How to Move a Trust to Another Jurisdiction: The Legal Mechanics

If you want to move a trust to another jurisdiction, the first thing to understand is that "moving" is not a legal act. A trust is not a company with a registered office that can be re-domiciled by filing a form. It is a relationship created by a trust deed, governed by a body of law, administered by a trustee in a particular place, and holding assets that sit in various countries. Each of those elements can be moved independently, and each requires its own legal basis.

This guide explains the routes that exist, the powers that make them possible, the role of the courts, and the places where relocations most often go wrong. It compares what typically happens when the destination is a civil-law seat such as Switzerland with what happens in common-law seats. Because trust statutes differ widely, the details always depend on the law of the origin, the law of the destination and the terms of the deed.

What "moving" a trust can actually mean

Practitioners use the word loosely. Before any step is taken, it helps to separate the layers, because a transfer that works for one layer can leave another untouched.

• Proper law: the law that governs the validity, interpretation and effects of the trust. Changing it replaces the rulebook the trustee and beneficiaries live under.
• Seat of administration: where the trustee actually carries out its functions, keeps records and takes decisions. This often drives regulation, reporting and the attitude of banks.
• Forum for disputes: which courts supervise the trust and hear claims about it. It can be fixed by the deed or follow from the proper law.
• Trustee: the person or company holding legal title. Replacing the trustee is a different exercise from changing the law, and the choice and appointment of a trustee is dealt with elsewhere.
• Assets and accounts: custody, bank relationships, registered titles and shareholdings, each governed by the rules of the place where they sit.

A relocation to Switzerland, for example, may involve only the last three layers, with a foreign proper law kept in place, because the Hague Trusts Convention lets Swiss authorities recognise a trust governed by foreign law. A different family may want the law changed too. The distinction between these choices is explored in governing law versus seat of administration.

The three main routes

When people say they want to move a trust, they generally mean one of three legal techniques. They are not interchangeable.

Route one: changing the proper law

Many modern trust deeds, and many statutes, allow the proper law to be changed by exercising a power. The trust remains the same trust: the same assets, the same beneficiaries, the same history, now under another legal system. This is the cleanest route in principle because nothing is transferred.

It depends on a valid power. Either the deed gives a person, usually the trustee, the express power to change the governing law, or the existing law supplies a statutory power. Older deeds often have no such power, and some jurisdictions are reluctant to read one in. Where a power exists it has to be exercised formally, in the way the deed requires, typically by a written deed of variation or declaration.

Two questions then arise. Does the destination law accept a trust that arrives by this route? And does the origin law allow the trust to leave? A change of proper law is effective only where both systems cooperate, which is why proper law analysis comes before everything else.

Route two: decanting into a new trust

Decanting means the trustee uses a power to pay or appoint the assets of one trust into the hands of the trustee of another trust, which is governed by the law of the chosen seat. The old trust is emptied; the new trust is the home of the assets. Our entry on decanting a trust explains the concept.

Its attraction is flexibility: the new instrument can be modernised, the powers clarified, and the administrative provisions adapted to the destination. Its risk is that it is a transfer of assets, not a continuation. Depending on the terms and the countries involved, the exercise can raise questions about whether a new settlement has been made, about the rights of beneficiaries whose interests change, and about the tax treatment of a transfer. Those tax questions depend on the residence of the settlor and the beneficiaries and need individual analysis.

The power to decant may come from the deed, from a statute or from case law, and the conditions differ. Some regimes require that the new trust does not alter beneficial interests in a way the original trust did not permit. Others require notice or consent.

Route three: a new trust and a distribution or sale

The third route is the blunt one. A new trust is established in the destination, and the assets are transferred in by the existing trustee, either as a distribution that the deed permits or as a sale. The old trust may then be wound up. This is sometimes the only available route when the old deed has neither a power to change law nor a decanting power.

It also has the heaviest consequences. Assets change hands, so property transfer formalities, transfer taxes, bank re-documentation and perhaps new know-your-customer reviews all apply. The beneficiaries' rights have to be examined carefully, because they are rights under the old trust and the new trust is a distinct legal arrangement.

The diagram below puts the three routes in sequence, starting from the question that determines which of them is open.

