A flee clause trust provision is a term of the trust deed that allows the trust to leave its current legal system when conditions there turn hostile, for example after a political upheaval, a change of law or a banking crisis. It usually names who may trigger the move, which events justify it and what happens to the trustee's powers meanwhile. The entries below define the flee clause first, then the vocabulary that surrounds it, so you can read a trust deed or a seat comparison with confidence.
This is general information, not advice. Whether a flee clause works depends on the law of the seat, the wording of the deed and the situation of the family, which calls for an individual analysis.
A
AEOI (automatic exchange of information)
The international system under which tax authorities automatically share financial account data about foreign residents. It is built on the Common Reporting Standard. A trust holding bank accounts may be reported through its trustee or its bank, depending on the seat.
Asset-protection statute
A law, found in certain trust seats, that limits when a creditor of the settlor can reach assets placed in a trust. The conditions, time limits and exceptions differ widely. See asset-protection statutes compared.
B
Beneficiary
A person or entity for whom the trustee holds and uses the trust assets. Beneficiaries may have fixed entitlements or only a hope of receiving distributions at the trustee's discretion. Their country of residence often shapes the tax and reporting treatment.
C
Civil-law seat
A jurisdiction whose private law rests on codes rather than on judge-made equity. Trusts do not originate there, so recognition usually depends on a treaty or on a dedicated statute. The contrast is drawn in common-law versus civil-law seats.
Common-law seat
A jurisdiction where trusts developed through case law and equity, and where trustee duties are well established. Many offshore trust centers belong to this family. Courts there generally have long experience of trust disputes.
CRS (Common Reporting Standard)
The standard of the OECD that sets out which financial accounts are reported and what data is collected for AEOI. Trusts can be treated as reporting institutions or as account holders. Classification depends on the trust's activities and on who manages it.
Custody
The safekeeping of trust assets by a bank or other custodian, in the name of the trustee. The place of custody can differ from the seat of the trust. This mismatch matters when a flee clause is used, because assets must follow the trustee's decision.
D
Decanting
The transfer of assets from one trust to another, often to change terms or move the seat. It depends on the trustee's powers under the deed or on a statute. The topic has its own entry at decanting a trust.
Deed of appointment
The document by which a new trustee takes office, replacing or joining the current one. It records the transfer of responsibility and typically accompanies the hand-over of records and bank relationships. It is distinct from the trust deed itself.
Discretionary trust
A trust in which the trustee decides who among the beneficiaries receives distributions, and when. Because no beneficiary has a fixed entitlement, the trustee carries a heavy duty to consider the objects of the trust fairly. Flee clauses are common in this type of trust.
E
Economic substance
The real activity, people and premises a structure maintains in the place where it is established. Some regimes require it for entities, not for the trust itself, which can matter for companies held in a trust. Compare the substance requirements.
F
FinIA (Swiss Financial Institutions Act) — LEFin / FINIG
The Swiss federal law that regulates financial institutions. Under Art. 2 para. 1 let. b, trustees count as financial institutions alongside asset managers. Art. 17 para. 2 defines a trustee as a person who, on a professional basis, manages a segregated estate or disposes of it for a beneficiary or a defined purpose under a trust deed within the meaning of the 1985 Hague Convention.
FINMA
The Swiss Financial Market Supervisory Authority. Under Art. 61 of the Act, trustees are subject to its supervision, and it involves a supervisory organisation for day-to-day oversight.
Firewall legislation
A statute, found in some seats, that tells local courts to apply local trust law and to ignore foreign rules on forced heirship or matrimonial claims. Its effect abroad is not certain, because foreign courts may not follow it. The topic has its own entry at firewall legislation.
Flee clause
A provision in a trust deed, also called a flee or "cuckoo" clause, that lets the trust change its governing law or move its administration if specified events occur. Triggers may include war, expropriation, sanctions, a change of tax law or a threat to the trustee's independence. The power usually lies with the trustee, a protector or both; its limits are set by the deed and the law of the seat.
For a jurisdictional example, picture a fictional family in Lausanne whose trust is governed by the law of an island seat. Its deed lets the protector require a change of governing law if the island's courts lose independence. Switching to another seat would still need the new law to recognise the trust, which is why moving a trust between jurisdictions and the comparison with the Cayman Islands are worth reading together.
Forced heirship
Rules of succession law that reserve a share of an estate to certain relatives, whatever the owner wishes. They can be invoked against transfers to a trust. The topic is covered in forced heirship and trusts.
