A trust proposal may appear complete because it identifies assets, participants and a trustee. Before signing, understand something more concrete: what each person can decide, what will happen if the settlor becomes incapacitated or dies, and how the assets must be administered in those circumstances.
Law 1 of 1984 describes a trust as the act through which the settlor transfers assets to the trustee to administer or dispose of them according to an established purpose. Trust assets constitute a separate estate from the trustee’s personal assets. For real estate located in Panama, the transfer is recorded in the Public Registry in the trustee’s name. This distinction should be explained clearly: the assets are no longer administered as part of the settlor’s personal estate, but they do not become part of the trustee’s own estate.
Read the roles together with the powers
The settlor establishes the structure and transfers the stated assets. The trustee assumes the functions set out in the agreement. The beneficiaries may receive the defined benefits. Some structures also include a protector or trust council, whose authority should be expressly limited.
Before reviewing the draft, confirm who will be the settlor, trustee and beneficiaries, and whether a protector, trust council or, when relevant, a resident agent will participate. Then identify the assets to be transferred, permitted uses, distribution rules and dates, applicable conditions and reporting procedures.
Ask what happens if the settlor suffers partial or total incapacity and what the immediate effect of the settlor’s death will be when that person is also the principal beneficiary. The agreement should state who may give instructions, approve distributions, replace the trustee or perform supervisory functions in each scenario. Titles can suggest a level of control that does not match the actual powers.
Powers, supervision and due diligence
Review the trustee’s fees and third-party expenses. The document should make clear when charges arise, how they are approved and whether the trustee may pay them from the trust assets.
Identification and due-diligence rules also matter. Agreement 1-2026 of the Superintendency of Banks requires banks and trust companies to identify, among others, relevant persons in a trust and those who exercise ultimate effective control. Its application belongs to the regulated entities and must be assessed for the transaction.
Clarify the proposal before signing.
A properly designed trust begins with a clear purpose and powers that can be explained. If the proposal does not answer your questions about administration, cost, supervision and replacement of key persons, request clarification before proceeding.
At Carolina Solís Law, I can review the scope of an estate proposal from an independent perspective, confirm which issues fall within my field and identify where additional coordination is required.
Read each role alongside its powers
The agreement and applicable law determine actual powers. In a hypothetical incapacity scenario, names are not enough: review who can act, what evidence is needed and which controls apply.
Participant
Question to resolve
Settlor
Which powers are reserved and what happens on incapacity or death?
Trustee
Which decisions can it implement, how does it report and charge fees?
Beneficiaries
Which benefits, conditions and rights does the instrument provide?
Protector or council, if any
What can it approve, oversee or replace under the agreement?
