In this article, Luigi Wewege compares Belize trusts and Panama foundations. He highlights the differences between the two structures in terms of their legal frameworks, features, and applications. Understanding these differences aids in informed decisions for asset protection, wealth management, and estate planning.
In recent years, Belize and Panama have gained prominence for their favorable legal frameworks to safeguard assets and preserve wealth.
Among these, Belize trusts and Panama foundations are popular options. In this article, we’ll talk about the nuances of these two structures. We’ll also highlight any differences in legal frameworks, features, and applications.
Legal Framework
Belize has robust trust legislation, drawing upon common law principles derived from English trust law. The 1992 Trusts Act of Belize is a comprehensive legal framework for the establishment and administration of trusts.
Under Belizean law, a trust is created when a settlor transfers assets to a trustee, who holds and manages these assets for the benefit of designated beneficiaries. Belize trusts allow settlors to specify the terms and conditions governing the trust. These include the appointment and removal of trustees, distribution of assets, and duration of the trust.
Belize trusts also have strong confidentiality provisions, with strict regulations safeguarding privacy. Trust deeds are not filed with any public registry in Belize. This ensures a high level of confidentiality and discretion for settlors and beneficiaries.
Panama foundations operate under a framework governed by the 1995 Panama Private Interest Foundations Act. Unlike trusts, foundations are not a common law concept. Instead, they are based on civil law principles.
Like corporations, Panama foundations function as legal entities separate from their founders and beneficiaries. When a founder establishes a foundations, they endow it with assets. These assets are then managed by a foundation council. The council assures accordance with the foundation charter and bylaws. Beneficiaries can receive distributions from the foundation, but they have no ownership rights over the foundation’s assets.
There are specific differences between common law and civil law. Some similarities can confuse those not familiar with either type of law. Protect yourself today by subscribing: @luigiwewegehttps://t.co/Pn1T3jfsZr #offshore #expat pic.twitter.com/GY4FfoVFiU
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Features and Characteristics
Belize trusts offer several features that make them attractive. One is the ability to create purpose trusts, established for non-charitable purposes. Theses include asset protection, estate planning, or the maintenance of family businesses.
Belize trusts are also renowned for their perpetuity period, allowing them to exist for an indefinite duration. This enables settlors to create long-term wealth preservation strategies and generational planning.
There is also flexibility in the choice of governing law. This allows settlors to select the jurisdiction whose laws will govern the administration of the trust. It enables them to choose jurisdictions with favorable trust laws.
Panama foundations have their own unique set of features and characteristics. One key feature is their hybrid nature, combining elements of both trusts and corporations. Foundations enjoy a separate legal personality, like corporations, while also incorporating aspects of trust law, such as the fiduciary duties owed by foundation council members.
They also offer considerable flexibility in structuring and governance. Founders have broad discretion in drafting the foundation charter and bylaws. They can determine the purposes of the foundation, appoint council members, and specify the rights and obligations of beneficiaries.
Panama foundations also enjoy tax neutrality. If the foundation conducts its activities outside Panama, they are exempt from all Panamanian taxes. This makes Panama foundations appealing for those seeking to minimize their tax liabilities.
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โ Luigi Wewege (@luigiwewege) February 26, 2022
Applications and Use Cases
Purposes of Belize trusts include asset protection, estate planning, wealth preservation, and succession planning. High-net-worth individuals often establish Belize trusts to shield their assets from potential creditors, lawsuits, or governmental seizure.
International tax planning strategists often use Belize trusts. They enable settlors to mitigate tax liabilities and optimize their tax efficiency. It’s also possible to tailor trust structures to accommodate specific tax jurisdictions.
Belize trusts are also instrumental in facilitating intergenerational wealth transfer. Settlors can provide for their descendants while controlling asset distribution and protecting family wealth from dissipation or mismanagement.
Panama foundations serve a diverse range of purposes. Applications span asset protection, estate planning, charitable endeavors, and corporate structuring. Foundations allow individuals to safeguard their assets from legal risks, political instability, or economic uncertainty. Estate planning strategies can also ensure seamless wealth transfer. With a foundation, it’s possible to create a perpetual vehicle to preserve family wealth for future generations.
Other uses for Panama foundations include international business structuring. They can also serve as holding entities for investments, real estate holdings, intellectual property, and other assets. Foundations are a flexible and tax-efficient vehicle for organizing and managing diverse asset portfolios.
๐ช๐ต๐ ๐๐ฒ๐ ๐๐ฝ ๐ฎ ๐ฃ๐ฎ๐ป๐ฎ๐บ๐ฎ ๐ณ๐ผ๐๐ป๐ฑ๐ฎ๐๐ถ๐ผ๐ป?
Here are a few reasons… https://t.co/tWTygTYVN3โ PanamaLawyer (@thePanamalawyer) May 7, 2023
Conclusion
Belize trusts and Panama foundations are two distinct yet complementary structures for asset protection, wealth management, and estate planning.
While Belize trusts adhere to common law principles and offer flexibility and confidentiality, Panama foundations operate under civil law principles and provide a hybrid entity with tax advantages and governance flexibility.
By understanding the differences between these structures, settlors and investors can make informed decisions when choosing the most suitable vehicle for their specific needs.
Luigi Wewege is the President ofย Caye International Bank, headquartered on the island of Ambergris Caye, Belize. He is also the published author ofย The Digital Banking Revolution,ย now in its third edition.
