A trust is not a legal entity. It is organized by way of a legal action, comprised in a document called the “trust deed”. It is prevalent in jurisdictions with the Anglo-Saxon legal system but there are occasions when it has been adopted by civil law legal regimes, as is the case in Panama .
Under a trust, the assets remain as a separate patrimony. They are not part of the trustee’s own patrimony, hence they are not to be subjected to precautionary measures (attachments or executions), except in case of obligations or damages caused as a result of acts directly related to the purposes of the trust deed.
Creating a trust and settling it with specific assets, may potentially safeguard the assets as an alternative from local marital or inheritance regulations to which the settlor may be subject to in accordance with his laws of nationality or domicile.
The Panama trust provisions are upheld by local courts even when they contradict the settlor´s national law which may impose forced successions or a legal attack filed by a potential heir. The trust is also used to safeguard assets from disputes and claims brought by civil creditors.
The Panama trust may cover present or future assets of any nature. It may be created to have effect “inter vivos” or “mortis causa” of the settlor. The Panama trust may be revocable or irrevocable. When a trust is revocable, the trustee as well as the beneficiary or beneficiaries may be substituted by others, at any time. In the opposite case they can be substituted only in the manner described in the trust deed. Trustees must be banks or entities licensed by the Superintendent.
Neither the constitution, amendment nor termination of the trust, nor the transfer of the trust assets shall be subject to levying of Panama taxes, as long as said assets are: a) located abroad, or deriving from foreign sources, or b) are shares or securities of any kind, issued by institutions whose revenues are not derived from taxable Panamanian sources, even if such shares or securities are deposited in the Republic of Panama. This exemption also applies to funds earned from foreign sources, even if they are deposited in Panama.