Trusts in Switzerland
It is said that one third of the world’s wealth is managed in Switzerland and a substantial proportion of it held within trusts. Switzerland is accordingly a very important centre for trust management and yet trusts as such do not exist in Switzerland. As a civil law country Switzerland ignores the distinction between legal and equitable ownership, which exists in common law. In reality many of the trusts, together with anstalts and foundations administered in Switzerland are established under the laws of countries which recognise trusts, principally Liechtenstein. Liechtenstein enacted a specific law of trusts, modelled on Anglo Saxon law.
Whilst this works in practise most of the time it should be remembered that a dispute might require to be settled in Court and that the Swiss Court does not necessarily recognise all forms of trust and may approach the matter differently from (say) an English Court. It was indeed only in 2003 that the Swiss Supreme Court expressly recognised the standing of a trustee. The situation should be improved when Switzerland ratifies the Hague Convention on the recognition of trusts. In this web site therefore we describe Liechtenstein trusts.
Liechtenstein Trusts
Liechtenstein is the only civil law jurisdiction, which has adopted largely Anglo Saxon trust legislation (contained in the PGR Code), although, unlike the common law trust, there is no limitation on the time for which income can be accumulated and no rule against perpetuities.
A Liechtenstein Trust is set up by a written agreement (Trust Deed) between the settlor and the trustee(s). The Trust Deed does not have to contain the names of beneficiaries. If the Trust Deed is deposited with the Registrar of Trusts, it will not be publicly available, and later instruments (e.g. naming beneficiaries) will not have to be revealed. If the Trust Deed is not deposited within 12 months, the following details of the trust must be placed on the public register,
- A description of the trust
- The date of formation
- The duration of the trust
- The name (or trade name) and address of the trustee
A registration fee is payable on registration.
The settlor can make such provision as he wishes for the beneficiaries and include such other trusts and powers as he thinks desirable. The Deed however must not bind the trustee to the settlor’s continuing directions, or the trust will be treated as an ordinary contract. The trustee must keep the trust property separate from his other assets.
Some of the characteristics of Liechtenstein Trusts are as follows:
- A trustee can be an individual or a corporation; one trustee must be a Liechtenstein-resident individual with appropriate professional qualifications
- Trustees have a duty of care towards the settlor and the trust property
- Trustees who carry on business as such must keep an inventory of their trusteeships and must keep each trust's assets separate from other assets; if trust assets are deposited with banks they must again be kept in separate designated accounts
- Trustees are liable for breach of trust to the full extent of their assets; joint trustees must normally act jointly and are jointly liable
- The Court has ultimate jurisdiction, even if the Trust Deed specifies alternative supervision.
- The trustee must keep proper accounting records
- Liechtenstein being a civil law jurisdiction, trust assets may be vulnerable to forced heir ship provisions.
- The trustee's creditors have no access to the trust assets
- The settlor’s creditors have access to trust property only under certain defined circumstances, one of which is under law of succession
- The beneficiaries' creditors have access to the trust assets only if the beneficiary has a vested interest and if the trust deed does not prevent him alienating his interest
- Trust documents, including the Trust Deed, can be in any language
For more information on offshore trusts click on the link or call us on +353 1 431 9663.
