When the Settlor Moves Country: Trust Law, Recognition and Seat

When a settlor moves country, trust law does not move with them. The trust keeps the governing law it was given, its trustee stays where the trustee is, and the assets stay where they are. What changes is the legal environment around the trust: a new country may look at the structure differently, apply mandatory rules of its own, and ask new questions about the settlor, the beneficiaries and the banks involved.

This page explains what a relocation does and does not alter, and how the choice of seat reduces disruption. It is general information; the answer in a given case depends on the countries involved, the nature of the assets and the wording of the trust deed.

Does the trust change when the settlor changes residence?

Not by itself. A trust is a legal relationship between a settlor, a trustee and beneficiaries, and it is governed by a law that was fixed when it was created or that can be derived from its connections. The settlor's residence is only one of several facts around it. Moving house does not amend the trust deed, replace the trustee or change the governing law.

Three things are easy to confuse, and a move tends to expose the confusion:

• Governing law: the law that decides validity, interpretation and administration of the trust.
• Seat: where the trust is administered in practice, usually where the trustee is established and the records are kept.
• Residence: where a person or a trustee is considered resident for other purposes, such as reporting or taxation.

The distinction is developed in the guide on governing law versus seat of administration, and the typical errors are listed under confusing governing law, seat and residence.

What the Hague Trusts Convention provides

Most cross-border questions start from the Hague Convention of 1985 on the law applicable to trusts and on their recognition. Under Articles 6 and 7, a trust is governed by the law the settlor chose, expressly or by implication. If no law was chosen, or if the chosen law does not know the trust, the trust is governed by the law with which it has the closest connection, looking at the place of administration designated by the settlor, the location of the assets, the residence of the trustee and the purposes of the trust.

Under Article 11, a trust validly created under the applicable law is recognised as a trust. Recognition means, at a minimum, that the trust assets are separate from the trustee's personal estate and that the trustee can sue and be sued in that capacity.

Switzerland signed the Convention on 3 April 2007, ratified it on 26 April 2007, and it entered into force for Switzerland on 1 July 2007. The Federal Office of Justice confirms that foreign trusts have been recognised in Switzerland since that date. For the broader picture, see the Hague Trusts Convention explained.

Two limits matter for a settlor who relocates:

• Article 13: a state is not obliged to recognise a trust whose significant elements, apart from the chosen law, the place of administration and the trustee's habitual residence, are connected essentially with states that do not know the institution of the trust.
• Article 15: the Convention does not prevent the application of mandatory rules of the forum, including 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.

In other words, recognition of the trust and application of local mandatory rules are two separate questions. A family moving between systems often meets the second one first; see forced heirship and trusts.

Where friction typically appears after a move

Swiss rules illustrate how a recognising country handles a foreign trust. Chapter 9a of the Private International Law Act (Articles 149a to 149e) was introduced to implement the Convention, with effect from the same date in 2007. Under Article 149c the law applicable to trusts is determined by the Convention. Article 149b makes a forum clause in the terms of the trust decisive for jurisdiction and, failing one, points to the courts of the defendant's domicile, of the seat of the trust or of the place of an establishment in Switzerland. Article 149e provides for recognition of foreign decisions in trust matters, notably those from the validly designated court or from the state whose law governs the trust.

Practical points follow. Under Article 149d, where trust assets are registered in a trustee's name in the land register, the link to the trust may be noted; a link that is not noted cannot be relied on against good-faith third parties. Under Article 284a of the Debt Enforcement and Bankruptcy Act, enforcement against trust assets is directed at a trustee as representative of the trust, at the seat of the trust, and continues as a bankruptcy limited to the trust estate. These rules show why the seat is more than a label.

A settlor's move, step by step

How the seat reduces disruption

A trust whose seat, trustee and custody already sit in a stable, recognising system has fewer moving parts when the settlor leaves home. The settlor changes country; the administration does not. That is the practical argument for choosing the seat for what it offers over the long term, rather than for the settlor's residence on the day of creation.

Switzerland is a civil-law country that has recognised foreign trusts since 2007 and regulates professional trustees. Its strengths and limits as a seat are set out in Switzerland as a trust seat. A settlor moving to or from a US context faces additional constraints, covered in the US person settlor situation, and families crossing between civil-law and common-law countries are discussed in a family moving between civil-law and common-law countries.

Where the existing seat is no longer a good fit, the trust itself can sometimes be relocated; the legal mechanics are in moving a trust between jurisdictions, and the dedicated service is described under relocating an existing trust to Switzerland.

What the review of a trust before or after a move covers

The service is aimed at settlors, and families around them, who are moving to or from Switzerland, or between other countries, and who already hold or plan a trust. It covers:

• Review of the trust before the move: deed, governing law, powers of the trustee, protector and reserved powers, and any provisions triggered by a change of residence.
• Coordination with advisers in both countries: so that legal, tax and banking advice is read against the same facts.
• Residence-related questions raised for the trustee: the trustee is told of changes in a structured way. For a Swiss professional trustee, the FINMA grants the authorisation, a supervisory organisation checks compliance on an ongoing basis, and changes of facts must be notified to that organisation in advance.
• Adjustment of governance if beneficiaries move: for instance a letter of wishes, a protector's role or distribution mechanics.
• Banking set-up for the new location: account opening documents, source-of-wealth explanations and custody arrangements.

Typical documents include the trust deed and amendments, the letter of wishes, trustee accounts, and bank and asset records. Decisions usually concern whether to keep the seat, whether to adjust governance, and in what order to act.

What it does not cover

It does not select or replace a trustee, and it does not provide tax advice for a specific country or draft a will or marriage contract. It does not guarantee how a foreign court or authority will react. Where the result turns on a national tax regime or a forced-heirship rule, local counsel gives the final answer, and the review identifies those points early.

What the confidential assessment establishes

The assessment sets out the facts of the move, which questions are legal rather than administrative, which advisers are needed, and in what sequence steps should be taken. Fees depend on the structure and are indicated after the assessment.