Skip to main content
This email address is being protected from spambots. You need JavaScript enabled to view it. | +44 789 453 4200

Panama Trust Essentials: Navigating Offshore Wealth Management

Panama has established itself as a significant center for financial services, including trust formation, due to its stable political and economic climate. A trust is a legal arrangement where a trustee holds and manages assets on behalf of beneficiaries, and Panama offers an advantageous environment for setting up such entities. The nations's legal system, while based on civil law, is unique in its accommodation of trusts, a concept traditionally associated with common law jurisdictions.

The Panamanian trust framework was first introduced in the 1940s and has since evolved, particularly with the enactment of Trust Law No. 1 of 1984, to enhance flexibility in trust establishment and administration. The country's modern trust laws are characterized by their robustness and clarity, making Panama an attractive destination for international asset protection, estate planning, and privacy preservation.

Key Takeaways

  • Panama Trusts offer a secure legal environment for asset management and succession planning.
  • Trusts in Panama ensure confidentiality and privacy for the settlors and beneficiaries.
  • Panama's trust legislation is comprehensive, permitting various types of trusts adaptable to individual needs.

History and Legislation of Panama Trusts

The Republic of Panama is unique for its adaptation of trust law principles into its civil law system, which has evolved through significant legislation to meet the demands of international finance and wealth management.

Development of Trust Law in Panama

Panama's initial foray into trust law began in the 1940s, drawing inspiration from the common law system to create the first iteration of its trust law. The evolution continued, notably with the establishment of Law No. 1 on January 5, 1984, which augmented Panama's competitive position in the trust industry. The intention was to align the legal framework with the comprehensive suite of financial services offered within the jurisdiction.

Key Legislation: Law No. 1 of 1984 and Subsequent Amendments

Law No. 1 of 1984 represents a cornerstone in Panama's trust legislation. It introduced a legal structure whereby a settlor could transfer assets to a trustee, marking a critical development in asset management and protection in Latin America.

Later, in 2017, Law 21 was enacted, updating the trust law to better address modern financial intricacies. This amendment aimed for greater transparency and accountability within Panama's trust industry, signifying its commitment to international standards. Moreover, it provided for the establishment of a new regulatory body to oversee the trust business, ensuring compliance and safeguarding the interests of all parties involved.


Shield Your Assets From Lawsuits And Lawyers. Explore How An Offshore Asset Protection Trust Can Safeguard Your Wealth.


Establishing a Panama Trust

When establishing a trust in Panama, the selection of a settlor and trustee, as well as the precise drafting of the trust deed, are paramount. These elements ensure the trust operates as intended for asset protection and estate planning.

Role and Selection of Settlor

The settlor, also known as the grantor, is the individual who creates the trust. He or she transfers ownership of the assets into the trust for the benefit of the beneficiaries. A settlor should be fully informed about the legal implications related to the assets and the purpose of the trust. It's crucial to select a settlor who:

  • Legally owns the assets being transferred
  • Understands the objectives of the trust
  • Is clear about the beneficiaries' needs

Role and Selection of Trustee

The trustee is the party responsible for managing the trust's assets in accordance with the trust's terms and for the benefit of the beneficiaries. Trustees in Panama must adhere to local regulations, including potential oversight by regulatory bodies. One should consider the following when selecting a trustee:

  • Trustworthiness and reliability
  • Financial acumen and experience
  • Understanding of fiduciary duties and Panamanian trust law

Drafting the Trust Deed

The trust deed is the core legal document that outlines the terms of the Panama trust. Known as a private document, the deed does not require public registration, offering privacy. It should be crafted with precision to avoid future disputes and state clearly:

  • The assets being included
  • The terms under which the assets are to be managed
  • The rights and obligations of the trustee
  • The intentions toward the beneficiaries

Key Components of a Trust

In the context of a Panamanian Trust, it is critical to understand the structure and functions of its key components, which ensure the trust operates as intended, with clear assignment of control, protection, and benefits to the right parties.

The Trust Assets

The trust assets consist of the properties and rights transferred into the trust. These can include real estate, financial instruments, and other tangible or intangible property. Panamanian trust law requires a clear identification of these assets to ensure proper management and legal protection.

Designating Beneficiaries

Beneficiaries are individuals or entities who are entitled to benefit from the trust assets. The settlor must specify the beneficiaries clearly in the trust agreement. This clarity in designation prevents disputes and ensures the assets are distributed according to the settlor's wishes.

The Protector's Duties

The protector has an oversight role with the power to intervene under certain circumstances to safeguard the interests of the beneficiaries. While not a mandatory role, the protector provides an additional layer of control over the trustee’s management of the trust assets.

