Background Information

In essence, the Private Foundation is a unique form of a legal entity which acts like a Trust, and operates like a Company. Therefore, it can be established by a corporate entity or a private person and be used for the following purposes:

• Payment of individual sums to members of one or more specified families for subsistence, education, training, clothing and other relief. In these cases the Foundation is usually known as "The Family Foundation".
  
• Recurring payments to individually designated "Beneficiaries" and distribution of the "Foundation" funds to those "Beneficiaries" if there is a dissolution of the Foundation.
  
• For inheritance purposes, similar to a Will.
  
• For charitable or religious purposes.
  
• Funds dedicated to a Family Foundation which also serves general purposes outside the family, e.g., for the Church. This is known as the "Mixed Family Foundation".
  
• A "common" Foundation established for any clearly defined asset protection purpose.
  

• Private Foundation Law  - Law No. 25 of June 12, 1996 recently sanctioned by the Government of the Republic of Panama introduces the figure of the Foundation of Private Interest. It is a reflection of the Family Foundation of the Principality of Liechtenstein, which has been very popular in Continental Europe for many years.
  
• However, Panama Foundations are having great advantages compared to the Liechtenstein model. In the Republic of Panama there is the possibility of being one's own beneficiary and of having the beneficiaries set in a private document that does not get filed in the registry.
  
• The characteristics of a Private Foundation (created in the jurisdiction of Panama) are very similar to those of a Common Law Trust. It's a juridical person created to preserve the assets conveyed to it by its creator. As such, it has no owners but beneficiaries. The Foundation requires specific formalities - the Founder's assets are transferred to the Foundation; a Foundation may be revocable (but irrevocability is strongly recommended; it may be inter-vivos or mortis causa through testamentary provisions; the same is usually created for the purpose of handling, conserving, administering and investing assets to protect the beneficiary members or the transferor's immediate family; it is created to maintain confidentiality about the ownership of assets and to obtain fiscal advantages.
  
• The acts of creation, modification and extinction of a Foundation, with the acts of transfer, transmittal or encumbrance of a Foundation's assets and the income arising therefrom or any other act thereon, are exempt in the Republic of Panama from all taxes, assessments, rates, liens or imposts of any kind or description, provided that said assets consist of assets located outside the Republic of Panama, are shares or securities issued by a company whose income does not arise from a source in the Republic of Panama or where their income is not taxable on any account even though such shares or securities are deposited in the Republic of Panama.
  
• The private Foundation law also includes minimal constitutional procedures; and, on the matter of succession, it introduces revolutionary rules in the Republic of Panama such as that of the law on inheritance regarding the Founder's or the Beneficiaries' domicile that will not be opposable to the Foundation nor will it affect its validity or prevent the fulfilment of its objectives.