonymity for Foundation Founder and beneficiaries, etc.
• Estate Planning Vehicle: The Panama Private Interest Foundation is a sophisticated and efficient substitute to wills, trusts etc. The Panamanian Foundation is a perfect vehicle for inter vivos or mortis causa estate planning, as it can be set up to remain in perpetuity in so far as the purposes of the Foundation continue to be met. This may prevent hereditary disputes, as well as avoiding forced heir ship rules.
• Foundation Council Meetings: It is not necessary to hold annual meetings.
• Founders: The Founder may be one or more natural or legal persons of any nationality. Panama law is silent on the transferability of the Founder’s rights and obligations, there is nothing to prevent the transfer of these rights and obligations from a nominee founder as registered in the Foundation Charter to the real founder by a private document, think secrecy. We normally use a Nominee Founder. It is possible for the Founder to retain certain controls with respect to the Foundation, although these should be set out clearly in the Foundation’s Bylaws. There can also be a private instruction that speaks to this subject.
• Preservation and Administration of Assets: The Private Interest Foundation is a perfect vehicle for the preservation and administration of assets. The Foundation Charter may limit or prohibit property splitting, property transfers, the mortgaging or using of property to secure loans or other forms of financing, and regulate the general administration of the assets or business donated to the Foundation. The Foundation should be authorized to preserve, administer, and invest the assets consigned to it and to conclude all commercial and legal transactions necessary to the realization of its purposes. The Protector can play a vital role in the administration of the Foundation.
• Revocable: Although the Foundation is generally irrevocable, there are a limited number of cases, where it is possible to revoke its establishment:
  • Before registration of the Foundation Charter.
  • When the Foundation Charter expressly provides for revocation.
  • For any of the Civil Code causes for revoking inter vivos donations.
• Tax Advantages: The assignment, transfer or donation of assets to the Foundation is not subject to any tax under Panamanian law, neither is the organization, modification or dissolution of the Foundation. Provided it meets general requirements; income generated by assets of the Foundation is not subject to taxes, contributions, rates or liens of any kind.

Other Foundation Technical Points

• There is no statutory requirement for a private foundation to file any annual tax return or financial statements.
• One could set up a Panama Foundation to transfer control of assets to the surviving spouse, and one could insert instructions privately that if the surviving spouse remarried the control reverts to another family member or another person. The Panama Courts would find this completely enforceable and this is not at all unusual
• The foundation is revocable by the founder. If a nominee founder is used private instructions can be established to transfer this control to another.
• The foundation may be created to become effective on a certain date, on the occurrence of certain event or condition, or upon the death of the founder.
• Detailed information about the names, percentages and other particulars regarding the beneficiaries can be included in a separate document called “Regulations or Instructions” which is of a private nature and as such does not have to be recorded at the Public Registry Office. Anonymity.
• A foreign foundation may re-domicile in Panama through a Certificate of Continuation. By the same token, Panamanian foundations may transfer their domicile or assets to another country if so provided in the foundation charter or its Regulations.
• The rules of “forced heir ship” of other countries will not be applied against the foundation.