If you have been investigating offshore banking and asset protection strategies that offer strong privacy benefits, you must have heard about the Republic of Panama by now.  Panama has really earned its reputation as a safe off-shore banking center that is business friendly.

One strategy that clients have been asking about a lot lately is the Panamanian Private Interest Foundation.  (For ease, we are just going to call it a Panama Foundation, if that’s ok with you).  You have probably searched websites and read articles about Panama Foundations.  The terms can be a little confusing.  Those articles are often written by internet marketers who have not studied Panamanian law, which is closer to the continental European legal systems, or by Panamanian lawyers, whose first language usually is not English, and who are unfamiliar with Anglo-American common law.  In both cases, something goes missing in the translation.

Many people don’t really understand the key difference between a Panama Foundation and the more familiar Anglo-American Trust.  While that lack of knowledge by others is probably a benefit for those of us using Panama Foundations, how can you decide to use something when you don’t properly understand what it does for you?  Recently, a client was interested in the possibility of using a Panama Foundation based on what he knew, but he wanted to make he understood exactly.  So, I set out to explain the Panama Foundation concept in plain English.
A brief answer to the question, “What are the key differences between a Panama Foundation and a Trust” is this: A Panama Foundation contains the best features of a trust, and the best features of an IBC or Offshore Company in a single legal entity, which can hold assets like bank accounts, stocks, bearer shares, and real estate, passively.  A Panama Foundation is based on the Liechtenstein Foundation or ‘Anstalt.’  The Anstalt form has been a preferred wealth and asset protection tool for continental Europeans over several generations, but it is neither well known nor understood in the Anglo-American common law countries.  Liechtenstein offers superb offshore secrecy and confidentiality, but these days, my opinion is that Panama offers even better safeguards.

As an asset protection and estate planning vehicle, a Panama Foundation is second to none.  Most of my clients who choose this vehicle want to create a legal structure that will reduce tax liabilities, and protect their hard-earned assets from lawsuits or claims.  Upon their demise, their estates pass to the chosen beneficiaries without unnecessary legal disputes or fees.

In most countries there are no reporting requirements.  Because US tax law doesn’t specifically recognize Panama Foundations, you can structure it to legally avoid IRS reporting requirements.  This ‘difficulty’ only applies to US taxpayers; other nations make it even easier.

Ironically, the best way to keep your assets safe in a Panama Foundation is by avoiding Panamanian banks!  By keeping accounts in another country, perhaps on another continent, you are protected by strict Panamanian secrecy laws, and the most powerful asset protection strategy on earth… ignorance.  What somebody doesn’t know, they can’t reveal. You can make sure that your Foundation is structured so there are absolutely no records held in Panama of what the assets are and where they are located.
Panama Foundations are attractive for Estate and Inheritance Planning, too. They offer a way to avoid probate on offshore holdings. They can be used inter vivos, replacing a living will.