The trust is one of the most effective legal vehicles of the Panamanian legal system. It allows a person called grantor, to transfer to another (a "trustee") legal title to assets, and empowers the trustee to administer and/or dispose of the trust's assets for the benefit of the grantor or other beneficiaries.

The Panamanian trust is a descendent of the English common law trust. Today, Panamanian trusts are regulated by Law No. 1 of 1984.

Trusts in Panama can be irrevocable or revocable. It is possible, by a private written instrument and without executing a will to create a mortis-causa trust.

The grantor may appoint successive or non-successive substitutes to the beneficiaries. In a revocable trust, the grantor can replace the beneficiaries or appoint new ones at any time.

Panamanian law requires the trustee to protect the confidentiality of the operations of the trust.

A grantor may appoint one or more trustees in the trust instrument. A grantor can also appoint one or more substitutes to replace the trustee. In a revocable trust, the trustee may be replaced, or new trustees may be appointed at any time by the grantor or by the person authorized by the grantor to do so. This is permitted if the original trust instrument allows it, and the legal formalities and faculties required for the original settlement of the trust are again followed.

The trust funds are legally separate and distinct from the personal property of the trustee. The funds cannot be seized, except in the case of obligations incurred for damages caused by the execution of the trust, or where the funds were fraudulently transferred and aggrieved parties bring suit.

After the grantor's death, the trustee can continue to manage the trust funds according to the terms set out in the instrument.

The panamanian trust is regulated by panamanian law, and may establish that the trust be administered in accordance with the laws of another jurisdiction, and that the assets of the trust be transferred to another jurisdiction.

To act as a trustee, a person must have a license issued by the Bank Supervision Authority of Panama.