The Swiss trust project and its abandonment

From motion to draft

The recognition of foreign trusts left Switzerland in a curious position. Swiss banks, trustees and lawyers administered trusts every day, yet a Swiss family wishing to use a trust had to choose a foreign law, usually that of Jersey, Guernsey or England, and often a foreign trustee. During the 2010s the view gained ground in Parliament and in the profession that Switzerland should create a trust of its own. Proponents argued that a Swiss trust would keep the associated legal, fiduciary and advisory work in the country and would give Swiss families an instrument subject to Swiss courts. They also pointed to the example of Liechtenstein, which had enacted trust provisions in its Persons and Companies Act as early as 1926.¹

In 2018 Parliament adopted motion 18.3383, which instructed the Federal Council to create the legal foundations for a trust under Swiss law. An expert group began work in June 2018. On 12 January 2022 the Federal Council opened a consultation on draft amendments to the Code of Obligations, which ran until 7 July 2022.² The draft proposed to insert the trust into the Code of Obligations as a contractual institution, with the trustee holding the trust assets as a separate fund, rules on the duties of the trustee and the rights of the beneficiaries, and the possibility of a protector. It also contained tax provisions, which would for the first time have codified the taxation of trusts in the Federal Act on Direct Federal Tax and the Tax Harmonisation Act. Those provisions departed from the practice under Circular No. 30 in several respects, most visibly in the treatment of irrevocable discretionary trusts.³

The Federal Council’s decision of 15 September 2023

The consultation did not produce the support that the proponents had hoped for. On 15 September 2023 the Federal Council took note of the results and concluded that there was currently no sufficient political consensus for the introduction of a trust under Swiss law. The tax provisions had met with clear rejection. Many respondents agreed that Switzerland lacked a suitable instrument for wealth and succession planning, yet they doubted whether the Anglo-Saxon trust was the right answer for Swiss purposes. Respondents also expressed a preference for the continuation of the existing tax practice under the circulars.⁴ The Federal Council therefore decided not to prepare a message to Parliament and requested that motion 18.3383 be written off. The Council of States agreed on 12 December 2023 and the National Council on 27 February 2024. The motion has since been formally closed, and Switzerland continues to recognise foreign trusts under the Hague Convention without a domestic trust law.⁵

The failure of the project deserves an explanation that goes beyond the tax question. A domestic trust would have had to fit into a civil law system built on the numerus clausus of property rights, on a clear distinction between ownership and obligation, and on compulsory portions in succession. Every one of these features pulls against the trust. The draft attempted to reconcile them through a contractual construction, but many practitioners feared that a Swiss trust would be less flexible than the foreign trusts it was meant to replace, while carrying greater tax risk. International clients who already used Jersey or Cayman trusts had little reason to switch, and Swiss clients had little reason to adopt an untested instrument. The project also coincided with the period in which the Swiss financial centre was absorbing the end of banking secrecy for foreign clients, the introduction of automatic exchange of information and the licensing of trustees under FinIA. Its authors had to design an attractive trust at a moment when the political mood favoured transparency and control over new opportunities for private wealth.

Protectors, letters of wishes and practice

In the absence of a Swiss trust, Zurich practice works with foreign trusts and has developed a considerable body of experience with the institutions that surround them. The protector is the most important of these. A protector is a person, often a trusted adviser or a family member, who holds powers under the trust deed to consent to or veto certain decisions of the trustee, to remove and appoint trustees, or to change the governing law. For families from civil law countries, the protector offers a reassuring counterweight to the discretion of the trustee. Swiss lawyers frequently act as protectors of foreign trusts whose trustees are located offshore or in Zurich.

The position carries its own risks. Whether a protector owes fiduciary duties, and to whom, depends on the governing law of the trust and on the wording of the deed. A protector who is too closely aligned with the settlor may give the tax authorities grounds to treat the trust as revocable, with the consequences described in the previous section. A protector who is also a lawyer or adviser of the family may face conflicts of interest when family members disagree. Letters of wishes, by which the settlor expresses non-binding wishes to the trustee, raise similar issues. They are useful for guiding the trustee but may be read by a court or a tax authority as evidence that the settlor has retained control. Practitioners therefore draft protector clauses and letters of wishes with both the governing trust law and the Swiss tax practice in mind.

Notes

1. Marxer & Partner, “Der Trust / The Trust”, on the regulation of the trust (Treuhänderschaft) in Articles 897–932 of the Persons and Companies Act (PGR) of 20 January 1926 and on Liechtenstein as the first continental European country to codify the Anglo-American trust comprehensively, https://www.marxerpartner.com/files/media/Downloads/Der_Trust_DEU_ENG.pdf. ↩
2. Federal Office of Justice, “Einführung eines Schweizer Trusts”, https://www.bj.admin.ch/de/einfuehrung-eines-schweizer-trusts. ↩
3. Walder Wyss, Newsletter No. 163, on the consultation opened by the Federal Council on 12 January 2022, the proposed statutory tax rules for trusts and the treatment of irrevocable discretionary trusts as independent taxpayers in departure from Circular No. 30, https://www.walderwyss.com/assets/content/publications/Newsletter-163_D.pdf. ↩
4. LAW.CH, “Schweizer Trust: Einführung derzeit nicht mehrheitsfähig”, LAWNEWS, September 2023, https://law.ch/lawnews/2023/09/schweizer-trust-einfuehrung-derzeit-nicht-mehrheitsfaehig/. ↩
5. Federal Office of Justice, “Einführung eines Schweizer Trusts”, URL as above. ↩

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.