Offshore Asset Protection: Aruba House Owned By Panama Corporation

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One my clients hired me for offshore asset protection advice after having purchased offshore real estate many years ago. The client had bought a second home in Aruba for all cash. The home was titled in the name of a Panamanian corporation. A Panama bank was named as the sole officer and director. The corporate documents stated that the company held real estate as a “nominee” of the shareholders, but the documents did not name or describe who the shareholders were. The bank assured the client that it would follow the client’s directions regarding renting or selling the property. Rental income from the Aruba house is listed on the client’s U.S. tax return. The client asked me if the house was protected from her U.S. judgment creditors.

The client would have to disclose her equitable interest in the house during the creditor’s discovery in aid of collection. Although the client does not have legal title to the home, he does have equitable ownership and the asset is revealed on the tax returns. There are no exemptions applicable to the client’s interest in the corporation.

The creditor’s execution against this asset would be very difficult, but not impossible. The creditor could not practically execute on the property in Aruba or the corporation in Panama. However, the creditor could try to get a U.S. sheriff to levy upon the debtor’s equitable rights in the company. This type of creditor tool is unusual but not impossible.

 This home was purchased more than four years ago which is beyond the statute of limitation for fraudulent transfers. If the client bought the home more recently and under the threat of litigation the creditor might have additional remedies in U.S. courts.
The Aruba property would be less protected if the client filed Chapter 7 bankruptcy. The bankruptcy court has worldwide jurisdiction over the debtor’s property interest. A bankruptcy trustee could demand that the client debtor do what is necessary to turn over his interest in the Panama corporation to the trustee and the creditors. The trustee may also pressure the Panama bank to convey title to the trustee.