Panama Offshore Asset Protection Trust
Protect your assets from creditors, tax-collectors, litigious plaintiffs, contingent fee lawyers, ex-spouses and disgruntled business associates – and save on taxes and invest your money as you please with a Panamanian Offshore Asset Protection Offshore Trust for only US$999.
A trust is basically a very special type of contract recognized by law. It is a contract between an individual (the settlor) who transfers certain assets owned by him (the trust fund) to one or more persons (the trustees) with instructions, which are legally binding on the trustees, that the trustees should hold the trust fund upon prescribed terms (the beneficiaries). The document in which the settlor´s instructions are contained is called the “trust instrument”, which governs all future dealings by the trustees of the trust fund. Trusts are either revocable, or are irrevocable.
The trust instrument is usually signed and sealed by both the settlor and the trustees. If the settlor does not wish to be named personally in the trust instrument, the trust can be formed by a “Declaration of Trust” which is signed and executed under seal by the Creator and the Trustees alone.
The choice of trustees is very important as the trustees are under a strict legal obligation to carry out the precise terms of the trust. Trustees can either be individuals or companies, or a combination of the two. The Trust fund can consist of a variety of assets including cash, company stocks and bonds, businesses, investments, property, homes, insurance policies or interests in other trusts.
Overview
The most common form of trust established in an offshore jurisdiction is the “DISCRETIONARY TRUST”. This is a very flexible trust and gives a high level of confidentiality as usually there is no requirement to file the trust instrument with any government agency, so that privacy of the settlor, the trust´s activities and the identity of the beneficiaries is fully protected.
Typically, the trust is created in a country which imposes no tax of any kind on the settlor, the beneficiaries or in the income or capital tax gains earned by the trust. Further, most jurisdictions selected for forming offshore trusts do not have any requirement for the trustees to file trust accounts with the local tax authority, thus further preserving the confidentiality of the trust´s activities.
Depending upon the residence for tax purposes of the settlor and the beneficiaries, it is often possible to make distributions of capital or income from the trust completely free of tax.
Frequently, international businessmen employ offshore discretionary trusts to hold their various investments. In this matter, many reporting requirements are either eliminated or are vested in the trustees.
Specially designed trusts can effectively protect the settlor´s assets from attack by erstwhile creditors. Thereby preserving the settlor´s assets for the enjoyment of the settlor and his or her selected beneficiaries.
Discretionary trusts are often used by wealthy individuals to divest themselves of certain assets, by expatriates working abroad who wish to accumulate funds offshore prior to returning to a high tax country or by businessmen engaged in international trade and investments who require anonymity as to the ownership of offshore companies with certainty and security as to the passing of the trust fund to their chosen beneficiaries at the time selected by them.
About the Panamanian Offshore Asset Protection Trust
Panama continues to be an important site for trust operations. Revised trust regulations amending the outmoded rules of 1941 were approved by Executive Decree No. 16 of October 3, 1984. The legislation amends the tax treatment of trusts so that income on property and on transfer of assets is exempt from taxation where a resident trust has foreign source income and/or foreign situs assets.
A trust deed must specify that the trust is Panamanian and when and where it was created. Documents should also designate: the settlor, who does not have to be a Panama resident and who can be a beneficiary; the beneficiary or the class of entities that may be beneficiary; and a trustee as well as that person’s authorities and duties and any limits to abilities. If a trust has two trustees, they must manage jointly, whereas if more than that number, the trustees will manage by majority vote.
Documents should appoint a Panamanian attorney or law firm to be the trust’s registered agent. Trust deeds should define property, land and valuables included in the trust, as well as how assets will earn income and how the income will be distributed, although there is no limit to the ability of a Panama trust to accumulate income.
Trustees must register any real estate in their name and as the trustee in the Public Registry. Income and assets assigned to a minor’s trust that is managed by the national savings bank (Caja de Ahorros) may not be legally attached by the settlor’s creditors, unless those assets are specified in a final court judgment. Although the country does not have either a forced-heirship law or an asset protection law per se, there are laws that protect the assets of a trust from attachment by either a settlor’s or trustee’s creditors unless fraud can be proven by the creditor on asset transfers.
There is no time limit for creditors to bring such suits. Confidentiality rules in Panama are very strict. Anyone involved in the trust, including trustees, the people who work for them and official organizations, who divulges information unlawfully is subject to a 50,000 balboa (US$50,000) fine and time in prison for up to six months. No time limit is placed on the life of a Panamanian trust or its right to acquire income.