Powers: who can decide to move

Everything above turns on powers, so it is worth asking who holds them. A well-drafted modern deed distributes the relevant authority deliberately.

The trustee usually holds the power of appointment or distribution that makes decanting possible, and often the power to change the seat of administration. It exercises these as a fiduciary, which means it must act in the interest of the beneficiaries as a whole, can be called to account, and cannot treat the power as a personal option.

The protector, where there is one, may hold a veto, a power to consent, or a power to appoint and remove trustees. In many deeds a change of governing law cannot be made without the protector's consent. The way protector powers are treated differs by seat, a subject examined in protector and reserved powers law by jurisdiction.

The settlor may have reserved powers. Whether these are valid, and whether a trust with extensive reserved powers is treated as genuine, is a recurring theme in the law of several seats. A settlor who is still alive and who tries to direct the relocation personally may undermine the independence of the trust, with consequences in both asset protection and tax.

The beneficiaries normally have no power to decide, but their consent can make an otherwise doubtful step safe, if they are adult and competent and their interests are affected. Minors, unborn or unascertained beneficiaries cannot consent, and that is a common reason for turning to a court.

When a court is needed

Many relocations require no court at all. Where the deed grants clear powers, the trustee has acted in good faith and the law at both ends permits the step, the exercise is documented by deeds and resolutions. But a court becomes relevant in several recurring situations.

• No power in the deed. Courts in some seats have an inherent or statutory jurisdiction to approve a variation or a transfer on behalf of beneficiaries who cannot consent, and in some others they do not.
• Interests of minors or unborn beneficiaries. Because they cannot agree, a court may be asked to consent for them.
• Doubt about the proper exercise of a power. Trustees can ask a court to confirm that a decision is within their powers and a reasonable exercise of them. This protects them against later challenge.
• A dispute. If a beneficiary objects, the court is the forum for the objection, and the trustee should not proceed first.
• Foreign recognition. Occasionally the destination authority, a bank or a registry wants a court order or a foreign judgment confirmed before it accepts the new position. The topic is developed in courts, enforcement and foreign judgments for trusts.

Court approval is discretionary and procedural rules differ by seat. A judge in a common-law seat generally looks for a proper purpose, the absence of prejudice to beneficiaries and, in some systems, a benefit to them. Timelines vary with the court and the complexity, and no honest summary can give a duration without knowing the case.

What the destination must accept

A frequent misunderstanding is that a trust can be sent anywhere. The destination has to accommodate it, and the reasons are different from country to country.

In common-law seats, trust law is a domestic institution, so a trust arriving from elsewhere generally finds a statute and case law written for it. Many offshore centres have specific legislation allowing the trust to be "migrated in" or to be governed by local law on exercise of a power. The questions are then about the conditions imposed and the supervision applied.

In civil-law seats, the situation is different. Switzerland, for instance, has no domestic trust law, but it has ratified the Hague Trusts Convention, so a trust validly created under a foreign law is recognised. Those who relocate to Switzerland therefore keep a foreign proper law and move administration, banking and the trustee to Geneva or another Swiss place. The strengths and limits are summarised in Switzerland as a trust seat, and the practical process is treated in relocating an existing trust to Switzerland.

If the trustee is to be professional and Swiss-based, the regulatory framework applies. Under the Federal Act on Financial Institutions (FinIA, LEFin, FINIG), a trustee is someone who, on a professional basis, manages a separate estate or disposes of it for a beneficiary or for a defined purpose on the basis of a trust deed within the meaning of the 1985 Hague Convention (Art. 17 para. 2). Trustees are financial institutions under Art. 2 para. 1 let. b, must be authorised by FINMA, and need to be organised as a sole proprietorship, commercial company or cooperative entered in the commercial register where they have their seat or domicile (Art. 18). The management must include at least two qualified persons (Art. 20), and the capital required is CHF 100,000, paid up in cash, with appropriate security or professional indemnity insurance (Art. 22). Day-to-day compliance is checked by a supervisory organisation that is itself authorised and supervised by FINMA, and changes in the relevant facts must be notified to that organisation in advance.

For a relocation, these points mean that the trustee receiving the trust must already hold the authorisation, or have a regulated arrangement in place, before it takes office. The relocation therefore cannot be completed first and regularised afterwards.

