The death of a loved one brings about a series of situations that may be unpleasant for your family. Once such difficult mourning period has passed, we are faced with the task of organizing, distributing or simply dealing with the assets and liabilities left by that person who is no longer with us. While struggling at a crossroads we wonder, Why wasn’t this transfer performed? Where is that mortgage cancellation deed?
Family succession laws in different countries country allow us to pull all the threads together and distribute the assets of the deceased among his/her family members, dependent upon the form of succession as set forth in the law. Generally, two kinds of successions are managed: Testate and Intestate. As suggested by its name, Testate succession is one in which there is a document known as a will that has been left by the deceased. To have validity, this will must be legally constituted and have all the formalities required by law. Intestate succession is such in which there is no last will or a testament duly constituted by the deceased. Thus, the form of distribution of assets is defined by law. In any case, in order to legally assign or transfer the property, it is necessary to undergo arduous succession proceedings, which can be tedious, lengthy and often costly.
Fortunately, the Panamanian jurisdiction provides us with a mechanism to avoid these processes and efficiently manage our estate by using a Private Foundation. Introduced under Law No.25 of 12th June 1995, same is a hybrid between a corporation and a trust. It is incorporated by means of a Foundation Charter that is registered at the Public Registry of Panama and offers a legal form not provided for in a trust.
Among the parties involved in a Private Foundation is its principal administration body named Foundation Council. It is similar to a Board of Directors with some of the functions of the Trustee of a Trust. Those who receive the benefits and profits of a Foundation are the beneficiaries. It also allows the appointment of an independent body to oversee the actions of the Foundation Council.
What benefits can a Private Foundation offer as compared to other options? Here are some of its advantages:
- A Foundation may engage in civil and commercial activities and transactions on a non-habitual basis anywhere in the world.
- The property and assets that are part of the Foundation constitute a separate and independent estate. Therefore, they cannot be seized or attached on account of obligations of the Founder or Beneficiary (ies), unless the Foundation itself has agreed to same or is guilty of defrauding creditors.
- The assets of a Foundation may be increased at any time and can be located anywhere in the world.
- The property and assets of a Foundation may be used and enjoyed by its Founder or Beneficiaries, in accordance with what has been stipulated in its Foundation Charter and Regulations.
- It is not required to disclose the name of the beneficiaries in the Foundation Charter (document that is registered with the Public Registry of Panama and brings the Foundation into existence). Generally, this information is provided in a separate private document and same is named Regulations. Such document may contain, among others, details of the specific property of the Foundation as well as their distribution rules.
- It is exempted from payment of taxes, fees or assessments in the Republic of Panama. Its sole obligation is to pay an Annual Franchise Tax of U.S. $ 400.00 at the Public Registry of Panama.
The advantages of owning Private Foundations for estate planning structures are truly amazing. Compared to other options, they are inexpensive with low maintenance cost. They also allow all kinds of persons to manage their assets in an efficient and safe manner while helping to plan and structure their succession, avoiding cumbersome legal processes and inconveniences to their family members in case of death.