Estate, Succession Planning and Asset Protection

What is Estate Planning?
Estate Planning is drawing a plan or a course of action, for when we are no longer here, on the assets that belong to us. This can definitely be overwhelming, but it doesn't have to be that way. On the other hand, good estate planning implies that you have control, as far as possible, about how your assets will be divided. It also involves you reviewing your plan from time to time, in order to keep it up to date, especially if you are accumulating assets and/or people that you want to include in your planning.

Why should you do Estate Planning?

Here are some reasons for you to carry out estate planning:

Provide for your loved ones. You may have a wife/husband, children, grandchildren, or grandparents or other family members that depend on you financially. In this sense, it is worth that you ask yourself, what happens if I am no longer with them or I become incapacitated? How will they be sustained? How will my children or grandchildren pay for their studies ?; Am I leaving a headache for my heirs? Are taxes due? Creditors?

Minimize the tax or tax burden as much as possible.

Protect your investments or businesses. Here factors such as political decisions that may affect your business or investments come into play; that your second or third generation does not bring the business to bankruptcy; If you have partners, how is everything resolved in case of your death? There are many variables to see at this point.

Where to start?
1. Make a balance sheet of all the assets you own, including real estate, bank accounts, retirement plans, among others.
2. Are there certain people that you want to specifically exclude from your estate? Is there a specific property that I want to go to a specific person?
3. Seek legal advice. This will allow you to analyze the different options available to transfer your assets.

What do we do?
Each client is different, in this sense, we accompany you at every step necessary to create your plan and put it into practice using the instrument or instruments that are most suitable for you. Among these instruments, we contemplate wills, trusts, companies, private interest foundations, among other figures that are useful and that are within the budget of the client.

Likewise, we carry out an evaluation of all your assets and create the best strategy so that your plan is also tax efficient. The latter we achieve by working hand in hand with your tax advisor or by providing you with one.

The Panama Private Foundation (hereinafter known as PIF) has its origins in Law 25 of 1995, which in turn was inspired in the PGR or better known as the “Liechtenstein Persons and Company Act”, that contains one of the first references to the private non-profit foundations. In Panama, this and the most recent innovations in the Anglo-Saxon Trust enabled the creation of the Private Foundation utilizing the best features and characteristics of both worlds.

A PIF is a legal entity that can be created by either a natural person or a corporation that later transfers part or all of his/her assets to the Private Foundation so they can be managed and protected in favor of the Beneficiaries.

I. USES THAT CAN BE GIVEN TO A PIF.

With regards to uses that can be given to a PIF we can find the following:

  • Family support. 
  • For Tax purposes.
  • For the protection and management of assets. 
  • For educational purposes. 
  • Testamentary purposes.
  • For life annuity purposes. 
  • For charitable purposes. 
  • To receive and manage capital and titles. 
  • For the purpose of serving as guarantee or collateral. 
  • For the management of insurance. 

We must comment that several or all uses mentioned above can be given to a particular PIF, there are no restrictions as to the objects or uses one PIF can be given. For example, one PIF can be created to protect assets, but also with a testamentary use or in any case, with all the above-mentioned uses. However, a PIF cannot engage in commercial or for-profit activities as a day-to-day activity.

II. ADVANTAGES.

PIF’s may be successfully used to achieve the goals you or your clients have set out for, with the following advantages:

  1. They provide a fiduciary structure for the orderly transfer and disposition of assets to beneficiaries upon the death of the Founder, keeping control of the assets during lifetime;
  2. They may be established to have effects from the date of their constitution or after the death of the Founder;
  3. According to Law 25 of 1995, inheritance laws that apply in the domicile of the Founder of the Beneficiaries, shall not be effective against the Foundations assets nor may these laws affect the validity or performance of the Foundations objectives;
  4. Foundations are established to carry the specifics goals set out in the Foundation Charter and may additionally undertake sporadic commercial activities, exercise rights pertaining to their holdings, own property, contract obligations and take part in administrative or judicial proceedings.
  5. A Private Interest Foundation should be established with a patrimony destined to fulfill its objectives, which shall be no less than US$10,000.00. Said patrimony may be increased by additional contributions of the Founder or third parties and does not have to pay in part or in full before the incorporation;
  6. The assets of the Foundation become legally independent and do not form a part of the private estate of the Founder. Such assets are not sizeable and may not be subject to any precautionary action or measure unless such action or measure pertains to obligations incurred or damages arising from the fulfillment of the Foundations objectives; Notwithstanding the creditors of the Founder or of a third party shall have the right to contest the contribution or transfer of assets to a foundation when such transfer constitutes an act in fraud of the creditors. The rights and actions of such creditors shall lapse at the expiration of three (3) years, counted from the date of the contribution or transfer of the assets to the foundation was done.
  7. According to article 27 of Law 25 of 1995, Private Interest Foundations are exempt from payment of any taxes, contributions, duties, liens or assessments of any kind arising from the acts of constitution, amendment or extinction of the same, as well as acts of transfer or encumbrance of the Foundation's assets and the income arising thereof, when related to:
    1. Assets localized abroad;
    2. Money deposited by natural or juridical persons whose income does not derive from a Panamanian source is not taxable in Panama for any reason;
    3. Shares or securities of any kind issued by corporations in ch income is not derived from a Panama source, or which are not taxable for any reason, even when such shares or securities are deposited in the Republic of Panama.

The transfer of immovable property, titles, and certificates of deposits, assets, funds, securities, r shares carried out by reason of the fulfillment of the objectives of the foundation or the termination of the same, in favor of relatives within the first degree of consanguinity or the spouse of the Founder shall also be exempted from all taxes.

III. INFORMATION OF PUBLIC AND PRIVATE KNOWLEDGE.

The only information made public is the names of the Founder, the member (s) of the Foundation Council, and the name of the Protector, this last if it is so established on the Foundation Charter, as the Protector can be appointed by means of a private and confidential document.

The Foundation Regulations are for internal purposes of the Foundation and are not a matter of public records. Information regarding names of beneficiaries and of the protector and method for distribution of assets can be contained within the Regulations, thus will not be publicly disclosed.

IV. CONFIDENTIALITY.

The Law 25 of 1995 innovates in this field when it stipulates on Article 35 that all the members of the Foundation Council, Protector, public or private servants that have knowledge of the