The Swiss trust law has been a long time in the making. Since the ratification of the Hague Trust Convention in 2007 several attempts were made by interested parties to come to legislation on the proper Swiss trust; thus far unsuccessful. However, this may be (soon) changing.
With the 2007 ratification by Switzerland of the Hague Trust Convention, for the first time, trusts would be recognised as such in Switzerland. The chosen law of the trust would be accepted by Swiss courts. Besides, it was now possible to opt for Swiss jurisdiction. This was undoubtedly progress for Swiss-based trust practitioners such as Intertrust.
This did not mean, however, that there was such a 'thing' as the Swiss trust. As early as 2009/2010, attempts were made by members of parliament to come to a Swiss trust law (the Law). In 2015 a motion was introduced to review the possibility of a Law, but again no joy. In 2016 a member of parliament submitted an initiative promoting the introduction of the Law with success and in 2018/2019 the Swiss Parliament adopted the motion requesting the Swiss Federal Council to start the project of introducing the Law.
Where are we now?
Currently, an expert commission is reviewing the legal and regulatory framework. At the same time, an external group is conducting a regulatory impact assessment, which is expected to produce its report later this year.
The Law – What you need to know
First and foremost, with the introduction of the Law, it will become possible to settle a trust in Switzerland under Swiss law. Until such time, trusts 'in Switzerland' will be settled under a foreign law (e.g. English law).
Swiss trusts will most likely be of the type 'express' and used for wealth management and estate planning situations.
As the trust concept was established under common law it may prove difficult to convert the trust concept into Swiss law, which is a civil law jurisdiction. Swiss legal scholars and advisors have been discussing the possible models for a while now. They vary from the common law model on the one side through the foundation model to the fiduciary contract model on the other.
For Swiss nationals and residents it is important not to forget forced heirship rules, which at this point in time cannot be 'neutralised' by making use of a trust, be they Swiss or otherwise.
What will it mean for Switzerland?
The original intention seems to have been to introduce an additional option for Swiss nationals and residents. The debate among legal scholars and advisors appears to focus on whether or not that was really necessary. With the already existing Swiss foundation, business holding foundation, family foundation, usufruct and fiduciary contract some are of the opinion that there are already plenty of options. Perhaps not perfect, but still there. Service providers, trustees, asset managers and the like focus on the addition of a product; another 'arrow in the quiver' of the Swiss market place. Time will only tell whether or not it will be a boon.
How can we help?
Upon acceptance of the Law we are on hand to answer your questions and review possible structuring opportunities with you and your advisors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.