Where relocations fail

Most failed or painful relocations share a handful of recurring causes. Looking for them early is cheaper than correcting them later.

The power does not exist, or it was not exercised properly

Deeds are sometimes read in a hurry. A power to "appoint a new trustee abroad" is not necessarily a power to change the governing law. A power exercisable only with the written consent of the protector, exercised without that consent, is void. Trustees sometimes execute documents in a form that does not match what the deed prescribes. A mistake of this kind can invalidate the whole step.

Forced heirship and clawback exposure is ignored

A change of seat does not erase claims that can arise under the law of the place where the settlor lived or where assets sit. Statutes that protect a trust against forced heirship claims exist in some places and are of limited help in others. The matter is detailed in forced heirship and trusts. A transfer made at an unfortunate moment can also be reviewed by courts as a transaction against creditors, so timing and solvency of the settlor matter.

Tax and reporting consequences are overlooked

A move can change the tax residence of the trust, trigger exit or entry rules in one of the countries involved, and alter the automatic exchange of information treatment (AEOI, CRS) of the trust and its accounts. The same applies to public or semi-public registers: a trust that was previously not on any register may suddenly appear on one. See trust registers and privacy for the shape of that issue. Whether a particular step has any tax effect depends entirely on the situation of the settlor and the beneficiaries, and requires individual analysis.

Banks are not on board

A trust's accounts do not automatically follow the trust. A bank on the receiving side will carry out its own onboarding under anti-money-laundering rules (AMLA, LBA, GwG), will want to understand the source of wealth, and may decline the relationship for reasons unrelated to the legal quality of the transfer. Delays in account opening can leave assets stranded. Practical preparation is covered in documents to gather for a trust relocation.

Reputational and sanctions screening

Origin and destination seats are screened by banks and counterparties. A seat that has been grey-listed or criticised internationally can make onward banking harder, which is sometimes the very reason for moving. Conversely, a destination may look closely at the history of the structure. The topic is developed in sanctions and reputation risk by seat.

A one-sided view of beneficiary rights

If the relocation, in substance, benefits some beneficiaries at the expense of others, or is motivated by a wish to avoid information duties, a court will be less sympathetic. Fiduciary duties follow the trustee into the new regime, and a step taken for a collateral purpose may be set aside.

A worked illustration

Here is an example, presented as an illustration only. A family established in Lausanne has a discretionary trust that was created decades earlier under the law of an offshore centre. The deed has a power for the trustee to change the governing law with the consent of a protector, but no decanting power. The family wants the administration and bank accounts in Switzerland while keeping the existing law, because the deed was drafted with it in mind.

In that situation the key step is not a change of law at all. The trustee, with the protector, replaces the administrative seat and appoints a Swiss-regulated trustee, and the Hague Trusts Convention gives Swiss banks and authorities a basis to treat the foreign-law trust as a trust. The analysis then moves to what the old and new trustee must hand over, what the origin law demands before the trustee retires, and how the bank onboards the trust. A later question, whether the law should be changed at all, can be considered separately and calmly.

Contrast this with a family whose deed has no power of any kind. Their choices are to go to court, seeking approval of a variation, or to settle a new trust and arrange for a transfer. They would weigh the cost, delay and uncertainty of each. The legal and practical differences are why a review of the deed precedes any choice of destination. For the narrower question of whether an existing structure still suits where it sits, see reviewing whether a trust still fits its seat.

A sensible order of work

Though every case differs, the sequence of thinking tends to be the same:

• Obtain the full trust deed, all amendments, letters of wishes and appointment documents
• Identify every power relating to governing law, seat, trustee appointment and distribution
• Establish who holds each power and whether any consent is required
• Obtain advice on the law of the origin about whether and how the trust may leave
• Confirm that the destination will recognise the trust or the transfer
• Check beneficiary classes for minors, unborn or unascertained persons
• Assess tax, reporting and register consequences in each country involved
• Confirm that the receiving trustee holds the required authorisation
• Agree the banking and custody solution before the legal step is taken
• Decide whether court directions or approval should be sought
• Execute the documents in the form the deed requires, and keep a clear record of the reasons

A longer set of preliminary questions is in the pre-relocation risk checklist, and the common errors are discussed in common mistakes when relocating a trust.