On 15 September 2023, Berne sounded a clear message: the Swiss trust, although flexible and attractive on paper, is not about to see the light of day. Although it originated in the Anglo-Saxon legal system and is well established in other jurisdictions, the trust has failed to win over Switzerland. So why not?
1. A quick lesson: what is a trust?
For those who have never heard of a trust, think of it as an invisible box in which you place your assets. This box is managed by a trusted person (the trustee) for the benefit of others. It’s an elegant way of managing and passing on assets, whether to protect family wealth or to finance major projects.
2. The Trust in Switzerland?
Despite its absence from Swiss law, the trust is not unknown in Switzerland. Since 2007, thanks to the Hague Convention, foreign trusts have been recognised. So why not create one with a Swiss twist? That was the idea. But the consultation showed that it wasn’t quite that simple.
3. The major reservations
Taxation: Taxation was a major obstacle. The proposed tax rules were not well received, with a predominant demand to maintain current practice.
Scepticism: although many recognised the usefulness of an instrument to manage wealth, many were sceptical about the creation of a typically Swiss trust.
Legal issues: many legal uncertainties have been raised. What are the essential criteria for establishing a trust? Who should be appointed as trustee and how should assets be transferred? These were all questions that dampened enthusiasm.
4. Conclusion: where do we go from here?
The Federal Council has decided that, in view of these reservations, it is preferable not to proceed. The message is clear and the project will be put forward for classification. However, this does not mean the end of the reflection process. Who knows, perhaps with a few adjustments and better communication, the Swiss trust could make its appearance in the future!
For the time being, if you have assets to protect or pass on, you’ll have to look elsewhere. But after all, Switzerland has always stood out for its uniqueness and thoughtful approach to new legal developments. And that’s a trust we can all share!
