Cross Border Estate Planning Tools

If you are a foreigner currently living in Panamá, or who has invested in real estate and other assets located in Panamá, among the many issues that you need to consider is how holding assets abroad will affect your estate plan. Among the several questions that we get are: Will my foreign estate plan remain valid in Panamá? If not, do we need a separate estate plan to cover our Panamanian assets? Can I have a will abroad and a will in Panamá, and what happens If they overlap? These are just some of the questions that we will address in this article.

WHICH ARE MY OPTIONS FOR A CROSS-BORDER ESTATE PLANNING?

OPTION 1: It is advisable to have two wills. To have a carefully drafted will in both countries, well prepared to avoid inconsistencies and issues that can lead to one of your wills being null and void. Having a will that satisfies the appropriate your country's requirements and another that meets the formality requirements in Panama may work for you. Besides, if you already have an estate plan, you may want a backup plan to dispose of suddenly acquired property. Also, check the treaties between Panama and the country were you born to determine further legal consequences. Wills are always revocable; a new will can be written, leaving the previous one without legal effects. Hence, the importance of the date in the will. Be aware that in Panamá, wills are subject to the probate process. Probate takes time and can be expensive, as you have to pay lawyer and process fees, and experts to appraise your real estates, in case you have it. Also, probate can be complicated. Under Panama Civil Laws, there is the freedom to dispose of your assets, except for the funds owed as alimony to children or parents or spouse. If you choose to use a will as your estate planning tool, you can use one fo the type of wills authorized by the Panamanian Civil Code. For instance:

1) Handwritten or holographic will: should be written, dated, and signed in the handwriting of the person making the will. Might be inside a sealed envelope or not and is not usually witnessed. You can read about holographic will in

https://www.kerycruz.com/en/news/handwriting-will-in-panama

2) Open will:

• It is reading before a Public Notary and three witnesses.
• The document is kept at the Public Notary archives.
• A copy is handed to the person making the will.
• Anyone can have access to the document.

3) Closed will: It is written by the person making the will, enclosed in an envelope that must be thoroughly sealed by the Public Notary and handed back to the signatory. The contents of the document will only be known by the person who wrote the will. Once the person dies, the will is opened by the judge in charge of the probate proceedings.

4) Nuncupative (Oral) will: It is valid if the person is at risk of imminent death, expresses his/her last will before five witnesses, and dies within two months after so doing.

5) Will in the Panamanian Consulate. You may file your last will with the Panamanian Consulate. The Consuls are authorized to act as a Notary abroad. However, be sure that they know how to write the will and are familiar with the preparation and registration process. I strongly recommend preparing the will in advance with a lawyer. The Consulate will have to send a copy of the will to the Secretary of the Government (if it is an open will) or the minute of will (if it is a close will) for filing. When the testator dies, the Consul has to send the will and the certificate of death to the General Secretary of the Minister of Government. The Secretary of the Minister of Government must publish the notice of death, to the interested party pick the will up, and process the notarization.

Drafting the will. You may have different types of beneficiaries. For instance: Primary Beneficiaries; Alternate Beneficiaries.Those named to receive a gift if the primary recipient cannot, for any reason, receive it; Life Estate Beneficiaries (usufructuarios mientras vivan), who receives the right to receive income from, or the property's use during their life, but never acquire ownership rights? Residuary Beneficiaries are those named to inherit assets that are not expressly left to any other person.

Controls over the property. You can leave assets for a specific purpose, for instance, for your grandchildren's education; in this case, you should decide what level of education a child must reach. It is also possible to establish an annuity instead of a total lump sum for the beneficiary. You can also ban the beneficiary from selling the estate, for a specific time, mainly when the beneficiary is financially irresponsible.

Panamanian Will Formalities: A will written in a foreign language requires two official translators, chosen by the person who is disposing of his/her assets, having the document translated into Spanish. A will that lacks this formality can be nullified.

Panamanian Will Disadvantage. Your inheritors will need to hire a lawyer, pay legal fees, pay appraisal fees, and, apart from that, they will have to file the deceased person's will with a local court and, once the will is proved and the estate appraised, the assets will be distributed.

