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Why choose a trustee in Switzerland?

Updated: Aug 20, 2021

Andrew McCallum & Ana Romero |  Rhone Trust & Fiduciary Services S.A.

Switzerland has established itself as an attractive destination for wealthy individuals and families for many generations. It has built a worldwide reputation as a politically, legally and economically secure financial centre thanks to its developed banking, its solid and stable economic system, and its political direct democracy system. Switzerland is a key player in the high-net-worth and ultra-high-net-worth arena, where families and individuals are well catered by an extensive choice of private banks, independent asset managers, family offices and trust companies.

Trusts in Switzerland

Trusts are formally recognized in Switzerland since 2007, when the country ratified the Hague Convention of 1985 on the Law Applicable to Trusts and their Recognition (the “Convention”). The Convention came into existence to set forth the general procedures of how the countries shall consider trust instruments set up in other states.

The ratification of the Convention helped Switzerland further position itself as a “Trust-friendly” jurisdiction and provided legal certainty to Swiss trustees operating trusts governed by foreign law (e.g. Bahamas law). It further strengthened the use of Trusts in Switzerland as a tool for estate and succession planning, and wealth and asset protection.

Although Switzerland does not have yet its own substantive trust legislation, the Swiss authorities are currently working on the possible introduction of such legislation into internal Swiss law, and this may see light of day in the next 2-4 years.

Therefore, at present, it is not possible to establish a trust governed by Swiss law, but rather Swiss trustees operate foreign law trusts under the Convention arrangements. This permits the perfect situation of having Swiss based trustees and the assets deposited at a Swiss bank if desired, with the legal certainty of choosing a recognized trust law to govern the Trust.

The introduction of a Swiss substantive Trust law, would further reinforce the attractiveness of Switzerland by bringing many advantages, in particular in relation to Swiss residents, who will have an instrument ruled by their own domestic legal system.

Why choose a Swiss Trustee?

The Trustee's main role is to manage the assets held in Trust under his fiduciary duty. The Trustee is the legal owner of Trust assets and, therefore, is responsible for their usage according to the terms of the Trust instrument. However, the Trustee is not economically entitled to the Trust property neither to the income resulting from the property. In the event of the bankruptcy of the Trustee, the assets are not considered as belonging to the Trustee but are submitted to the Trust’s protection and held separately for the Beneficiaries. The Trust’s assets are therefore segregated from the Trustee’s estate.

Individuals acting as Trustees who are resident in Switzerland and Trust companies having their seat in Switzerland are not subject to tax on Trust property and the income generated by this property.

Swiss Trustees are able to provide frequent and high quality service as they can regularly meet appropriate clients in Switzerland (many families meet their bankers and Trustees in the same day in Switzerland) and, likewise, being based in the centre of Europe, they have the ability to travel abroad easily. In addition, Switzerland has a corroborated reputation for discreet professional service which is fully respected by the Swiss Trustees managing the affairs of wealthy individuals and families. Last but not least, the broad pallet of knowledgeable ancillary services ensures that there are many qualified individuals in Switzerland to provide local administration of high quality.

Regulation of Swiss Trustees

From 1st January 2020, Swiss Trustees are not only subject to anti-money laundering and terrorist financing rules (the rules of which have been in place for many years) but also to a new regulatory regime that forces them to obtain a license to carry out Trustee activities.

This licensing has been implemented by the Swiss Financial Institutions Act (FinIA) and, where applicable, the Swiss Financial Services Act (FinSA). Several industry bodies such as the Swiss Association of Trust Companies (SATC) and the Society of Trusts and Estate Practitioners (STEP) are actively assisting the regulator to introduce reasonable and appropriate regulations.

Under this new regime, Trustees will operate in a uniform competitive landscape as even the Trustee’s professional qualifications will be scrutinized. One outcome is the further improvement of client protection by boosting the quality of Swiss Trust industry and to reinforce its accountability and integrity.

All in all, the new regulation will strengthen the well-deserved reputation and competitiveness of Switzerland as a financial centre, and provide further reason to consider choosing a Swiss Trustee.


Andrew McCallum & Ana Romero

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