The Private Foundations have certain similarities with Trusts, both formation structures are capable for managing and protecting assets in a secure and legal financially sound environment, also there will be for the council or trustee to determine which of the beneficiaries are to benefit, when, on what terms and so on. It also possible for a third party to be appointed to oversee and monitor the council or trustee in their management of the property. This article describes the differences between Private Foundations and Trusts: -

1.      Establishment

Trusts are established when the settlor prepares a Trust Deed and transfers assets to the trustee for the benefit of the beneficiary. In order for a trust to be valid, the assets must be transferred to the trusts. Since these does not need to be registered, the existence of trusts can remain confidential and non-public.

Private Foundations are legal entity formed by registering a document called the Foundation Charter or Declaration of Establishment. The foundation charter documents will be a public document. Unlike the trust, there are no immediate requirement to transfer the assets to the foundation for it to be valid.

2.      Naming

Private Foundations name must end with the English word or translated equivalent for “Foundation”, or the abbreviation FDN, also the name must first be approved by jurisdiction. However, there are no name restrictions for Trusts but must include the word “Trust”.

3.      Duration

Trusts are established for a definite period, generally 100 years. On the contrary, the Private Foundations can be established for an indefinite period or set to a specific number of years.

 
4.      Legal Structure

Private Foundations are a separate legal entity, which can contract and hold assets in its own name, also holds the legal and beneficial title to the assets.

Trusts are a legal obligation or relationship between the settlor and the trustee and the beneficiary. The legal ownership of the trust fund sits with the trustees and beneficial ownership with the beneficiaries.

5.      Rights and Duties

(1)     The person who creates

The regulations of Private Foundations give rights to the founder, who can be a council member and also a guardian of the foundation and so have a direct right in the running of the foundation.

The settlor created Trusts, they can reserve some rights, that can appoint a protector to whom certain rights may be granted, such as a right of veto over the actions of the trustees.

(2)     The person who managed

Private Foundations has a council to run its affairs, which similar duties and functions to the board of directors of a company. Also, the foundation law provides for the figure of a Protector for supervising and safeguarding the assets at the disposal of the foundation council.

The trustees of Trusts are responsible for the decision making and managing the trust fund. The trustee can be an individual or corporate trustee, which have powers to buy, sell, and invest on behalf of the trust.

(3)    The person who receives benefits

Private Foundations does not have owners, rather it has beneficiaries. The foundation’s beneficiaries are appointed by the Protector through either a simple, privately written letter of wishes, or through a more formal set of Foundation by laws, that should be written with the assistance of a Panamanian Attorney.

The beneficiaries of Trusts have a beneficial interest in the assets, and therefore have legal rights which can go as far as forcing the trustees to take an action through the court. The beneficiary’s rights to information are based on the fiduciary duty of the trustees to keep the beneficiaries informed and to provide accounts.

6.      Liability

Trusts has no asset protection regulations claims, the trustee is wholly responsible for the liabilities of the trust.

On the contrary, Private Foundations have regulations and limited liability, hence the personal assets of the beneficiaries and members of council are protected.