The Panama Trust

Panama is one of the few jurisdictions that cater to both trusts and foundations. While trusts are typical of common law systems and not generally found in civil law countries, Panama—being a civil law jurisdiction—is an exception to this rule.

Built on the principles of certainty, security, and confidentiality, Panama is an attractive location for establishing trusts. It provides high-net-worth individuals with peace of mind in a well-regulated environment that preserves the original essence of trust law.

As a reputable trust jurisdiction with an increasing number of authorized trustees, Panama introduced its trust law in 1925 and last amended it in 2017. This update aligned the framework with international standards, creating new opportunities for individuals and families seeking customized trustee solutions.

Panama law supports all main types of trusts found in traditional common law jurisdictions, including:

• Discretionary trusts
• Accumulation and maintenance trusts
• Fixed interest trusts
• Charitable trusts
• Unit trusts

Benefits of Panama Trusts & Foundations

• One of the few civil law jurisdictions with a domestic trust law
• Recognition of trusts established under foreign laws
• Availability of both domestic trusts and foundations
• Legislation published in Spanish and translated into English
• High professional standards with internationally trained professionals
• Fast-track authorization for trustees licensed abroad
• English-speaking country with a pro-business government

Growing Popularity

Whether for tax planning, inheritance, asset protection, or shareholding purposes, trusts and foundations are increasingly favored by high-net-worth individuals and corporate entities. The global financial crises and economic uncertainty have also made asset protection appealing to individuals of moderate wealth.

Foundations are particularly attractive to clients from civil law jurisdictions such as continental Europe, Latin America, and Asia, where trusts are less common. Conversely, common law clients appreciate Panama’s foundations because they offer trust-like benefits while allowing founders greater control. Unlike trusts, foundations have their own legal personality and can hold assets directly.

Multiple Uses

Panama’s legal framework supports both trusts and foundations, which operate in parallel. Each trust is individually structured to meet specific client needs—Panama does not offer “off-the-shelf” solutions. The law recognizes discretionary, accumulation, fixed interest, spendthrift, and charitable trusts, as well as commercial variations such as security, real estate, and investment trusts.

Foundations are commonly used for wealth planning, philanthropy, and estate management, often serving as an alternative to corporations or trusts depending on the client’s goals.

Recognition of Foreign Trust Law

Panama’s trust law allows settlors to establish trusts governed by foreign law, and such trusts are fully recognized. Although Panama is not a party to the Hague Convention on Trusts, its laws comply with the core trust concepts expressed in it. The jurisdiction ensures that foreign trusts can operate free from forced heirship and similar restrictions, providing flexibility for international investors. Properly executed foreign trusts are recognized and enforceable under Panama law.

Reliable Service Providers

Professional trustees and foundation administrators in Panama must be licensed by the Panama Banking Authority (PBA), ensuring compliance and high standards. The PBA has licensed more than 80 local and international fiduciary companies, reflecting rapid growth in this financial sector.

Lower Set-up Costs

Panama offers significantly lower setup and administrative costs compared to other trust jurisdictions. Establishing a trust in Switzerland may cost over US$8,000, while in Panama the cost averages around US$2,500. Professional fees for trust management, legal, and auditing services are also notably lower, supported by highly regarded professionals with international experience.

A Robust Structure

Globally, there is a growing awareness of the need for compliant and transparent structures for wealth and succession planning. Panama’s Banking and Securities Authorities are recognized for their effective and collaborative regulation, reinforcing the country's position as a leading wealth management hub. Income earned by non-resident beneficiaries from assets outside Panama is not subject to taxation, enhancing Panama’s appeal as a trust jurisdiction.

Geared to Service

Trust and foundation professionals in Panama uphold the highest international standards. Many are trained abroad, and global firms such as Deloitte, PwC, Ernst & Young, and KPMG maintain offices in the country. Panama also hosts global banks including Scotiabank, Bank of China, Credit Suisse, and UBS, offering custodial services for fiduciary clients. The country’s bilingual, well-educated workforce provides top-tier service at two-thirds of the cost of equivalent labor in the U.S. or Europe, strengthening Panama’s reputation as a premier fiduciary services hub.