Absence of a will. Dying intestate entails that property will be distributed according to the relevant jurisdiction's law, not as you wish. Your executor and the guardian for your minor children will be appointed by a judge following the law's criteria. Under Panamanian Law:

1. If there is a surviving spouse, the estate is inherited by the surviving spouse, the children, and the children's closest descendants, if a child has died.
2. If there is no will and no surviving spouse, the estate is inherited by the children and the children's closest descendants if a child has died.
3. If there are no descendants, the parents will inherit.
4. In the absence of descendants and parents, the closest ascendants will inherit.
5. If there are no relatives at all, the Municipality of your last Panamanian address will inherit.

OPTION 2: Having a will in a different country to cover the assets in that particular country. If you have a foreign will, you may include your Panamanian properties in that will. However, the will must be drafted following the law of that country. However, be aware that Panamanian law does not allow joint will.

You need to make sure that your foreigner will satisfy all relevant formalities to be recognized in Panama, and filed it with the appropriate Panamanian Consul.

OPTION 3: Panamanian Trusts and Private Interest Foundation. If you are looking to avoid probate in Panamá, there are various legal vehicles available. Two of the most common are:

Panamanian Trusts. Trusts in Panama are contractual relationships that allow for the transfer of personal assets to the trust, which then holds the assets independent of the trust's creator (often called a "trustor," "grantor," or "settlor"). As such, any assets transferred to the trust become the trust's property. The trust contract will dictate how the trust is to manage and distribute the assets during and after the trustor's death. However, in Panama Trusts Companies need to be registered, and just that one with licenses can act as trustees.

Living trusts, also called inter vivos, are revocable before you die. While you are still alive, you control the trust assets. Hence you can dispose of them in any manner you consider adequate, without any limitations. As a settlor or trustor, you may choose yourself or a third party as trustee.

The Private Interest Foundation. Private interest foundations provide greater flexibility than wills and can be used to avoid probate. It is a legal entity that is a fusion of an LLC in the USA and a USA Living Trust. A private interest foundation can own property and bank accounts in its name while being able to take on debts and other obligations. In other words, it is possible to transfer local assets to a Private Interest Foundation, appointing an administration council, which manages the assets according to the founder's instructions. At the founder's death, everything goes to the person or persons designated as a beneficiary, avoiding probate. Private Interest Foundations can be revoked or modified by the founder, in principle, subject to the provisions of the articles of incorporation.

Administration Council. The founder can be a member of the Administration Council, with such powers that will allow him/her complete control over the assets.

The Protector. The founder can appoint a protector with or without power to veto the decisions of the Council. Once the founder dies, the assets will be distributed by the Council according to the instructions of the founder, without the need to file for probate, pay legal fees, or engage in time-consuming court proceedings

Advantages of Panamanian Trusts and Private Interest Foundations

Simplicity. Living trusts can be executed before a Notary Public in Panama. Private Interest Foundations must be registered in Panama, but a third-party representative can do this.

Revocability. Trusts and private interest foundations are freely revocable.

Disadvantages of Panamanian Trusts and Private Interest Foundations

The founder is irreplaceable. If you use a local lawyer to settle the foundation, that lawyer may act as the founder, which is irreplaceable. Be sure that you keep complete control over the foundation.

Publicity. Registration of property must be done through the Public Registry of Panamá.

Maintenance Cost. Panamanian Private Interest Foundation has to pay yearly USD 400 to Panama's government plus a fee between USD 250 to 500 for having a Resident Agent.

OTHER ESTATE PLANNING DOCUMENTS IN PANAMA

Power of Attorney. Under Panamanian law, all powers of attorney automatically terminate upon the grantor's death. Besides, any directives that are inconsistent with Panama's laws governing intestate succession (the transfer of assets without an estate plan) will be disregarded.

When you are mentally incompetent, or you are alive due to the use of life-sustaining medical technology, and you are not able to make medical or financial decisions, your will and the instructions therein contained shall not apply, because your will takes effect when you die, not before. In such a case, a power of attorney, whereby the person appoints a trusted one who will make the vital healthcare and financial decisions during the relevant period of time, maybe handy. You may also leave directions and instructions on medical care and financial issues that will be implemented or executed by doctors and bankers, while you are incapacitated.

Joint Tenancy Bank Account. In some cases, a joint tenancy bank account can be a useful probate avoiding tool, especially when there are family ties. Be sure that the bank account is opened in the name of A 'or' B. Both persons will be able to withdraw the funds without the consent of the other. Hence, this type of account requires a high level of trust. Also, you can ask your banker if they have some account beneficiary forms. Usually, a lot of the banks have this type of form for the account holder leaves instructions about how the bank should distribute any balance.