The Panama Foundation of Asset Protection – A Guide
Panama Private Interest Foundation (PPIF) combines a trust, a corporation and a will into a legal entity. The foundation typically holds assets such as real estate, shares and stocks and bank accounts passively. An important element of PPIF is it does not have an owner, instead one or multiple beneficiaries are involved using which asset holders from various countries are able to legally avoid the IRS requirements. This is where the ultimate question makes its way: Is the foundation a rewarding asset protection tool or just a hype?
To help you understand what’s best for your asset, this guide will cover every aspect of Panama foundation including its components, purpose and benefits.
Structure of Panama Private Interest Foundation
There are four key components of the Panama foundation and these are:
- Founder: The founder is the one who tends to create the foundation in the public registry of Panama.
- Council for Foundation: A council is established whose responsibilities are similar to that of board of directors for a corporation. The name and passport numbers of the members remain registered in the public registry of Panama. For complete privacy protection, law firms opt for nominee on their behalf.
- Protector: The protector has 100% control on the foundation. After creation of the PIF, the founder appoints the protector using notarized PIF Protectorate document. As this document is kept private and not registered publicly, the protector remains anonymous. This means, the protector acquires full control of assets, yet stays anonymous.
- Beneficiaries: The beneficiaries are selected by the protector in a private document, again keeping them anonymous. Only the protector has the legal right to either modify or change the name of beneficiaries.
The structure itself speaks volumes about how proper asset protection with much-needed anonymity can be guaranteed with Panama Foundation.
The Purpose of Panama Foundation
Panama Foundation does not have any corporate shares, rather it can be the only shareholder of a particular corporation. Here, the asset holder is able to control the foundation privately as a protector. Further, the Panamanian banks are known for their strict confidentially for account holder under the bank laws of Panama. If the account holder wants to remain anonymous then the foundation would be an advantageous owner.
According to the Panamanian laws, no matter what the circumstances might be, the assets of the foundation cannot be blocked- making it an exceptional protection vehicle for assets. In fact, the PIF automatically distributes the asset among beneficiaries in the event of incapacity of protector or death. It should be noted that, as the wealth comes for various countries around the globe, it is not subjected to any legal procedures or standard taxes of Panama.
However, the assets are always dealt within the jurisdictions of Panama, allowing people to diversify their assets without having to battle in their residing states. For instance, if you have a child from your previous marriage and are not sure whether he/she is going to be treated as a member of the family or not, then you can consider having their portion of asset in Panama with their name as the beneficiary.
Thus, the purpose of the foundation can be stated as: to act as a form of holding company, with efficient estate planning and can also work as charitable entity. This makes it a hybrid structure that lies between Corporation or LLC and Trust. It comes with this incredible flexibility, giving you the perfect opportunity to have control when circumstances are in your favor, and give up whenever required.
Benefits of Using Panama Foundation As Asset Protection Tool
There are countless benefits of choosing the foundation as a part of your asset protection strategy and some of them are:
- Holds Multiple Assets: The foundation holds various assets including collectibles, artwork, boats, plane and other forms based on instructions about how each have to be dealt with under specific circumstances, everything is customized to meet your needs, as trademarks, copyrights and royalties can also be assigned to foundation.
- Tax Benefits: The transfer, assignment or donation of your assets will not be subjected to any tax, neither is the modification, organization and dissolution of foundation. In addition to that, the income that will be generated from your assets does not come under any contributions, rates or taxes too.
- No Capital Requirement: The accounting and books will be held in abroad or Panama and there are no specific requirements for filing tax returns. The operation of foundation and management are not subjected for remaining in supervision of the governmental authority.
- Disputes Resolved by Arbitration: If any legal dispute arises with connection to Foundation then would be solely resolved using arbitration, avoiding any public records about the litigation. Such provisions incorporate procedural rules and location that has to be followed during the arbitration.
- Right to Revoke: Though the foundation was made with an aim of being irrevocable, but there are certain circumstances that give protector the right to revoke. The foundation can be made effective on certain date or occurrence of a condition or event, or the founder’s death.
Panama Foundation – Frequently Asked Questions
- Who should consider private interest foundation for asset protection?
The individuals with ample wealth who aspire to use foundation as a critical element of traditional estate planning, should select foundation for asset protection. As, there can be many unforeseen, unexpected and unintended risks that would be managed effectively with the foundation.
- What makes the foundation more popular than ever?
Historically, the foundations remained the most useful and flexible means of formulating estate plans around Latin America and Continental Europe. Good estate planning is not but proper protection, accumulation and the distribution of estate. Through the foundation, the asset owners can effectively achieve their objectives, while minimize tax impositions.
- What is required for incorporating the foundation?
The primary information needed for the process are:
- Purpose and Name of Foundation
- Address of Foundation
- Name of Council Members of the Foundation
- Appointment of Agent Registered in Public Registry
- Is the foundation handled like other Trust, Corporation or LLC?
The foundation councils administer have powers and responsibilities that are established under regulations and charter of foundation, same as seen in a corporation or Trust. If the council is juridical person (offshore company), then the total number of members in the council must not be more than three.
- Is the foundation protected by confidentially and secrecy?
The different members of the council, supervisory bodies, private or public employees, and if those who are aware of the operations and transactions that are being carried out, must stay confidential at all times. If there is a breach then the defaulter would be imprisoned for a period of 6 months and has to pay a hefty fine too. The rules that are made for breaching and maintaining the foundation are definitely strong.
In the end, Panama Foundation is an impeccable tool for estate planning and asset protection. It is relatively inexpensive, when compared to private interest foundation of other jurisdictions. The country does not have any sort of agreements or treaties for information exchange. The court is deterrent for spouse, creditor, government or business partner and offers fiduciary structure for ensuring orderly asset transfers. It protects identity of beneficiaries, protector and the PIF too, underlying Article 35 of the 1995 Legislation for Panama Private Interest Foundation.