Trust Jurisdiction FAQ: Choosing Where a Trust Sits

This trust jurisdiction FAQ collects the questions that come up most often when a family, an entrepreneur or an adviser compares places to hold a trust. The answers are general information. Almost every one of them turns on where the settlor lives, where the beneficiaries live, what the trust owns and which courts could one day be involved, so they are a starting point for an individual analysis, not a substitute for it.

The questions are grouped by theme: the vocabulary of seat and law, how Switzerland treats trusts, recognition elsewhere, protection against claims, practical matters such as banking and reporting, and a few closing questions.

Seat, governing law and residence

What do people mean by the "seat" of a trust?

In everyday use the seat is the place where the trust is administered: where the trustee sits, where the records are kept and where decisions are taken. It is not a formal term in every legal system, and it is often confused with the law that governs the trust deed. The distinction matters because courts, banks and registers each look at a different connection. The page on governing law versus seat of administration sets the two side by side.

Can the governing law differ from the seat?

Yes. Under the Hague Convention the settlor may choose the law that governs the trust, expressly or by implication (Art. 6). A trust can therefore be governed by the law of one jurisdiction while being administered by a trustee in another. Whether that combination is sensible depends on the trustee's regulatory position, the location of the assets and the courts likely to hear a dispute.

What happens if the settlor does not choose a law?

Where no valid choice exists, Art. 7 of the Convention applies the law with which the trust has the closest connection. The Convention points to the place of administration designated by the settlor, the location of the trust assets, the residence or place of business of the trustee and the objects of the trust. In practice an unclear deed can leave the answer open to argument, which is a reason to state the choice clearly at the outset.

What if the chosen law does not know the trust at all?

The choice then has no effect, and the closest-connection test of Art. 7 takes over. This is why a settlor cannot simply select a civil-law system that has no trust institution and expect it to produce a trust. A trust needs a legal system that provides for the institution, or a recognition mechanism that fills the gap.

Is the seat the same as the tax residence of the trust?

No. Governing law, administration, trustee residence and tax residence are separate questions, and each can point to a different country. The table below shows what each concept usually answers.

Tax consequences depend on the residence of the settlor and beneficiaries as much as on the trust, so they need a separate review with advisers in each country concerned.

Switzerland and the Hague Convention

Does Switzerland have a trust law?

Switzerland has no domestic statute that creates its own form of trust. What it has is a framework for trusts governed by foreign law and for trustees operating in Switzerland. The Hague Convention on the Law Applicable to Trusts and on their Recognition, adopted on 1 July 1985, was signed by Switzerland on 3 April 2007 and ratified on 26 April 2007. It entered into force for Switzerland on 1 July 2007. The same day, Switzerland's private international law statute (LDIP) received a chapter on trusts. The Federal Office of Justice confirms that foreign trusts have been recognised in Switzerland since that date. A longer assessment is in Switzerland as a trust seat.

What does the Hague Convention require of a state?

It requires recognition of a trust that was validly created under its applicable law. Under Art. 11 recognition means, at a minimum, that the trust assets are kept separate from the trustee's personal estate and that the trustee can sue and be sued in that capacity. The Convention does not harmonise the substantive law of trusts, and it does not oblige a state to introduce trusts into its own legislation. The explainer on the Hague Trusts Convention covers its structure in more detail.

How does the Convention define a trust?

Art. 2 describes a legal relationship, created during life or on death, in which assets are placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose. The assets form a separate fund, title stands in the trustee's name, and the trustee must manage the assets and account for them. The Convention adds that powers reserved by the settlor, or the fact that the trustee is also a beneficiary, do not by themselves prevent a trust from existing.

Can Switzerland refuse to recognise a trust?

Art. 13 allows a state to decline recognition where the significant elements of the trust, other than the chosen law, the place of administration and the trustee's habitual residence, are connected essentially with states that do not have the institution of the trust. Separately, Art. 15 keeps the mandatory rules of the forum in force, such as those on the protection of minors and incapacitated persons, the effects of marriage, succession rights, the transfer of title and the protection of creditors and good-faith third parties. Recognition is therefore real but not unconditional.

Which Swiss court hears a trust dispute?

Art. 149b LDIP gives priority to a forum clause in the terms of the trust, provided it is in writing or in a form that can be proved by text. Without one, the courts at the defendant's domicile, at the seat of the trust or at the place of the Swiss establishment are competent. A trust deed that is silent on jurisdiction leaves more room for dispute about where a case belongs.

Are foreign judgments about trusts recognised in Switzerland?

