Private Foundation vs Trust
There are certain similarities between Trusts and Private Interest Foundations. The fundamental similarity is absolute confidence between the client and the trust company. However, there are also substantial distinctions between the Panama Private Interest Foundation and the Panama Trust. The main of them are as follows:
The trust is a legal act by means of which a person called the settlor transfers assets to a person called the trustee, who will manage or dispose of them in favour of a beneficiary (who can be the same person as the settlor). The trustee is usually 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 other hand, the registration of the foundation charter at the Public Registry of Panama grants the status of independent legal person to the Private Interest Foundation; due to this, the foundation can purchase and hold assets of any kind and can enter into any agreements.
The control and administration of the assets in the trust is the power of the trustee. In the Private Interest Foundation, this power of control and administration belongs to 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 individuals or one 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 foundation, which is different from the trust, is the owner of its own assets. These assets are managed by the foundation council, which has the function and the power to fulfill the objectives and purposes of the foundation. The use of the foundation as a structure and a tool for the ownership of any movable or immovable assets is not applicable to trusts, because the trust does not represent by itself 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.
General use of a trust is to substitute wills and to execute commercial transactions such as purchases of real estate, opening and administering bank accounts, investing in stock markets and mutual funds, and the entering into international agreements.
Private Interest Foundation is a discreet tool for opening and operating bank accounts, and is created principally for testamentary protection, to manage and administer the distribution of money and family properties, to be a philanthropic or ecclesiastic institution, and to become holding entity that operates as the corporation's owner.