There are several uses for a Panama Foundation and they are described below.
IMPORTANT NOTICE TO US PERSONS: US Persons (residents or citizens of the United States) are required to report all interest in any foreign corporation, trust, or private interest foundation to the US tax authorities. POLS does not offer Panama Private Interest Foundations to US Persons.
Uses of a Panama Foundation
Panama Private Interest Foundations may be established for the benefit of a person or persons, a family, or a specific social purpose.
In general, Panama Foundations are used for estate planning of families, serving as holding entities for personal assets such as shares of corporations, bank accounts, investment accounts, real estate, or any other asset. Just as one would do when transferring assets to a Family Trust, the estate planning process involves transferring assets from one’s personal name to the name of the Private Interest Foundation that has been established for estate planning purposes. The primary use of a Panama Private Interest Foundation is for testamentary purposes, for passing family patrimony (assets) from one generation to the next. This is another reason most wealthy Panamanians and other families from all over the world hold their assets in a Panama Private Interest Foundation.
Instead of holding the asset, such as shares of a corporation, in one’s personal name or in bearer form (which could be risky if lost), the person would establish a Private Interest Foundation in Panama that holds and owns the shares of the corporation. Hence, the advantage of using the Panama Foundation as a shareholder for their corporation is to remove ownership from one’s personal name, and transfer ownership to the name of an estate planning entity which by nature does not have owners, rather has privately appointed beneficiaries as established in the Foundations By-Laws or Letter of Wishes.
The Panama Foundation provides additional advantages other than just estate planning for families’ patrimony. For example, the Panama Foundation can be useful for asset protection purposes. In some cases, people use Panama Foundations to hold assets that they wish to protect, because under Panamanian laws, the assets held within a Private Interest Foundation are protected from civil lawsuits, as the purpose of the foundation is intended to preserve the founders family assets.
Under Panamanian laws, the assets held in a Panama Foundation are non-sequestrable, and non-embargable, meaning that the assets cannot be seized, or have liens placed on them, in the event of a civil legal attack. For this reason, most wealthy Panamanians hold their family assets in Private Interest Foundations, to protect their assets. Please note, however, that this applies only to civil attacks, and not to criminal cases. Also, this protection applies only to those assets held within the Panama jurisdiction.
In general, Private Interest Foundations may not engage in habitual profit-making commercial activities as a corporation can. Nevertheless, the Private Interest Foundation may carry out commercial activities from time to time, as long as the profits of those activities are used for the objectives of the foundation. For example, a Private Interest Foundation may engage in passive real estate investments, or banking and other investment activities, such as investing in bank time deposits (Certificates of Deposit – CD’s), stocks, bonds, mutual funds, options, money markets, etc. so long as the proceeds from these investment activities are for the benefit of the beneficiaries of the foundation. Panama Private Interest Foundations should not be utilized for traditional business activities such as providing services or selling products to the public, for example, it should not be used for opening a restaurant, a consulting service, or a retail or wholesale business.