Since trust property is distinct from assets belonging to the settlor and trustee, it is therefore protected from legal actions unless the property was placed in the trust under fraud. Trustees may move a trust and all its property to another country just on the basis of a declaration and as long as all laws are complied with, a trust may stipulate in its documents that it is liable to the laws of a different country as well as to Panama’s laws. It may be revocable or irrevocable and substitute beneficiaries may be named by the grantor, who also may change the beneficiaries at any time. Establishing a trust in Panama requires a document that clarifies the following:
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- The trust is created in Panama, as well as the date and place of establishment of the trust;
- Designation of settlor, trustee and beneficiary or the class of entities that may be a beneficiary, delineation of the trustee’s authority and duties and any limits to the trustee’s abilities;
- Definition of property, land and valuables included in the trust, as well as how income from the assets will be earned and distributed;
- Name of a Panamanian attorney or law firm to be the trust’s registered agent; and
- If a private deed is the manner in which the trust is established, then the document must be witnessed by a Panamanian notary public.
Beneficiaries must receive an accounting from the fiduciary not less than once a year, unless the time frame is stipulated differently in the documents. A trust may be governed by either Panamanian law or the law of another country, as declared in the trust deed. In addition, a Panamanian trust may be transferred to another country or a foreign trust may be transferred to Panama. Any changing of governing law for a trust requires a legally notarized document. In addition, cases where a private deed establishes the trust the document must be witnessed by a Panamanian notary public or a notary public from any country as permitted under Decree Law No. 5 of July 2, 1997. This amendment supplanted the previous requirement confining the witness to a Panamanian.
All juridical and natural persons involved in trust operations are subject to the Panamanian National Banking Commission, which means that banks are able to manage trust without posting extra guarantees or acquiring additional licenses. On the other hand, all other trustees must have a lawyer represent them in the licensing procedure and pay a 1,000 balboa (US$1,000) fee, although Panamanian nationals must pay US$2,000 to obtain a trust license.
Under the 1984 law paid-in capital had to be at least US$1 million because the Trust Law fell under the jurisdiction of the National Banking Commission, which requires a minimum capital of 1 million balboas (US$1 million).
This relatively high sum caused considerable criticism among various trade and professional associations and the business community banded together to have the capital requirement reduced. Its contention was that the amount of trust business in Panama did not warrant such a large outlay, which should come under the “bracket of banking business.” The Panamanian Government considered the possibility of lowing the paid-up capital requirement in order that a larger share of the trust business be administered by separate trust organizations rather than almost exclusively by the banking industry.
As a result, the 1984 Executive Decree was amended by Executive Decree No. 53 of December 30, 1985, modifying the US$1 million capital requirement called for by banks under the banking regulations by inserting Article 14 in Chapter II on Guaranties. This states that every trust enterprise engaged in the trust business, which specifically includes trustees other than banks, in or from Panama must maintain at all times in the Republic of Panama at the disposal of the National Banking Commission a guaranty of 250,000 balboas (US$250,000) for the due performance of its obligations.
Not less than 10% of the guaranty must consist of deposits in the Banco Nacional de Panama or the Caja de Aborros. In addition to cash deposits, the guaranty may include Government bonds, bank guaranties or checks issued or certified by local banks. Panama’s Law 31 of December 30, 1991 declared no fee for creating a trust, a thus repealed the previous 100 balboa (US$100) charge due at the time of trust creation and once a year thereafter, as well as the 20 balboa (US$20) penalty for not paying the tax on time. However, all trusts are subject to an annual tax of 100 balboas (US$100) paid within three months of the anniversary date. Arrears in payment are subject to a 20 balboa (US$20) surcharge.
The December 30, 1985 amendment added a number of restrictions on the settlor’s activities. Trust enterprises are prohibited from investing the trust’s assets in the shares of the trust enterprise or in other property owned by it and in shares of stock or properties of an enterprise in which directors, officers, partners, consultants or administrative managers, with some exceptions, participate. The trust may not make loans from trust funds to officers, stockholders, employees, subsidiaries or other affiliates. Neither may it acquire for itself or through an intermediary the properties in trust.
BULLET PROOFING
Due to the proliferation of lawsuite, government confiscations, and new laws enacted to “protect us” from ourselves, many if not all wealthy people, especially in the United States, have set up Asset Protection Trusts. By having title to assets like stock or real property held by foreign corporations or trustees, these assets can be hidden and protected from creditors. At the same time ownership benefits (like income) can still be enjoyed as before.
SHARK REPELLENT
It is well known that ambulance-chasing lawyers are constantly sniffing out potential defendants by identifying high net worth individuals. By keeping some of your assets in a Panamanian Offshore Asset Protection Trust you can lower your visible level of wealth. This makes you a far less attractive victim.
Before a contingent fee lawyer will file suit, he always gets a full report on his target’s assets. Since funds and properties held in a Panamanian Offshore Asset Protection Trust are invisible (or at least less discoverable) much litigation can be avoided or favourably settled.
The same reasoning, reducing your visible net worth, goes for repelling other blood sucking pests and predators who seek an unwarranted share of your wealth. The list includes burglars, kidnappers, extortionists, ex-spouses, tax-collectors, disgruntled business associates, crooked cops, insurance sales people, and bent bureaucrats seeking bribes.