Types of Trusts in Panama

Panama's legal framework accommodates a variety of trusts, each with different levels of control and purpose, tailored to meet specific needs of settlors and beneficiaries.

Revocable vs. Irrevocable Trusts

Revocable Trusts in Panama offer the settlor the flexibility to alter or terminate the trust during their lifetime. They retain the right to revoke the trust, which can benefit the settlor by allowing adaptations to changing circumstances.

On the contrary, Irrevocable Trusts are binding agreements where the settlor relinquishes control over the trust assets. This type of trust is often utilized for its asset protection qualities since the assets are legally transferred out of the settlor's estate, thereby shielding them from future liabilities or claims.

Discretionary, Charitable and Unit Trusts

Discretionary Trusts give the trustee the authority to decide how to distribute the trust assets to beneficiaries. This enables trustees to consider the evolving needs of the beneficiaries over time.

Charitable Trusts are established with the specific aim of supporting charitable activities. Funds and assets held in these types of trusts are dedicated to particular philanthropic purposes, aligning with the settlor's wish to contribute to society.

Unit Trusts involve the holding of assets divided into units owned by the beneficiaries. Each unit represents a proportion of the trust's value, and the units can be bought or sold by the beneficiaries, providing a structured way of managing and distributing trust assets.

Trust Administration and Management

Effective trust administration and management are pivotal for safeguarding assets and ensuring they are used for their intended purposes. It is a meticulous task that encompasses legal, financial, and fiduciary responsibilities.

Duties and Powers of Trustees

Legal Obligations: Trustees hold a significant legal responsibility to act in the best interest of the beneficiaries. They must:

  • Adhere to the specific terms set by the trust deed.
  • Avoid any conflict of interest, ensuring impartiality at all times.

Fiduciary Duties: Financial prudence is a cornerstone of a trustee's role. They must:

  • Maintain accurate records of transactions.
  • Make decisions that align with the settlor’s intentions for estate planning.

Authority: Trustees possess the authority to:

  • Manage and distribute trust assets.
  • Invest prudently, balancing risks and returns as per the trust's stipulations.

Trust Fund Management

Asset Allocation: Management of the trust fund revolves around:

  • Evaluating the trust’s financial objectives.
  • Diversifying investments to mitigate risks.

Monitoring: Trustees must:

  • Monitor the performance of trust assets.
  • Review and adjust the portfolio in response to market changes or trust requirements.

Compliance: Trustees are responsible for:

  • Ensuring the trust complies with relevant laws and regulations, including those outlined in Panama's Law 21 of 2017 for trust business regulation.

By maintaining a rigorous approach to trust administration, trustees uphold their fiduciary duties and secure the financial objectives of the trust funds they manage for estate planning.

Confidentiality and Asset Protection

In the realm of asset protection, Panama offers a highly confidential environment, fostering the secure management of trusts. Leveraging strict privacy laws, Panama ensures that sensitive trust details remain shielded from public scrutiny.

Privacy Protection Measures

Panama upholds a stringent legal framework designed to preserve the privacy of trust arrangements. Article 37 of Law 1 articulates that it is a crime to breach trust confidentiality, reinforcing the privacy of:

  • Trust assets
  • Beneficiary identities

Penalties for violating these privacy provisions include:

  • Imprisonment: Up to six months
  • Fines: As high as $50,000 USD

Confidential Information Handling

Trustees and associated parties in Panama are legally bound to handle all trust-related information with the utmost discretion. They are governed by laws that specify:

  • Confidentiality Obligations: Trustees must not disclose any confidential information pertaining to the trust.
  • Liability for Breach: A willful violation of confidentiality can lead to severe legal consequences, maintaining an environment where confidential information remains protected.


Learn How To Protect Your Assets With The Strongest Offshore Asset Protection Structure In The World.


Financial and Tax Implications

This section discusses the financial and tax considerations for those interested in establishing a Panamanian trust, focusing on income tax requirements and the specific tax advantages for offshore trusts.

Income Tax Considerations

In Panama, trusts are subject to certain income tax regulations. The income produced by the assets of a trust is taxable if that income is generated within Panama. If the beneficiaries are Panamanian residents, they are subject to tax on their worldwide income; however, for non-resident beneficiaries, only the income sourced in Panama is subject to taxation.

Tax Benefits for Offshore Trusts

Panama offers notable tax benefits for offshore trusts:

  • Foreign-sourced income: Offshore trusts in Panama are generally not taxed on income that is sourced outside of Panama. This makes it an attractive option for foreign investors.

