Differences: Private Interest Foundations & Trusts
There are certain similarities between Private Interest Foundations and Trusts due the fact that the foundation council enjoys considerable decision and control powers over the foundation assets by reason of the lack of ownership of the foundation. This fact creates a requirement of absolute confidence between the client and the foundation council, which is a fundamental similarity of the confidence between the client and the trust company. However, there are substantial distinctions between the Panama Private Interest Foundation and the Panama Trust:
The trust is a legal act by means of which a person called the settlor transfer assets to a person called the trustee, who will manage or dispose of them in favor of a beneficiary, who can be the same settlor. The trustee is normally a firm or company engaged professionally and customarily in the business in managing properties, investing liquid assets and transferring assets which are legally under the ownership of said trustee, but subject to the provisions of the trust instrument. On the contrary, the registration of the foundation charter at the Public Registry of Panama grants independent legal personality to the Private Interest Foundation and, as a consequence, the foundation can purchase and hold assets of any kind and can enter into any agreements. The foundation, different from the trust, is the owner of its own assets which are managed by the foundation council, which has the function to fulfill the objectives and purposes of the foundation.
The use of the foundation as a structure or vehicle for the ownership of any movable or immovable assets is not applicable to trusts due to the fact that trusts per se do not form a legal entity different from the trustee. In order to transfer the authority of the settlor over the trustee and over the assets managed by the trustee, it is required to execute other formal documentation with the same requirements to that by means of which the settlor transferred the assets to the trustee.
The control and administration of the assets given in trust is the power of the trustee. In the Private Interest Foundation, this power of control and administration is in the hands of the foundation council.
The trust allows the appointment of one or more trustees without a minimum or maximum. The foundation council requires a minimum of three (3) individuals or one (1) corporate director.
The trust law does not contain provisions for asset protection against future claims from creditors. The Private Interest Foundation legislation has very clear provisions limiting legal claims against the founder.
The trust is used mainly to substitute wills and to execute commercial transactions such as purchases of real estate, opening an administration of bank accounts, investment in stock markets and mutual funds, and the entering into international agreements. On the contrary, the Private Interest Foundation is a discreet vehicle to open an operate bank accounts and are created principally for testamentary protection, to manage and administer the distribution of moneys and families properties, to act as philanthropic or ecclesiastic institutions, and to become holding entity that operate as owner of corporations.
