You already know that offshore financial accounts are excellent choices for protecting assets. In cases where you opt for savings accounts, the interest rates can be better than what you can command at home. Investment accounts also allow you access to holdings that may or may not be easy to include in a domestic portfolio. Even so, it is essential to select the strategy that will provide the most benefits in the long run.
Offshore trusts are one of the most effective tools for asset protection and growth. Specifically, trusts in Belize can be a key element in your planning. You might also want to give some thought to a Panama foundation. To help you understand how each approach works and what they have to offer, here are some basics that will help you make the best decision.
What You Should Know About a Belize Trust
You will find that much of what you know about domestic trusts will also apply to a trust based in Belize. This type of arrangement allows you to assign various types of assets to the trust and have them managed under the auspices of the administrator or trustee. That management is conducted in compliance with all terms and conditions as identified in the trust agreement.
What sort of assets can be held in the trust? Stocks, bonds, and real estate are a few examples. Jewelry, artwork, and other types of assets may also be included. It is also possible to assign the payouts of life insurance policies to an offshore trust. If in doubt, a financial professional can tell you if a specific asset can be placed under the control of a Belize trust.
Benefits and Limitations Associated with a Belize Trust
In many instances, the holdings and revenue generated by the trust are considered tax neutral. That means you will not owe taxes to any revenue agency in your home country. In this way, the trust makes it possible to grow the assets while not having to be concerned with creating an additional tax obligation that could place you in a higher tax bracket at home.
You will also find that naming a trustee and an investment advisor based in Belize is the best way to obtain the maximum returns. Why can’t you, as the owner/settlor perform those duties? If you, as a citizen of a different nation, fulfill these roles, including the ability to end the trust or replace a trustee, there is a chance that a domestic court would close the trust and order the assets returned to your home country.
Exploring the Merits of a Panama Foundation
Like trusts, the modern Panama foundation is a means of protecting assets and ensuring they are passed on in the manner desired by the settlor. The basic model for this type of foundation is rooted in a wealth management strategy common in various parts of Europe for centuries. It is a way of protecting the assets to ensure they ultimately end up in the hands of the heirs you designate.
It is possible to structure the foundation as a charitable entity or even as a family foundation. The value here is that there is little to no chance that an increase in any of the held asset’s values will need reporting for tax purposes. To determine if this is true in your case, look closely at the laws applicable in your country of residence.
Passively Holding Assets in a Panama Foundation
Strictly speaking, there are no foundation owners. That means no one is actively managing the assets and taking actions intended to promote growth. Instead, the assets are being held and tracked. That means gains and losses are noted, but nothing is done about the holdings unless you decide to make a change.
That does not mean you can’t designate someone locally to act on your behalf. The laws related to Panama foundations include provisions for the appointment of a protector who can take independent action within the limits you set. That same individual can carry out directives issued by you if some unusual situation arises that needs attention immediately.
A Balance Between a Trust and an IBC
Some would say that a Panama foundation is a balance between establishing a trust and forming an international business company. To be sure, you can retain more control using this solution rather than opting for a Belize trust. In return, the level of asset protection may not be as great.
You can look forward to enjoying tax neutrality that is like what you find with a Belize trust. If you happen to be someone who prefers to retain control while also maintaining privacy, this could be the right approach for you.
The Costs Involved with Each Option
The expense associated with forming a Belize trust or establishing a Panama foundation is something to consider. Of the two solutions, expect to pay more to establish the trust. Depending on the source used to identify those costs, a Panama foundation will require roughly a third of the funds needed to pay for a Belize trust setup.
Keep in mind that much of the focus is not on how much you will pay to set up either option. Consider the type of assets that you wish to place under the care of each approach. You may also want to give some thought about where the assets will be directed in the future. Do consider the cost, but don’t make it the ultimate reason you go with one or the other. Doing so could create issues and lead to lost opportunities in the future.
As with any financial decision, consider the merits of each of these offshore strategies. It is also important to determine which solution moves you closer to your financial goals while providing the privacy and control level you seek.
Take your time, ask all questions that come to mind, and make sure you understand how each solution will function. Once you do that, deciding whether a Panama foundation or a Belize trust is the best approach will be simple.
I hope you got value from reading this article: Protecting and Growing Assets: Belize Trust or Panama Foundation?
Here are some additional articles you may enjoy reading on a Belize Trust or Panama Foundation.
About The Author
Luigi Wewege is the Senior Vice President, and Head of Private Banking of Belize based Caye International Bank, a FinTech School Instructor and the published author of The Digital Banking Revolution – now in its third edition. You can follow his posts on trends shaping the banking and financial services industry on Twitter: @luigiwewege
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