The Swiss family foundation

Article 335 of the Civil Code

Where common law families use trusts, Swiss families have traditionally used foundations. The Swiss Civil Code of 1907 knows two main forms. The ordinary or classic foundation dedicates assets to a particular purpose and is subject to state supervision. The family foundation under Article 335 of the Civil Code is a special form reserved for family purposes. According to that provision, assets may be dedicated to a family foundation for the purpose of meeting the costs of educating, endowing or supporting members of the family or for similar purposes. The second paragraph prohibits the creation of new family fideicommissa, the entailed estates by which families in earlier centuries bound their property to a line of succession.¹

The Federal Supreme Court has interpreted Article 335 narrowly since the early twentieth century. A family foundation may provide benefits to family members in particular situations of life, such as education, the establishment of a household or of a business, or need. It may not provide benefits without condition merely to raise the standard of living of the beneficiaries. The so-called maintenance foundation (Unterhaltsstiftung), which pays regular income to family members irrespective of need or occasion, is therefore invalid under Swiss law.² The leading case is BGE 108 II 393 of 1982, in which the court confirmed the prohibition.³ The policy behind the rule is historical. The drafters of the Civil Code, led by Eugen Huber, distrusted institutions that locked family property away from the market and allowed later generations to live on unearned income. Article 335 thus belongs to the same liberal and egalitarian tradition as the prohibition of the fideicommissum.

The consequence for practice has been significant. Swiss family foundations survive in considerable numbers, often as old institutions that support the education of descendants of a particular family or maintain a family archive or property. Their use as a modern instrument for succession planning is limited, because the foundation cannot simply accumulate wealth and pay it out to the next generation. A Swiss family wishing to do this has to use a foreign structure, typically a Liechtenstein foundation or a trust. The circular on the taxation of trusts reflects the same policy when it refuses to treat an irrevocable discretionary trust settled by a Swiss resident as a genuine divestment.⁴

Registration, supervision and taxation

Family foundations under Article 335 are not subject to supervision by a foundation supervisory authority. Article 87 of the Civil Code exempts them, as it exempts church foundations. Until 2015 they were also exempt from registration in the commercial register. The revision of the anti-money laundering legislation to implement the revised FATF Recommendations of 2012 changed this. Since 1 January 2016 family foundations and church foundations must be entered in the commercial register, with a transitional period for existing foundations that ended on 31 December 2020.⁵ This reform brought the family foundation into the public record and made it less attractive for families that value confidentiality above all.

In tax terms, a Swiss family foundation is a separate taxpayer subject to profit and capital tax. The contributions of the founder are subject to gift tax, and the distributions to beneficiaries are generally taxable income. The canton of Zurich taxes family foundations at special rates for gift and inheritance tax purposes, depending on the relationship between founder and beneficiary. The combination of taxation at the level of the foundation and at the level of the beneficiary makes the Swiss family foundation fiscally unattractive in comparison with foreign structures, although the precise burden varies considerably from canton to canton. Chapter H.V describes the Zurich regime in detail.

The mandate to liberalise the family foundation

The abandonment of the Swiss trust project revived interest in the family foundation as the domestic alternative. On 15 December 2022 Thierry Burkart, member of the Council of States, submitted motion 22.4445 under the title “Die Schweizer Familienstiftung stärken. Verbot der Unterhaltsstiftung aufheben”. The motion instructs the Federal Council to submit to Parliament an amendment of Article 335 of the Civil Code removing the prohibition of maintenance foundations. The Federal Council recommended rejection, stating that it was open to allowing maintenance foundations at a later point, but only within a comprehensive revision of foundation law.⁶ The motion’s supporters argued that Switzerland lacked a domestic instrument for structured succession planning, that wealthy families therefore resorted to foreign trusts or Liechtenstein foundations, and that a reformed Swiss family foundation would keep assets and advisory work in the country under Swiss oversight.⁷

The Legal Affairs Committee of the Council of States recommended acceptance on 7 November 2023 by seven votes to five, explicitly as a practical alternative to the failed trust project. The Council of States adopted the motion on 12 December 2023 by 31 votes to 12, on the same day as it wrote off the trust motion.⁸ The National Council followed on 27 February 2024.⁹ The Federal Council is therefore bound to prepare a draft. As at September 2026 no amendment of Article 335 has been enacted, and the scope of the future rules remains open.¹⁰ The literature has discussed several models, including time limits on maintenance foundations to prevent perpetual concentration of wealth and reserved rights of the founder to amend the foundation, which Swiss law currently allows only within narrow limits.

