Estate planning: Asking the right questions

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Estate planning: Asking the right questions

Estate Planning

If you have relocated to Panama, or you are thinking of retiring to Panama, then you should consider estate planning in Panama.  As an estate planner, I look at how you anticipate, during your life, to manage and dispose of your estate during and after death.  We consider issues of estate tax, gift tax, and income tax for the beneficiaries, as well as the costs of the transfer of the estate to the next generation. Asking the right questions is essential to make sure the estate plan works for you.

Wealth management

Accumulating wealth is a great accomplishment that requires skill and determination. It also requires a uniquely developed plan for your personal circumstances or that of your business.  Part of our job is to outline how our clients assets should be managed and preserved throughout their life and then distributed afterward to the people or causes they love.

During your lifetime, needs and goals will change. There will be the time for saving and investment, portfolio growth, business growth and investment, and then there are considerations of retirement.  During these different stages, priorities in the estate plan may change. Family situations may change. Estate plans should be updated.

The assets and their liquidity will change during these years. For some clients, business succession will need to be considered or having a golden parachute with which to leave the company.  Exit strategies need to be considered.  One of the most difficult parts of estate planning is family businesses and organising an orderly succession and transfer to the next generation.

Your plan

One part of estate planning may include a Last Will and Testament, for assets held in your personal name. Another option is to structure the assets in entities (corporation, trust or foundation), so that probate can be avoided and the transfer can happen quickly. The estate plan should also consider issues of a Living Will (for taking medical decisions and possible mental disability).  You will want to consider issues of guardianship or conservatorship.

To be effective, you need to be open with the estate planner about all the details of your life that need to be cared for.

Wills or  Intestate probate

Part of this estate planning process may include writing up a Will (Last Will & Testament). A will will cover assets held in your personal name (real estate, investment accounts, bank accounts, cars, etc.).

Types of Wills

There are a number of different types of wills that are acceptable in Panama, including these:

  1. Holographic will: the testator hand-writes their will on simple paper. They also date the will and sign it at the end (signing each page if it is more than one page long). This Will may, or may not, be inside a sealed envelope or not and is not normally witnessed. In order to be valid, this will must be presented for probate within five years of the death of the testator.
  2. Open will: A lawyer typically prepares this will, as a Public deed.  It is written before a Public Notary and three witnesses. The Notary will then  read the Will aloud before the witnesses, and the Testator confirms that the will fulfills their wishes.  The original Will is kept at the Public Notary archives, a copy is handed to the person making the will.
  3. Closed will: like the above, this will is written on special stamped Notarial paper. The Testator signs each page and at the end. The notary and three witnesses simply witness that the Testator expressed that they are issuing a closed will. They do not read the contents thereof.  The Notary then seals the will in an envelope with a deed that confirms this was done, signed by the Notary and three witnesses. The testator takes custody of their envelope. 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. Immanent death: Known as an oral will, this is valid if the person is in risk of imminent death. In this case, the person expresses his/her last will before five witnesses, and this type of will is valid where the decedent dies within two months after so doing.

Probate

Nevertheless, in Panama the probate process (either testate or intestate) will require a lawyer (not simply an executor) and will go through the court system. Lawyers in Panama charge for the probate process based on the value of the assets in the estate. Their fees usually run between 10-40% of the value of the assets.  While the fees established for the process run from ten to fifteen percent, these are the minimum fees charged. Clients often find that local lawyers are charging substantially more than this percentage for the probate process, so we attempt to use structuring to avoid the process.

Estate planning options

Nevertheless, you may prefer to structure your estates so as to avoid probate and the process above.  Instead of holding property and investments in your personal name, you could own property through a corporation, Private interest foundation or a trust.  These offer the benefit that assets do not have to be “transferred” to the beneficiaries by the court. They are managed and disbursed by the Board of Directors, Trustee or Foundation Council.  Nonetheless, there may still be costs involved (such as real estate commissions on the sale of the house or property transfer taxes to the buyer). There are also annual costs associated with the entity (management, government fees).

We understand that your estate is more than simply your wealth or money. It is somehow a reflection of a life well lived.  More than anything, it gives you the opportunities to live in retirement the way you envisioned living.  You can provide for your family or contribute to charities or causes that are meaningful to you. Once you have achieved your financial goals, you want the freedom to choose how you will spend your life and make use of your resources, knowing that you have taken care of all the details.

We know that this process should be all-encompassing, and are experienced in asking the right questions to help you move through this process. We want to ensure that your estate plan is personalised to your particular goals.

Contact us for more information regarding how we can help you with your estate plan.

 

Easements and Community Protection

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Defining Easements & “Right-of-Way”

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Right-of-Way over private property to “land locked” property

A “Right-of-Way” is the legal right, established by usage or grant, to pass through the property of another.  Typically, this is restricted to a specific route and area, and fenced off from the rest of the property.  A right-of-way is “servidumbre” in Spanish. The word “servidumbre” includes rights-of-wayeasements.  Easements allow access to land for things like natural resources, development and pipelines, or construction and maintenance. An example of an easement would be sewage pipes passing underground.  A right-of-way, on the other hand, allows the person to travel through the property.  Public right-of-way typically includes the street, the curb, alleys, sidewalks, planting strips, all the way up to the fence.

When someone owns land hemmed in on all sides by other private land, a court will grant that person a right-of-way through neighbouring land, if this has not already been granted by use, custom or grant.  For example, when someone buys a lot from a larger land owner who has road access, the seller must ensure that the buyer has road access through the principal property. This seller may establish a right-of-way  through a tranch of their land.

Regulation of right-of-way & easements in Panama

The Civil Code of Panama (1917) regulates rights-of-way and easements (Servidumbres) in Title X.  This Title of the Code covers definitions, general rules, how to acquire rights, rights and duties of the parties, and how to extinguish rights.  The Code goes so far as to cover grazing rights, water rights, and the such.  The Mining Code and Administrative Code also govern some easements for specific purposes.  The Environmental Authority of Panama establishes special rules regarding water rights. The Ministry of Housing and City Council establish special regulations and approvals regarding new development projects. Our office advises on Ley 6 (2006), one of the many laws regarding real estate development in Panama.

Problematic right-of-way & easements

Our firm deals with right-of-way problems, especially where these affect communities.  A recent case involves a community that wished to protect themselves from becoming a thorough-fare.  A developer built a gated community, and then “opened” a gate from her new development into the neighbouring community to provide another exit to the main roads.  In this case, the gate violated building permits issued by the City Council.  The affected community shut the right-of-way, and the developer asked the local Sheriff to enforce the right-of-way, in spite of having planning permits rejected by the City Engineers.  The Sheriff ordered the right-of-way be opened, ignoring the City Council’s rejection of the permit.

In this case, our firm appealed to the Mayor’s office, as the Mayor is the next instance for appeals.  We presented the Mayor’s office with the City Council’s order (Secretaría Técnica Judicial de Edificaciones y Construcciones), rejecting the gate and right-of-way.  They overturned the Sheriff’s decision to order the right-of-way through this community for a number of reasons.

Firstly, the Administrative Code of Panama establishes in Article 1325 that the appropriate authorities in case of dispute of rights-of-way or easements are the courts.  The Sheriff’s office must enforce the judgement by the court, but they do not have jurisdiction to hear the complaint.  Hearing the complaint violated the rights of the community to be heard in an appropriate forum. Secondly, the developer ignored the City Council’s order, violating urban development rulings.

Please contact Betsy Moran for more information regarding Community Protection.