The less well heeled you seem, the more of a repellent you become.
YOUR WORD
Particularly where your heirs are likely to squabble over their inheritance, it is likely that most of your estate could be eaten up in legal fees. Also, in some jurisdictions, the “forced heirship” law provides that you must leave all or a certain percentage of your property to a forgotten separated spouse, or to a child who detests you (and vice versa).
Assets in a Panamanian Offshore Asset Protection Trust can upon your demise be given to any person or be used for any purpose you designate. Once again you have the right to choose who gets the benefit of your estate. You don’t have to let the State make those choices for you.
MOBILITY
Many countries have controls on foreign remittances that make it impossible to move money to where it is needed. Many Chinese-Americans were criminally charged years ago for simply sending subsistence money to aged parents on the mainland. Expat Cubans face similar risks today.
Wealth taxes and other taxes eat away at your savings and profits. A Panamanian Offshore Asset Protection Trust can help you save on taxes, and allow you to spend or invest your own money as you please. Certain “roll-up” investment funds convert taxable income into non-taxable, unrealised capital gains.
WHAT IF
What recourse do you have if a trustee doesn’t do his job right? The most important asset of any money manager or trust administrator is his reputation. This is why it is important to deal with an established firm that has a good reputation, in depth management, client references, real offices, real employees, and good communications with customers. In taking out a Panamanian Offshore Asset Protection Trust you will have such a trust administrator working in your interests.
Besides all the usual court remedies (which take too long and are too expensive), your biggest element of control is that you can complain. Letters to the local regulatory bureaucrats will cause a legimate operator a great deal of trouble. You can also make your grievances public by writing to journalists and editors. Such complaints made in financial publications and on the Internet will cost a trustee dearly. Receiving bad publicity for not providing the services you bargained for, will cost much more than he could gain from mismanaging or stealing your account.
In the final analysis, dealings with a trustee, or any bank, is mainly dependent on trust. If you start modestly and build up assets, trust and confidence over the years with your trust manager, you should do very well.
FROM THE HORSE’S MOUTH
To give you more insight into the nuts and bolts of the Panamanian Offshore Asset Protection Trust Carlton Press provides answers to the most common questions relation to the operation of a Panamanian Offshore Asset Protection Trust.
Some Common Questions & Answers:
Question: What can I use an Asset Protection Offshore Trust for?
Answer: It is 1): an effective tool to settle or discourage litigation. 2): A means to keep the ownership of assets absolutely confidential. 3): An alternative to traditional pre-nuptial agreements. 4): A hedge against potential exchange controls. 5): A device to protect otherwise unprotectable pension assets. 6): A means to give an insolvent debtor a fresh start. 7): The preferred technique to avoid forced heir ship laws (common in Europe). 8): A way to internationalize investment and hedge against governmental instability.
Question: Do I have to give up control over my assets with a Panamanian Offshore Asset Protection Trust?
Answer: Look at it this way: Do you give up control when you let a pilot or good cab driver take you where you want to go in a strange country? Not really. The professional will probably get you to your destination faster and safer than you could do it your self. If you are unhappy you can change drivers (trustees) at any time. A Panamanian Offshore Asset Protection Trust which you can call “The Your Name Trust” is run by you. You call the shots. Only legal title is in the name of “Your Name Trust”. There is a foreign person who is in nominal control (your pilot), but he does exactly what you want.
Question: Are the assets physically in the country where the trust is established?
Answer: Normally not. You can have a Panama trustee with a bank account in Switzerland or Singapore. You can have access to that bank account anywhere in the world with an ATM (automatic teller machine) card. Securities or mutual funds may have assets all over the world and be quoted in daily papers.
Question: If there are political problems (i.e. wars, revolutions) in the country of the trust, does this affect me?
Answer: Not at all! Insofar as investment banking and shop-registry functions, Panama has a hundred year history of stability as a leading offshore banking center. In spite of the USA invasion a few years ago, normal business functions continued and most local property damage was reimbursed by the Americans.
Question: Can I invest in any stocks, property or other assets that I choose?
Answer: Yes, but it is best for you to start with a small discretionary account owned by your Panamanian Offshore Asset Protection Trust.
Question: Is everything you do legal?
Answer: Our local supplier has a staff of lawyers who keep us in compliance with all laws of all the jurisdictions where they operate.
Question: What are my reporting requirements in my home country with regard to a Panamanian Offshore Asset Protection Trust?
Answer: Certain forms need to be filled out and filed. We provide you with these filled out forms. It is your sole responsibility to file them if you choose to do so. Our local supllier of the Panamanian Offshore Asset Protection Trust, unless requested by you to do so in writing, reports nothing about your Trust to anyone.