Purposes

The most common purposes for private interest foundation are as follows:

1. Privacy. Private Foundation may be created purely for privacy. The terms of a will are public and the terms of a PIFs are not.

2. Spendthrift Protection. Panama Private Interest Foundations may be used to protect one's self against one's own inability to handle money. It is not unusual for an individual to create an inter vivos trust with a corporate trustee who may then disburse funds only for causes articulated in the trust document. These are especially attractive for spendthrifts.

3. Wills and Estate Planning. PIFs are frequently used in wills (indeed, technically, the administration of every deceased's estate is a form of trust or Private Interest Foundation in this cases). A fairly conventional will, even for a comparatively poor person, often leaves assets to the deceased's spouse (if any), and then to the children equally. If the children are under 18, or under some other age mentioned in the will (21 and 25 are common). The executor of the will is (usually) the protector, and the children are the beneficiaries. The protector will have powers to assist the beneficiaries during their minority.

4. Corporate Structures. Complex business arrangements, most often in the finance and insurance sectors, sometimes use Private Interest Foundations among various other entities in their structure, usually these entities are holding entities.

5. Asset Protection. The principle of "asset protection" is for a person to independence the assets from his or her own assets, with the intention that future creditors will not be able to attack that money, even though they may be able to bankrupt him or her personally. One method of asset protection is the creation of a discretionary trust, of which the settlor may be the protector and a beneficiary, but not the trustee and not the sole beneficiary. In such an arrangement the settlor may be in a position to benefit from the trust assets, without owning them, and therefore without them being available to his creditors. Such a trust will usually preserve anonymity with a completely unconnected name (e.g. "The Teddy Bear Trust").

6. Tax Planning. The tax consequences of doing anything using a trust are usually different from the tax consequences of achieving the same effect by another route (if, indeed, it would be possible to do so). In many cases the tax consequences of using the trust are better than the alternative, and trusts are therefore frequently used for tax avoidance.

7. Tax Evasion. In contrast to tax avoidance, tax evasion is the illegal concealment of income from the tax authorities. Trusts have proved a useful vehicle to the tax evader, as they tend to preserve anonymity, and they divorce the settlor and individual beneficiaries from ownership of the assets. This use is particularly common across borders — a trustee in one country is not necessarily bound to report income to the tax authorities of another. This issue has been addressed by various initiatives of the OECD.

8. Money Laundering. The same attributes of trusts which attract legitimate asset protectors also attract money launderers. Many of the techniques of asset protection, particularly layering, are techniques of money-laundering also, and innocent trustees such as bank trust companies can become involved in money-laundering in the belief that they are furthering a legitimate asset protection exercise, often without raising suspicion.

9. Co-ownership. Ownership of property by more than one person is facilitated by a trust. In particular, ownership of a matrimonial home is commonly effected by a trust with both partners as beneficiaries and one, or both, owning the legal title as trustee.