What Happens to a Private Interest Foundation in Panama After the Founder Passes Away?

Before delving into what happens when the founder passes away, it is crucial to understand the purpose and structure of a Private Interest Foundation (PIF). Regulated under Panamanian Law 25 of 1995, this type of entity is a legal tool used for wealth management, asset protection, and succession planning.

• PIFs are non-profit entities, although they may engage in incidental commercial activities.
• The founder establishes the governing statutes and, generally, an internal regulation to direct the operations of the foundation.
• The assets of the foundation are separate from the personal estate of the founder.

Understanding these aspects is key to managing a smooth transition after the founder’s passing.

The passing of the founder can lead to various legal and administrative implications, as PIFs have very specific mechanisms for succession and administrative changes.

1. Governing Legislation

Law 25 of 1995 specifies that foundations must adhere to the provisions outlined in their internal regulations or governing statutes in the event of the founder's death. Therefore, prior planning is essential to avoid potential future disputes.

2. Notification of Death

The administrative team of the foundation must be promptly informed of the death. This enables the initiation of succession mechanisms and avoids disruptions in asset management.

3. Role of the Board of Directors

If the founder was also a board member, an appropriate successor must be appointed since the board remains responsible for the foundation’s general management.

The internal regulation of the foundation plays a pivotal role in the transition. Here's what you need to know:

1. Appointment of Successors

The statutes must clearly outline how succession will be handled in the event of the founder’s death:

• Define who will take responsibility for managing the assets.
• Include detailed instructions for the distribution of assets.
• Appoint a protector or supervisor for the foundation to ensure the founder's intentions are upheld.

2. Review and Update of Regulations

After the notification of the founder’s death, it is advisable to review the internal regulation to ensure compliance with current laws and alignment with the foundation's objectives.

The temporary administration period is crucial to ensure the operational continuity of the foundation.

1. Temporary Administration

While final successors are identified and appointed, it is common for the remaining board members or a temporary administrator to assume immediate responsibilities.

2. Registering Changes

All changes to the board of directors, successor information, or amendments to the foundation’s statutes must be registered with the Panamanian Public Registry. This ensures transparency and legal compliance.

Failure to record these changes may result in penalties and serious legal complications.

Proper management of assets after the founder's death is essential to meet the foundation's objectives and minimize legal problems.

1. Asset Review

A detailed inventory must be made of all of the foundation's assets to ensure that they are managed and distributed as instructed by the founder.

2. Tax Obligations

The administration of the foundation must comply with all tax obligations, including the filing of annual tax returns and other required procedures.

3. Asset Protection

It's critical to ensure that all assets are properly protected against potential legal claims or family disputes.