G
Governing law
The law that determines the validity, interpretation and effects of the trust, also called its proper law. It is chosen in the deed and can be separate from the place where the trustee works. See proper law of a trust for the related entry.
H
Hague Trusts Convention
The Hague Convention of 1985 on the Law Applicable to Trusts and on their Recognition. It sets rules for choosing the law of a trust and for recognising trusts in countries that do not have the concept. The principles are explained in the Hague Trusts Convention explained.
I
Irrevocable trust
A trust that the settlor cannot cancel or reclaim at will. Control is given up, which may support asset-protection and tax objectives, at the price of flexibility. A flee clause can offer some flexibility to relocate without undoing it.
L
Letter of wishes
A non-binding note from the settlor guiding the trustee on how to use discretion. Its legal weight varies from one seat to another. The trustee must consider it but is generally not bound by it.
N
Nominated successor trustee
A person or firm named in advance to take over if the trustee resigns, is removed or cannot act. Naming one in the deed shortens the transition when a flee clause is triggered. It complements, but does not replace, the clause.
P
Perpetuity period
The maximum length of time a trust may last, set by the law of the seat. Some seats impose a limit, others have abolished or extended it. Details appear in perpetuity and duration limits by seat.
Private trust company
A company set up to act as trustee of one family's trust or of related trusts. It can add governance flexibility, but the seat of the company and the seat of the trust need to be considered together.
Proper law
Another term for the governing law of the trust. See governing law.
Protector
A person who holds defined powers over the trust, such as approving a change of trustee or triggering a flee clause. The extent of those powers and any duties attached to them depend on the seat. Compare the rules in protector and reserved powers law by jurisdiction.
Purpose trust
A trust created to pursue an aim rather than to benefit named people. Seats that permit it often require an enforcer. See purpose trust.
R
Register of trusts
A record, kept by public authorities in some countries, of trusts and their parties. Access ranges from authorities only to persons with a legitimate interest. Reporting duties differ widely, as seen in trust registers and privacy.
Reserved powers
Powers the settlor keeps over a trust, for example to direct investments or to remove the trustee. If the settlor keeps too many, a court may question whether a real transfer took place. The balance varies by seat.
Revocable trust
A trust that the settlor may cancel, so that the assets return to them. It offers control and flexibility but usually less protection from creditors or from claims on death.
S
Seat
The jurisdiction where the trust is administered, and often the place with the closest connection to it. Seat, governing law and tax residence may all differ. A flee clause usually acts on the first two.
Settlor
The person who creates the trust and transfers assets to it. Also called constituant in French or Errichter in German. The entry settlor covers the jurisdictional rules.
Situs
The place where an asset is located, which can decide which law governs transfers of land or registered property. See situs of trust assets.
STAR trust
A purpose-oriented trust form from one offshore seat, allowing both purposes and beneficiaries, with an enforcer. See STAR trust.
Supervisory organisation
In Switzerland, the body authorised by FINMA that performs the current supervision of trustees on its behalf. It audits compliance with the financial-institution rules.
T
Trust deed
The written instrument that creates the trust, names the parties and sets the powers and duties. A flee clause is found here. Careful drafting matters, since a vague deed can be hard to apply in a crisis.
Trustee
The person or firm that holds legal title to the trust assets and administers them for the beneficiaries or the stated purpose. In Switzerland, a trustee acting on a professional basis falls under the financial-institution regime described above.
V
VISTA trust
A trust form from one British overseas seat designed to hold shares in a company without the trustee being required to monitor management. See VISTA trust.
W
Winding up
The ending of a trust: distributing or transferring assets, settling liabilities and releasing the trustee. The rules and the consequences differ by seat. A flee clause may move the winding up to a more suitable forum.
Frequently asked questions
Does a flee clause make a trust safe from every risk?
No. It gives a trust a route out of a deteriorating legal environment, but a protection that has limits. The route depends on the deed, on the law of the old and the new seat, and on the cooperation of the trustee and the banks.
Who usually triggers a flee clause?
The deed decides. Common holders are the trustee, the protector, or both together, sometimes with the settlor's consent while alive. Where several people share the power, the deed should say who prevails.
Can an existing trust be given a flee clause?
Sometimes. It depends on whether the deed allows amendment, on the powers of the trustee or protector, and on the law of the seat. A court or a decanting into a new trust may be needed. Individual advice is required.
Sources
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