Private Interest Foundations
Perhaps you’ve read about Panama Offshore Corporations and Trusts. Their main purposes are to protect your assets and provide you with privacy regarding your financial affairs.
The Complete Offshore Structure is a combination of Panamanian legal entities. A Private Interest Foundation owns an Offshore Corporation. In this way, a corporate entity receives the maximum in asset protection, privacy, anonymity, and convenience!
How it works
The Panama Corporation owns all major assets (real estate, commercial businesses, commercial bank accounts, etc.). The Foundation acts as a holding company for the Corporation. The Foundation also holds passive investment accounts and bank accounts.
What is a Foundation?
The Panamanian Private Interest Foundation is a legal entity that acts like a Trust and operates like a Corporation. Law No. 25 of June 12, 1995, was created to regulate Panama Private Interest Foundations.
The Panama Private Interest Foundation is based on Private Interest Foundation models from Liechtenstein and the Delaware Trust Fund. Panama carefully designed the Panama Private Interest Foundation as a more modern, flexible, and affordable Asset Protection & Estate Planning vehicle for people worldwide.
Non-Profit Foundation
The law specifically states, “private foundations shall not be profit oriented.” Exception: Foundations may engage in commercial activities on a non-habitual basis or own shares of business companies and receive passive income, such as from rental properties or dividends.
Foundation Structure
The Private Interest Foundation has four main components:
- Founder. The Founder creates the Foundation in the Panama Public Registry.
- Foundation Council. The Council serves the same function as directors do for a corporation. The Council’s member names and passport numbers are registered in the Panama Public Registry when the Foundation is incorporated. In order to protect the privacy of clients, law firms generally provide a nominee Council, and provide pre-signed, undated letters of resignation from each member of the nominee Council. Thus, the Council has no control.
- Protector. The Protector ultimately controls the Foundation. When the Foundation is created, the Council appoints a Protector through a notarized Private Protectorate Document. Since the document is private and not publicly registered, the Protector remains 100% anonymous. Thus, the Protector has full control over the Foundation and all of its assets.
- Beneficiaries. The Beneficiaries are appointed through a Private Letter of Wishes, written by the Protector. The Letter of Wishes is a private document keeping the Beneficiaries 100% anonymous. Only the Protector can change or modify the Letter of Wishes.
Registered Agent. The Act requires that every Foundation have a registered agent, who must be either a Panamanian lawyer or law firm.
Capitalization. Only Ten Thousand (10,000) USD is required as the initial endowment of a Foundation.
Foundation Purposes
Holding Entity for a Corporation. A Foundation has no corporate shares. The Foundation can be the sole shareholder of your Corporation. You control the Foundation anonymously through a Private Protectorate role. As Protector, you appoint the Beneficiaries through a Private Letter of Wishes. Since both the Protector and Beneficiaries are appointed through non-public documents, their identities remain 100% anonymous.
Beneficial Owners when Opening Bank Accounts. Due to the global scare of terrorism, most offshore tax haven jurisdictions have implemented laws requiring their banks to obtain “declarations of beneficial ownership” when establishing corporate bank accounts. In Panama, the banks maintain this information with rigorous confidentiality under their strictly enforced bank secrecy laws. If an owner wishes to remain anonymous, the Foundation can serve as the beneficial owner. The nominee Foundation Council can sign the declarations on behalf of the Foundation, keeping the true owner 100% anonymous.
Distribution of Assets to your Heirs. Under Panamanian laws, no one may freeze a Foundation’s assets under any circumstances, thereby providing the ultimate asset protection vehicle. The Panama Private Interest Foundation is specifically designed to cherish, protect, and distribute its assets to your chosen beneficiaries upon a triggering event, such as your death or incapacity. Your Foundation’s Letter of Wishes, written by the Protector, details the Foundation’s assets, list of Beneficiaries, and how and when those assets are to be distributed to the Beneficiaries. Since the inheritance comes from outside of the Beneficiary’s domestic country, the inherited assets are not subject to any of the standard taxes and legal procedures employed by most countries. Through the Foundation, your heirs will receive their inheritance free of probate, gift taxes, estate taxes, inheritance taxes, or legal delays.
Facilitates Fund Mobility. Since the Foundation is a non-profit entity, it may receive donations, and it may give donations/grants, etc. The Foundation can accept donations of funds from any source. Furthermore, the Foundation can provide educational grants, charitable donations, etc., to any source whatsoever. All such activities are guided by instructions received from the Protector.
Summary
Rights of Heirs. Under Panamanian law, the Founder’s heirs do not have a right to revoke the creation of the Foundation, or the right to object to the transfer of properties to the Foundation. The laws of the Founder’s country regarding intestacy have no bearing on the validity of the Foundation, thereby ensuring that the Foundation’s objectives will be honored even in the event of the Founder’s death.
Features and Benefits. Some of the other features and benefits of a Foundation are as follows:
- Limited Liability. A Foundation holds its own assets and liabilities separate from those of the Founder or any other person. The Founder and the Foundation cannot be held responsible for the debts of one another, except where the Founder has administered the Foundation in a way that ignores the separate identity of the Foundation.
- Minimal Public Disclosure. Other than the ministerial act of accepting a proper Memorandum of Foundation for filing, no government approval or action is required for the establishment of a Foundation. The Regulations of a Foundation, under which it operates, are not required to be filed in any public office or registry. No governmental agency supervises or oversees the management and operation of a Foundation. No reports concerning a Foundation’s activities, its income or financial condition , or the names of its Beneficiaries, are required to be filed with any governmental agency.
- Avoidance of Testamentary Formalities. Property owned by a Foundation is not subject to probate, inheritance taxes, estate taxes, or any other taxes or regulatory fees as a result of the death of Founder, Protector, or any other individual associated with the Foundation.
- Privacy of Assets. Except for the initial endowment of Ten Thousand (10,000) USD, there are no public records as to the assets of a Foundation. There is no obligation for the filing of any public instrument with respect to an increase in the endowment and no filing of financial statements.
In Conclusion
Foundations protect your assets, act as your Holding Company, provide total Estate Planning, and act as a Charitable Entity. A Panama Private Interest Foundation has many advantages, including limited liability, privacy, elimination of a will and probate, virtually no public exposure, functionality as a Charitable Organization, and more. Panama’s Public Interest Foundation law, Corporation laws, and strict banking secrecy laws combine to provide you with the maximum in Asset Protection and Privacy.
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