  • Asset protection: Assets within an offshore trust may benefit from enhanced protection against potential creditors, lawsuits, or claims.

  • Estate planning: A Panamanian trust can be an effective vehicle for estate planning, potentially allowing for a tax-efficient transfer of wealth to beneficiaries.

International Aspects of Panama Trusts

Panama trusts offer robust structures for managing assets across borders, catering especially to foreign individuals and entities. These trusts are particularly appealing for their ability to interact with non-Panama assets and align with various jurisdictions, while ensuring compliance with foreign laws.

Cross-Border Trust Arrangements

Panama's legal framework for trusts is designed to facilitate cross-border arrangements. The country's trust law permits the creation of trusts with assets that are located outside of Panama. Foreign individuals commonly use Panama trusts to manage their international portfolios because these instruments offer:

  • Tax advantages: Often, assets and income derived from them are not subject to Panamanian taxes if they are situated abroad.
  • Privacy: Trust arrangements can provide a degree of confidentiality, which is appealing to those who require discretion in their financial affairs.

Notably, the flexibility of Panamanian trusts allows them to be tailored to the specifics of foreign jurisdictions, which is critical for the effective management of international assets.

Dealing with Foreign Laws and Assets

Trusts established in Panama must navigate and comply with relevant foreign laws when dealing with non-Panama assets. This compliance is achieved through:

  • Due Diligence: Panama trust entities conduct due diligence to ensure that the trust's activities adhere to the international legal standards and the laws of the countries where the assets are located.
  • Specialized Legal Counsel: Often, trusts engage legal experts from respective jurisdictions to handle legal matters and ensure efficient management of the assets abroad.

Panama's trust law articulates that these entities are not only permitted but are structured to seamlessly operate with assets across different legal systems, while upholding Panama’s own legal principles. This capacity for international operation has made Panama a notable choice for offshore trust arrangements.

Comparison with Other Jurisdictions

When considering setting up a trust, comparing Panama with other jurisdictions reveals distinct legal and structural advantages. Among these, Panama’s legal framework is especially appealing for asset protection and estate planning.

Panama vs. Other Offshore Trusts

Panama operates under Civil Law which is different from the Common Law framework that many other offshore jurisdictions use. Unlike some jurisdictions where a Mareva Injunction can freeze trust assets, Panamanian trusts offer more robust protection against such actions. Its legal system is designed to be attractive to international clients with an emphasis on privacy and asset protection.

  • Asset protection: Stronger regulations in comparison to other jurisdictions making it harder for creditors to claim assets.
  • Privacy: Ensures confidentiality of trustees and beneficiaries.

Another competitive edge is the relative ease and speed at which trusts can be established in Panama. The procedure is typically more straightforward than in many Common Law jurisdictions, with fewer demands for documentation and bureaucratic obstacles.

Panama Foundations and Corporate Entities

The Panama Foundation is another entity that serves a purpose similar to trusts but with key differences. These entities resemble a hybrid between a trust and a corporation, offering:

  • Separate legal personality: Foundations can own assets, enter into contracts, and undertake transactions much like corporations.
  • Estate planning efficiency: They're particularly structured to serve the long-term holding of personal and family assets, favorable for estate planning.

Contrary to corporations, however, foundations do not have shareholders and instead operate for the benefit of a class of beneficiaries, which can be defined broadly. This structure is unique to jurisdictions like Panama and provides alternatives not typically available within the traditional corporate entities of other regions.

Both Panamanian corporations and foundations are distinguished by their flexibility and lack of stringent reporting requirements, positioning them as favorable alternatives for those interested in offshore structuring.

Advantages of Panama Trusts

Panama Trusts offer individuals and entities comprehensive solutions in terms of estate planning, ensuring privacy, and providing flexibility in asset management. These advantages make Panama a favorable jurisdiction for establishing trusts.

Estate Planning and Transfer

Panama Trusts serve as a crucial tool for estate planning, as they allow for the seamless transfer of assets to beneficiaries upon the settlor's demise. The process avoids the often lengthy and complex probate process, ensuring that heirs receive their due inheritance efficiently and without unnecessary legal hurdles.

Privacy and Confidentiality

The jurisdiction of Panama upholds privacy and maintains confidentiality for trust arrangements. Information regarding the settlor and beneficiaries is kept out of the public domain, which means personal affairs and asset details remain shielded from public scrutiny. This level of discretion is pivotal for individuals who prioritize the protection of their personal information.

Flexibility and Perpetual Life

Trusts established in Panama are lauded for their flexibility and the option of perpetual life. Unlike trusts in some jurisdictions that are subject to expiration after a certain period, Panamanian Trusts can be designed to last indefinitely. This inbuilt flexibility also allows for a trust to accommodate various assets and to be structured according to specific instructions laid out by the settlor.

