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  The Trust under the Panamanian Legislation
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Mauad & Mauad is a Lawyers’ Firm having a proven and well-known track record in the corporate, finance and offshore structure fields. The Firm’s Corporate Department manages a broad variety of issues that range from the organization and constitution of stock corporations, limited liability companies and civil corporations, to the structuring of instruments such as Trusts and Private-Interest Foundations, with a view to providing clients with viable mechanisms for asset protection, investment planning, tax burden minimization and equity planning. Below are some relevant and interesting considerations related to one of such instruments, Trusts, under the Panamanian legislation.


A Trust is an effective legal instrument contemplated in the Panamanian legislation that allows the owner of any type of property, also known as Settlor, to transfer ownership or title of such property to another person, called the Trustee, so that the latter administers or disposes of such property, either permanently or temporary, in favor of a Beneficiary, which may be the Trustor himself. The Trustee is the person chosen to perform the mandate granted by Settlor and to carry out a certain purpose.

The purpose of a Trust is to convert the property transferred to the Trust into an independent estate, to be administered by the Trustee as per Settlor’s instructions. To become a trustee a license issued by the Superintendency of Banks is required.

In Panama, the Trust is a juridical institution stemming from the Anglo-Saxon Law and adapted to the Panamanian juridical body of laws through Act 1 of 1984.


Some of the relevant characteristics of a Trust in Panama are:
  • They may be irrevocable or revocable;
  • They may be constituted through a private document;
  • Trusts may be created without a will with mortis causa effects;
  • In revocable Trusts, the Settlor is empowered to substitute the beneficiary, appoint new beneficiaries at any time and substitute the Trustee or appoint new trustees at any time with the same formalities and powers as those inherent in the original trust deed.
  • The Settlor may appoint one or more trustees and appoint one or more substitutes to substitute Trustee at a certain time;
  • The Settlor may appoint substitutes for the beneficiary, whether successive or not;
  • The Trustee is obliged to keep secrecy of trust operations;
  • The trust property:
  • Constitutes a separate estate of the personal property of the Trustee for all legal effects, and may not be seized or attached, unless due to obligations or damages caused in the execution of the Trust, or by third parties when the property may have been transferred fraudulently to the detriment of their rights.
  • It may be subjected to the laws or the jurisdiction of another country, pursuant to the provisions in the trust deed.
  • t may be situated within the Republic of Panama or in any other part of the world.
  • Upon the death of Settlor, the Trustee may continue administering the property of the Trust pursuant to the trust deed and the term provided for therein;
  • Trusts constituted under the laws of the Republic of Panama will be ruled by the Panamanian law. However, they may be executed subject to a foreign law if this is provided for in the trust deed;
  • Trusts constituted under a foreign law may abide by the Panamanian law, provided that Settlor and Trustee, or the latter only, give a statement and that it is so authorized in the trust deed.

  • The fact that the property of the Trust is separate from the property of the Trustee offers a series of advantages from the fiscal perspective as well as the protection of the assets from possible seizures or attachments from third parties.
  • The confidentiality and secrecy of the Trust property,
  • A Trustee looking for credit may not offer the Trust property to which he is a Trustee as guaranty for the credit,
  • The Trust estate remains excluded from the Beneficiary’s property,
  • An exception to the rule of separation of property is when the seizures or attachments originate from liabilities by reason of damages caused in the execution of the Trust, or by third parties when the property may have been transferred fraudulently to the detriment of such third parties,
  • Flexibility to change jurisdiction of Trust,
  • Security of obligations for the parties involved,
  • Tax exemptions on acts of constitution, modification or termination of the Trust, and transfer, transmission or pledge of property under the Trust and the income deriving from such property or any other act over the property; provided always that the trust is constituted over: 1. property situated abroad; 2. money deposited by natural or juridical persons whose income is not derived from a Panamanian source or a source taxable in Panama; or 3. stocks or securities of any type issued by corporations whose revenues are not derived from a Panamanian source, even if such moneys, stocks or securities are deposited in the Republic of Panama.

A Trust has diverse uses as per the purpose and objective of the person constituting it (Settlor). Trusts are commonly created or constituted for the following uses:
  • Administration, conservation and protection of property
  • Investment of property
  • Protection of Beneficiaries
  • Tax advantages
  • Security of obligations

We can distinguish some types of Trusts depending on their nature and purpose. Some of them are:
  • Testamentary Trusts: The Settlor constitutes the trust by contributing certain property so that upon his dead the Trustee may deliver it to the persons designated as beneficiaries.
  • Educational Trusts: are constituted by persons who wish to systematically raise funds on a monthly basis to cover partially or totally the education costs of their children, relatives or their own education.
  • Investment Trusts: are those intended to invest the Trust property in securities in order to obtain attractive returns on the investment. The Trustee is obliged to assure the adequate structures of liquidity, profitability and security so as to get the maximum benefit for Settlor.
  • Guaranty Trusts: here Settlor is the debtor of an obligation, who delivers his own property to the trustee providing that if upon debt becoming due Settlor defaults payment, the Trustee may proceed to realize property and pay the debt to creditor from the proceeds thereof.
  • Miscellaneous trusts, are used for any legal, business or particular operation required by a client.

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NOTE: The information herein provided could have varied due to recently approved regulations. Therefore, we suggest you contact our office for a formal legal opinion.

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