The coming reform will have to address the same tax questions that sank the trust project. A maintenance foundation that pays regular income to family members will only be attractive if the combined taxation of foundation and beneficiaries is not prohibitive, and if the transfer of assets to the foundation does not trigger gift tax at high rates for descendants. The cantons, which control gift and inheritance taxation, have their own interests in this question. The history of the trust project suggests that civil law reform and tax reform cannot be separated in this field, and that a solution that fails to address both is unlikely to succeed.

Notes

1. Article 335 of the Swiss Civil Code (SR 210), quoted in law.ch, “Schweizer Familienstiftung: Modernisierung”, January 2024, https://law.ch/lawnews/2024/01/schweizer-familienstiftung-modernisierung/. Paragraph 1 lists the permitted purposes (Erziehung, Ausstattung, Unterstützung). Paragraph 2 provides that the creation of new Familienfideikommisse is no longer permitted. ↩
2. LAWSTYLE, “Motion zur Änderung von Art. 335 ZGB (Verbot Familienunterhaltsstiftungen)”, https://lawstyle.ch/motion-zur-aenderung-von-art-335-zgb-verbot-familienunterhaltsstiftungen/, summarising that Swiss family foundations may provide assistance only in certain situations (“Erziehung, Ausstattung, Unterstützung”) and that pure maintenance foundations are prohibited. ↩
3. BGE 108 II 393 (1982), as discussed in Opel, Jusletter article on the Swiss family foundation (PDF published by the University of Zurich), https://www.uzh.ch/cmsssl/ius/dam/jcr:05deac6b-7406-4557-8d4a-7b2552d37ba4/Opel_Familienstiftung_Jusletter.pdf, which also traces the Federal Supreme Court’s review of the civil law validity of family foundations back to BGE 71 I 265. ↩
4. SSK, Circular No. 30 (2007), section 5.1.1.2, URL as above, which expressly refers to the principle of Article 335 of the Civil Code. ↩
5. “Historisches Missverständnis: Familienstiftung, Handelsregister und Rechtsstaatlichkeit”, University of Zurich, stating that family foundations must be entered in the commercial register since 1 January 2016, with a transitional period until 31 December 2020, on the basis of the amendment of Article 52(2) of the Civil Code by the Federal Act of 12 December 2014 implementing the revised FATF Recommendations of 2012, https://www.uzh.ch/cmsssl/ius/dam/jcr:8e197c84-a8d2-4ebb-8823-6616e20c0032/HG_Historisches%20Missverst%C3%A4ndnis_Familienstiftung,%20Handelsregister%20und%20Rechtsstaatlichkeit.pdf. ↩
6. The Philanthropist, “Parlament behandelt Motion zu Familienstiftungen”, 6 March 2023, https://thephilanthropist.ch/parlament-behandelt-motion-zu-familienstiftungen/. ↩
7. LAWSTYLE, “Motion zur Änderung von Art. 335 ZGB”, URL as above. ↩
8. LAW.CH, “Schweizer Familienstiftung: Modernisierung?”, LAWNEWS, January 2024, https://law.ch/lawnews/2024/01/schweizer-familienstiftung-modernisierung/. ↩
9. Verein Successio, “Aktuelles”, https://www.verein-successio.ch/aktuelles, listing the dates of submission (15 December 2022), the committee report (7 November 2023), and the adoption by the Council of States (12 December 2023) and the National Council (27 February 2024). ↩
10. No enacted amendment of Article 335 of the Civil Code could be identified as at September 2026. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.