Setting Up and Registration

Setting up a trust in Panama involves a series of clearly defined steps which include the submission of documents and selecting a registered agent. The registration process is designed to ensure legal compliance while offering flexibility in asset management.

Document Submission and Processing

Upon deciding to set up a trust in Panama, one must prepare and submit the necessary documentation to the relevant authorities. These documents typically include the trust deed, identification of the parties involved, and details of the registered agent. The trust deed is a crucial document as it outlines the terms of the trust, the roles of the settlor, trustee, and beneficiaries, and the objectives and duration of the trust. Documents must be in compliance with Panamanian law, and any translations are required to be certified if the original documents are not in Spanish.

Once the documents are submitted, they are reviewed by the Registry Office. The processing involves examining the documentation for compliance with Panamanian trust law, such as ensuring that the trust has a licensed registered agent and a valid purpose. The trust is officially registered when all paperwork is processed and approved.

Role of Registered Agent

A registered agent plays an integral role in the formation of a Panama trust. They are responsible for ensuring that the trust complies with statutory requirements and often handle correspondences with the government on behalf of the trust. It is mandatory for a Panama trust to have a registered agent who is either a resident of Panama or a Panamanian law firm with a valid license to operate as such.

Moreover, the registered agent often assists in preparing the trust deed and other required documents. They hold a key position because they can provide expert guidance on the nuances of Panamanian trust law, help expedite the registration process, and offer ongoing support in the administration of the trust.

Frequently Asked Questions

In this section, readers will find precise answers to common inquiries regarding Panamanian trusts, including formation procedures, costs, ownership transparency, regulatory framework, and their benefits for international investors.

What are the key differences between a Panama Foundation and a Trust?

A Panama Foundation is designed primarily for asset protection and estate planning, functioning much like a corporation that holds assets for beneficiaries. In contrast, a trust is a legal agreement allowing a trustee to manage assets on behalf of a third party, offering flexible control and distribution of assets.

What are the steps involved in establishing a trust in Panama?

To establish a trust in Panama, one must select a reliable trust company, draft a trust deed outlining the terms, register the trust with necessary Panamanian authorities, and transfer the assets into the trust. It is crucial to comply with Panama's Trust Law for a valid setup.

What are the typical fees associated with setting up and maintaining a Panamanian trust?

The costs for setting up a Panamanian trust can vary, with initial setup fees typically around $1,600, according to service providers. Ongoing maintenance fees for administration, trustee services, and any legal requirements may apply annually.

How can one identify the owner of a Panamanian trust?

Identifying the owner, also known as the settlor, of a Panamanian trust typically requires accessing the trust agreement, where the settlor's identity is recorded. However, confidentiality laws may restrict public access, emphasizing privacy in trust arrangements.

What are the regulations governing trust companies in Panama?

Trust companies in Panama must adhere to regulatory standards set by Panama's Trust Law No. 1 of 1984, as well as any amendments such as Law No. 21 of 2017. These laws establish the framework for creation, operation, and supervision of trusts, including compliance requirements for trust companies.

What advantages do Panamanian trusts offer to international investors?

Panamanian trusts offer international investors benefits like asset protection, estate planning, tax planning opportunities, and confidentiality. The legal system in Panama is accommodating to foreign investment, which, coupled with a strong banking sector, creates an attractive environment for establishing trusts.

Secure Your Future.
Risk nothing with our tailored strategies designed to protect you.
Schedule your confidential consultation today—no obligations, absolutely free.

***Please Note: If you are a resident of a country that is a signatory of the Common Reporting Standard (CRS) (or a US citizen) your tax reduction possibilities are limited. Due FATCA, CRS, and CFC laws you may not be able to completely eliminate your taxes without moving your residence. While opening an offshore company can increase privacy and asset protection, your tax obligations remans tied to your ownership of overseas entities. Offshore company's are often not taxed in the country where they are incorporated, rather you as the owner are obligated to pay taxes in the country where you reside. Please make sure you know your tax obligations, as we are not tax advisors. Please seek a local tax professional for help regarding your situation. 

Go Deeper

Offshore Diversification Strategies
Offshore Onlline

Offshore Company Guides
Offshore Tax Reduction
Offshore Cryptocurrency
Offshore Wealth Security

Asset Protection & Financial Survival Strategies to Secure your Future

How To Protect Yourself, Your Assets And Your Freedom

  Why You Need A Plan B
  Threats to Your Assets
  Global Diversification Planning