The Panama Trust or Fideicomiso

The term "Trust" refers to the legal relationship created, either ínter vivos or upon death, by a settlor who transfers or places assets under the control of a trustee for the benefit of a beneficiary or in order to carry out a special purpose.

The uniqueness of Panama’s Trust legislation, which is a hybrid between the common law and civil law trusts, has enabled the constitution and administration of trusts or fideicomisos for two main purposes:

1. As an estate planning vehicle in order to transfer wealth to the next generations in an orderly manner; and
2. As a commercial trust, in order to guarantee obligations, develop special projects or as an investment vehicle.

Important characteristics of the Panamanian Trust:

• Title to the trust assets stands in the name of the Trustee, who has all the powers and rights inherent to ownership;
• Trust assets constitute a separate fund which is not part of the trustee’s own estate and cannot be subject to attachments or other preventive actions, except those originated or acquired by the Trust or established by law;
• Trusts may be constituted over any type of assets, present or future and for any legal purpose;
• The trustee has the power and the duty, in respect of which he is accountable, to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed on him by law;
• The fact that the Settlor reserves powers, as the power to amend the trust or direct investments, does not jeopardize the integrity of the trust. Therefore, the concept of "sham" is not contemplated in Panama’s trust legislation;
• In the case of Trusts of Shares, actual Management of the company's affairs may be delegated to the Directors of the company;
• Income may be accumulated for the full trust period;
• Extended powers may be granted to trustees to invest assets;
• A Protector or Protector Committee may be appointed:
• The trustee has the duty to render accounts at least once a year;
• Panamanian law imposes very strict confidentiality rules.
• Provisions enabling the trust to migrate to another jurisdiction upon the occurrence of an emergency may be included;
• There is no rule against perpetuities;
• KYC and stringent Due Diligence requirements must be fulfilled prior to the constitution of a Panamanian Trust;