Private Interest Foundation in Panama: 2025 Legal Guide for Families, Businesses, and Asset Protection

In this clear, up-to-date guide we cover the key features, legal advantages, governance roles (Founder, Council, and Protector), limitations, compliance, and the steps to establish a private interest foundation in Panama. The goal is to help international investors, families, and businesses—especially in the United States—evaluate whether this structure fits their asset protection and succession planning strategy.

Author: AG Legal Panama • Reviewed by: Corporate & Wealth Planning Team • Updated: Aug 25, 2025

What is a Panama Private Interest Foundation?

A Private Interest Foundation is a civil law structure created by a foundation charter for asset management and planning. It is not a commercial corporation nor an Anglo-American trust, though it shares certain wealth planning goals. The design enables legal segregation between the foundation’s assets and the personal assets of the founder and beneficiaries, so the foundation’s assets do not respond to personal liabilities of the founder or beneficiaries.

Benefits and common uses

• Asset segregation: foundation assets constitute a separate estate from the founder/beneficiaries.
• Succession planning: designate beneficiaries and distribution rules (letters of wishes, bylaws, guidelines).
• Flexible governance: a Foundation Council with generally at least three adult members; one or more Protectors may be appointed.
• Multi-jurisdiction reach: may hold assets in different jurisdictions and own equity in companies.
• Confidentiality & purpose focus: not intended for direct commercial profit; prioritizes long-term wealth goals.

Legal framework: asset segregation and limits

For legal purposes, the foundation’s assets form a separate estate. Generally, they cannot be subject to attachment, garnishment, or precautionary measures for personal debts of the founder or beneficiaries; however, they can respond for the foundation’s own obligations, for damages arising from the execution of its purposes, or to satisfy legitimate rights of beneficiaries.

Foundations are not used for direct commercial activities. They may, however, hold interests in companies that carry out business operations. They are subject to the Republic of Panama’s AML/CFT and FPADM compliance framework.

Who can establish it and with what initial assets?

One or more natural or legal persons may establish a foundation—directly or through representatives—while complying with legal formalities. An initial endowment (affected to the purposes of the charter) is required. The initial estate may be increased over time by the founder or by third parties. (Specific amounts and formalities should be confirmed on a case-by-case basis.)

Governance: Founder, Council, and Protector

• Founder: the individual or company that creates the foundation and makes the initial contribution.
• Foundation Council: responsible for administration; as a general rule, at least three adult members. A company may act as founder and as the sole member of the Council (corporate model).
• Protector(s): supervises and may intervene in Council actions; can be granted voting rights over certain decisions.
• Beneficiaries: those who may receive benefits under the foundation’s purposes and rules.
• Key documents: Foundation Charter and, if desired, Bylaws / letter of wishes with private instructions.

Compliance and transparency (AML/CFT – FPADM)

Private interest foundations fall within Panama’s AML/CFT and FPADM framework. Appropriate due diligence, ultimate beneficial owner verification, and any periodic obligations must be addressed. Local legal advice is essential to define processes and supporting documentation.

Permitted and prohibited activities

• Permitted: wealth administration; holding shares/interests in companies; investments; donations and philanthropic aims.
• Not permitted (directly): commercial operations for profit. For operating businesses, the foundation may own a separate operating company.

Quick comparison: foundation vs. trust vs. corporation

• Private Interest Foundation (civil law): assets affected to purposes; asset segregation; Council/Protector governance; succession and administration focus.
• Trust (common law): fiduciary separation; a trustee with fiduciary duties; widespread in common law jurisdictions.
• Corporation: created for commercial profit; not designed for estate planning (limited liability rules apply, but purpose differs).

How to set up a Private Interest Foundation in Panama (step by step)

1. Define purposes and beneficiaries: wealth objectives, distribution rules, and governance guidelines.
2. Choose name and Founder(s): individual(s) or company; appoint the Foundation Council (or a company) and Protector(s) if applicable.
3. Draft the charter and, where appropriate, the Bylaws / letter of wishes.
4. Provide the initial endowment allocated to the foundation’s purposes (future increases are possible).
5. Registered agent and filings with the relevant authorities.
6. Compliance: set up due diligence processes, UBO verification, and supporting documentation.
7. Governance & controls: Council protocols, Protector’s powers, and internal records.

Frequently asked questions

Do foundation assets respond for the founder’s or beneficiaries’ personal debts?

Generally, no. The foundation estate is separate and does not respond to their personal liabilities.

Can the foundation carry out commercial activities?

Not directly. It may, however, hold shares in companies that perform the commercial activity.

Who manages the foundation?

The Foundation Council (generally at least three adult members). A Protector may be appointed with supervisory powers and, in some cases, voting rights.

Who can establish it?

One or more natural or legal persons, directly or through representatives, subject to legal formalities.

Is it subject to AML/CFT?

Yes. Appropriate due diligence and applicable obligations under Panama’s AML/CFT and FPADM framework must be observed.

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