Art. 149e LDIP recognises foreign decisions in trust matters in particular when they come from the validly designated court, from the state of the defendant's domicile or establishment, from the seat of the trust or from the state whose law governs the trust. A judgment from a court with none of these links faces a harder path. The overview of courts, enforcement and foreign judgments looks at the practical side.

What is the status of a trustee under Swiss financial law?

Art. 17 para. 2 of the Financial Institutions Act (FinIA, or LEFin in French) defines a trustee as someone who, on a professional basis, manages or disposes of a separate estate for a beneficiary or for a specified purpose under a trust within the meaning of the Hague Convention. Art. 19 para. 2 adds that the trustee manages the separate estate, preserves its value and uses it for its intended purpose. A professional trustee in Switzerland is supervised by the FINMA, usually through a supervisory organisation, and subject to anti-money-laundering rules (AMLA, or LBA in French).

Recognition across seats

Are all seats equally recognised?

No. Some seats have long trust statutes, others rely on recognition under the Hague Convention, and others do not recognise trusts at all or do so only in part. Recognition also varies by purpose: a family trust may be unremarkable in one place and unfamiliar in another. The map of Hague parties shows who has joined, while the list itself is kept by the HCCH.

Is a trust recognised in a country that is not party to the Convention?

Possibly, but the outcome rests on local rules, case law or treaties rather than a uniform standard. A country outside the Convention may treat the trustee as the outright owner, ignore the separation of assets or apply its own tax characterisation. If a family holds property or has beneficiaries in such a country, that country's advisers should be consulted early.

Does a common-law seat recognise trusts better than a civil-law seat?

Common-law seats know the trust as part of their own legal tradition, so the institution fits their rules on property, equity and courts. Civil-law seats that have joined the Hague Convention recognise foreign trusts through the Convention and their own implementing legislation, but they do not develop trust doctrine themselves. Neither route is better in the abstract; the right fit depends on the assets, the family and the courts that might be asked to enforce the trust.

Protection, firewall statutes and creditors

What is a firewall statute?

A firewall statute is a rule in a trust jurisdiction that instructs its courts to apply local law, rather than foreign rules, to questions such as the validity of the trust or the claims of heirs. Its purpose is to stop a foreign inheritance or insolvency rule from being used to unwind the transfer. The glossary entry on firewall legislation gives a short definition.

Does a firewall statute make a trust safe from claims?

No. It is a protection that has limits. A court in another country with jurisdiction over the settlor, the beneficiaries or the assets may still apply its own mandatory rules, and the Hague Convention itself preserves such rules under Art. 15. The statute is most useful when assets, parties and courts are mainly in the trust's own country, and less so when they are not.

How does Switzerland treat a trust's assets in a trustee's insolvency?

Art. 284b of the Federal Debt Enforcement and Bankruptcy Act (LP) provides that, when a trustee goes bankrupt, the trust assets are removed from the bankruptcy estate after deduction of the trustee's own claims against them. Art. 284a LP allows enforcement for a debt of the trust to proceed against the trustee as representative of the trust, at the seat of the trust, with bankruptcy limited to the trust assets. The separation of the trust fund is therefore reflected in debt-collection law.

Banking, reporting and moving a trust

Does the seat affect banking access?

It can. Banks look at the trustee's regulatory status, the jurisdiction's standing with international bodies, the nature of the assets and the beneficiaries' countries. A seat with a good reputation does not open every account automatically, and a seat under scrutiny can make onboarding slower. The page on banking and custody for trust assets by seat explains what banks usually ask for.

Does the seat determine which registers and reports apply?

Partly. Some jurisdictions keep trust registers, some limit access to authorities, and automatic exchange of information (AEOI, also called CRS or EAR) applies according to the financial institutions involved and the residence of the persons concerned. The seat is therefore one input among several. The guide to trust registers and privacy compares what is disclosed where.

Can a trust be moved later?

Often, but not always, and not by a simple transfer. The trust deed must allow a change of governing law or of trustee, or the court or beneficiaries must approve it, and the receiving seat must accept the structure. Assets, banking relationships and tax positions also have to be reviewed at both ends. The service page on relocating an existing trust outlines the issues, and moving a trust is for that reason worth considering at the drafting stage.

Does changing the seat change the beneficiaries' rights?

It should not do so by itself, since a properly executed change leaves the trust deed and the beneficiaries' interests intact. In practice a new governing law can alter default rules, such as the duties of the trustee, the rights to information or the powers of the protector. A review of the deed before any move is therefore essential.