In general, the main objective of a trust is that the properties, whose ownership has been transferred, become part of an autonomous patrimony that will be administered by the fiduciary according to the instructions received by the trustee. The legislation allows all types and nature of property, current or future, to be established in the trust. Examples of property that can be transferred under the trust agreement are: cash, franchises, shares with or without voting rights, bonds, real estate properties or rights over these real estate properties, insurance policies, promissory notes, bills of exchange, etc. Properties can be added after the trust has been established upon the approval of the fiduciary.
The notion that the trust property makes up an autonomous patrimony, separate from the fiduciary`s personal assets, implicates his exclusion of the general guarantee of the fiduciary`s creditors considering that the property is registered separately, according to the accounting rules so that the property will not be confused with other properties under the fiduciary`s control. This situation leads to a series of benefits from the fiscal/tax standpoint and asset protection before possible confiscation or embargos by third parties. For example, the fiduciary that wants to obtain personal credit cannot offer the property he maintains in the trust as a guarantee. The trust patrimony is also excluded from the beneficiary`s creditors considering that he is not the owner of the property and only has an expectation of the transfer of the property or part of it, or periodically receives benefits and therefore, the creditors have no rights over such property, except for confiscation or embargo of the benefits/profits that the affected beneficiary should receive.
Practical uses and applications of trusts:
- Management, conservation or administration of property
- Investment of property
- Beneficiary protection
- Tax benefits
- Confidentiality of property
- Flexibility in the procedures of change in jurisdiction
- Guarantee of obligations
The Panama trust law establishes that the acts of constitution, modification or extinction of a trust as well as acts of transfer and duties of the trust property and the income originating from the property or any other act is exempt of all taxes and duties in the Republic of Panama, as long as the following requirements are met:
- The trust property is located abroad.
- The funds transferred to the trust do not originate from sources of income in Panama.
- The shares or securities of any kind should be issued by corporations whose income does not originate from a source in Panama even when the shares or securities have been deposited in the Republic of Panama.
Confidentiality of Property
The Panama trust law has dispositions that require that the fiduciary keep trust transactions carried out by the client confidential. Also, the trusts established according to the laws of Panama, except for the ones relating to the disposition of real estate properties located in Panama, do not have to be registered in the Public Registry of Panama, thus maintaining the identities of the trustees and beneficiaries confidential.