As illustrated earlier, Panamanian Private Interest Foundations are an ideal vehicle for the holding of assets designated for beneficial use and enjoyment. As such, the assets placed within the jurisdiction of the Foundation are afforded protection from attack by creditors, family members, third parties and intended beneficiaries. This makes Foundations the preferred vehicle for the holding of valuable assets such as real estate, appreciated securities and certain types of family businesses. 

With respect to real property, the utilization of Private Interest Foundations as owners and holders of the asset may provide certain additional advantages not found in the usual and customary methods of holding real property. Unlike a corporation or trust where one or more individuals or entities may serve as the manager or trustee charged with the conservation of and increase of value of real property assets and where these persons and/or entities may be professionally retained for those purposes, the Founder of the Foundation may implement the right to name a Supervisory Committee or “Protector” to oversee and/or serve as the “watchdog” over the Foundation Council to insure the Founder’s intentions are being served as well as to insure property preservation for the benefit of beneficial owners.

Regarding the mechanics of moving property into a Foundation structure, it is not possible in this writing to describe the methods pertaining to each jurisdiction or country as to the rules for an actual transfer. However, by using the U.S. model which is representative for most industrialized nations, some guidance may be found in that method. Under usual circumstances, the owner of property transfers via deed his/her ownership interest to the Foundation which should have been formed previous to the transfer. This deed of transfer, to be legally effective in most states in the U.S., must be recorded in the office of the county or local recorder of deeds. 

There will be, in most states in order to complete the transferal process, a requirement to pay state and local transfer taxes (which in some states may be as high as Ten (10%) percent of the value of the property) as well as local recording or documentary taxes (usually expressed either as a percentage of the value of the property or a certain numerator per every amount certain of value, e.g., $3.00 for every $1,000 of transfer value). 

When the transfer has been perfected, title to the real estate will be registered in the name of the Foundation through the person(s) or entity serving in the capacity of Foundation Council.

For example, in a transfer from John Smith to a Private Interest Foundation, the title should read: “The John Smith Foundation of Private Interest, XYZ Co., Ltd., Council and Trustees”. Whomever is the designated signatory within the Foundation Council or, if the Council is an entity, that person will have the legal capacity to bind the Foundation for contracts, notes and other transactions. 

VI. MISCELLANEOUS

With respect to the transfer of assets which compromise the patrimony of the foundation, the transfer itself creates a separate and autonomous being to itself and thus removes the assets from the estate of the Fundor/Founder. 

However, with respect to U.S. persons making transfers, the method and manner of transfer would be determinative as to the successful removal of assets from one’s taxable U.S. estate as well as determining if taxable gifts may result from the transfer. 

Pursuant to Panamanian law, the assets or patrimony in the foundation are exempt from Panamanian taxes provided the assets originate from a source outside of the Republic of Panama.

Foundations may produce international advantages such as changes in jurisdiction or change in the registry. Under circumstances specified in either the Articles or the bylaws, the Founder may elect to change the law of the foundation from Panamanian law to one more akin to his/her nationality. Furthermore, the Founder may establish the foundation in Panama but submit the relationship between the Foundation Council, Protector or Supervisory committee and Beneficiaries to the law of another jurisdiction, e.g., Bahamanian, Swiss, etc., in order to better facilitate dispute resolutions. Again, this provision must be either in the Articles or bylaws. 

Panamanian Foundations, when property planned and utilized, are excellent adjuncts to existing estate and/or business structure plans for both U.S. and non-resident persons. However, it must be emphasized that foundations are not the panacea to all offshore planning concerns and absolutely should not to considered by U.S. persons as their primary planning vehicle for removing assets from the domain of the U.S. Used in tandem and in harmony with other recognized planning vehicles (i.e., trusts, IBC’s, limited partnerships, etc.), foundations present a formidable protection tool for hard earned assets as well as providing a means for transitioning assets from one generation to the next as per the wishes of the Founder. 

Although there may be some estate and gift tax benefits to the use of foundations by U.S. persons if planned and structured properly as well as the potential for minimal reporting, foundations will in no way reduce, avoid nor affect the income taxes of U.S. persons. It may defer income taxation (again, with proper planning) with respect to and until the ultimate repatriation of assets back to U.S. hands and, in the case of appreciated securities, may defer capital gains taxation; otherwise, foundations cannot be viewed as a pure tax-planning device.

Furthermore, one must raise a cautious eye towards offshore planners and financial consultants that attempt to push Panamanian Foundations as the penultimate planning tool to an otherwise unaware public marketplace. There are those that proliferate the “one size fits all” approach to planning which fails to take into consideration a person’s total picture and variant life’s circumstances. Exposure to such proliferations should be avoided if at all possible since neither everyone needs nor have planning uses for foundations. However, in those cases where foundations are mandated and desired, a professionally planned structure incorporating their use would yield benefits and comforts to the disposition of one’s assets.