It is natural and normal that we human beings look very little to the future since we live our day to day surrounded by chores, work, family, etc., and even more so in this fast-paced life that «everything is for yesterday». However, I like to recommend to my clients that they should practice the habit of «looking from the balcony» and analyze: where am I standing and what do I do in case something happens to me?
I think that we are afraid of knowing a little further, since the most accurate thing is death and all of us, as human beings, are going to have a natural reaction of wanting to avoid what we do not know. Unfortunately, it’s something we’re all going to have to deal with, however fortunately there are ways to structure life postmortem. For this, there are the legal tools of donation, testament and/or foundation.
What is the donation and what is it for?
It is a right of exemption provided by the government for people who want to transfer real estate to spouses or first-degree relatives of consanguinity (spouses and children).
How, when, and where?
- It is processed before the General Directorate of Income only.
- The process takes 4-6 months for the issuance of a resolution that authorizes the procedure.
- Subsequently, a notary must be asked to raise a deed and notarize the resolution in order to enter it into the Public Registry.
- Very few people know about the subject and make capital gain expenses and transfer of real estate (3% and 2%) that are unnecessary. The only point against it is the bureaucracy and the delay on the part of the General Directorate of Revenues.
What is a will?
It is a document that serves as a legal tool to ensure that the will of the deceased is fulfilled, as long as this document meets the requirements of Law 2 of August 22, 1916 of the Civil Code of Panama.
What is a Bylaw?
The Bylaw is a private document and as such, it does not need to be registered in the Public Registry or in any other place. In practice, any information containing the names of the beneficiaries and their rights to the properties of the foundation is indicated in the “Regulations”. In this document, clear and precise guidelines are placed on what the Founder wants to be done in his Foundation. Although it is not explicit, the Founder places his last will.
What is the difference between a will or a bylaw?
Both have the same purpose, but their effect and internal organization are very different. These would be:
- With the will, a % of the assets must be paid as fees to the lawyer, while with the foundation there is no need to pay any lawyer or resident agent for the amount of assets that it has under its property.
- In Panama there is no inheritance tax (applies to both figures).
- The Will is requested by a natural person in favor of third parties as his last wish regarding the distribution of his assets. While the foundation is made up of a founder and a founding council that has clear regulations establishing how the assets will be distributed and said transfers are tax-free.
- The will has a single initial cost and is requested before a notary. However, the foundation has an initial cost for its establishment and later costs of a one-time fee and a resident agent fee.
- Each person has a way of working which they feel comfortable with and it is ideal to see, case by case, which of the above legal instruments is best for each one.
In summary, I give you my opinion:
- If you have several properties and economic assets, the foundation will give you a clear system for the division of assets and avoid future problems among the heirs. The foundation cannot be kidnapped, embargoed, or subject to action or precautionary measure.
- If you don’t have many assets, a will would be more than enough.
- If you are sure that you want to leave your entire inheritance while you are alive, it would be preferable that you make the relevant donations.
