A Trust When Your Family Moves Between Civil-Law and Common-Law Countries

A trust and a civil law country family move often meet at an awkward moment. The trust was set up in a place that knows the institution, and the family now lives, or is about to live, in a country whose legal tradition has no trust of its own. Notaries, tax offices, banks and courts there may never have seen a trust deed. What matters is not where the family sleeps, but which law governs the trust and whether the new country will treat it as a trust at all.

This page follows one reader: a family with a trust, or planning one, whose members are crossing the line between common-law and civil-law systems. It explains what a trust can and cannot deliver after such a move, which alternatives exist, and what to verify first. It is general information, not advice; the outcome depends on residence, the countries of the beneficiaries, the kind of assets and the canton or state involved.

Why a move changes the question

In a common-law country the trust is part of the furniture. Courts know how to read a trust deed, how to treat a trustee who holds title for others, and how to keep trust assets apart from the trustee's own estate. In many civil-law countries none of this is native. Property law is built around an owner, and the idea of one person holding title for the benefit of another sits uneasily with it.

So a move raises three separate questions that families often blur together:

• Which law governs the trust? This is the proper law, explained in our entry on the proper law of a trust.
• Will the new country recognise the trust as a trust, or look through it?
• Which mandatory local rules (family, inheritance, creditors) still apply regardless of the answer to the first two?

Confusing these is among the most frequent errors, and this note on governing law, seat and residence shows how it happens.

What the Hague Convention settles

The Hague Convention of 1985 on the law applicable to trusts and on their recognition was written for exactly this gap. Its Articles 6 and 7 say that a trust is governed by the law the settlor chose, expressly or by implication. If no law was chosen, the trust falls under the law with which it has the closest ties, looking at the place of administration named by the settlor, the location of the assets, the residence of the trustee and the purposes of the trust. If the chosen law does not know the trust, the choice has no effect and Article 7 applies instead.

Article 2 describes what counts as a trust: assets placed under the control of a trustee for a beneficiary or for a specific purpose, forming a separate fund, with title in the trustee's name and a duty to manage and account. Powers reserved by the settlor, or the trustee also being a beneficiary, do not prevent a trust from existing.

For a state that is a party, Article 11 requires recognition of a validly created trust. At a minimum, recognition means the trust assets are kept apart from the trustee's personal estate and 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 a wider view of the treaty, see the Hague Trusts Convention explained, and for a country-by-country picture, the recognition map of Hague parties.

Three move scenarios at a glance

A decision path for your move

The tree below simplifies the reasoning. Real cases have more branches, and the right-hand answers are starting points for an individual analysis, not conclusions.

Two points deserve emphasis. First, Article 13 allows a state to decline recognition of a trust whose significant elements, other than the chosen law, the place of administration and the trustee's habitual residence, are connected essentially with states that do not know the trust. A family whose entire life, assets and beneficiaries sit in a civil-law country cannot simply rely on a foreign label. Second, recognition is not immunity from local law, as the next section shows.

Where civil-law countries push back

Article 15 of the Convention leaves intact the mandatory rules of the forum 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 practice, a civil-law court that recognises the trust can still apply its own reserved-share rules or matrimonial regime to the assets.

This is why succession law is the sharpest edge in a family move. How far a trust can reduce forced-heirship claims depends on the country of the deceased, the location of the assets and the timing of transfers; the guide on forced heirship and trusts compares seats on this point. The detail of French or German family succession belongs elsewhere; here it is enough to say that the family's new home state may treat a lifetime transfer to a trust very differently from the state where the trust was created.

Switzerland is itself part of this story. The OFJ presents the revised inheritance rules, in force since 1 January 2023, as a way to allow people to dispose freely of a larger share of their assets. That is a change in the Swiss framework, not a promise about any particular trust, and the effect on a given estate has to be tested case by case.

What Switzerland adds as a seat

Switzerland is a civil-law country that recognises foreign trusts and has built rules around them. Chapter 9a of the Private International Law Act (LDIP), Articles 149a to 149e, has applied since 1 July 2007. Article 149a defines trusts as those created by a legal act within the meaning of the Convention, whether or not proven in writing. Article 149b gives weight to a forum choice in the trust terms and otherwise points to the courts at the defendant's domicile, the seat of the trust or the Swiss place of establishment. Article 149c refers applicable law back to the Convention, and does not deal with succession law. Article 149d lets a trust link be noted in the land register, and an unnoted link cannot be set against good-faith third parties. Article 149e recognises foreign decisions in trust matters in several situations, including those from the court validly designated or from the state whose law governs the trust.

On the debt side, Article 284a of the Debt Enforcement and Bankruptcy Act provides that when trust assets answer for a debt, enforcement is directed at a trustee as representative of the trust, at the seat of the trust, and proceeds by bankruptcy limited to the trust estate. Under Article 284b, in the bankruptcy of a trustee, the trust estate is set aside from the bankruptcy estate after deduction of the trustee's claims against it. Professional trustees are also supervised under the FinIA (LEFin), which requires a minimum capital of CHF 100,000 paid in cash and appropriate guarantees or professional liability insurance for trustees and asset managers.

For a family leaving a common-law seat, these rules can make a Swiss seat easier to explain to a civil-law bank or court. They do not remove the need to compare it with the alternatives, and our overview of Switzerland as a trust seat sets out strengths and limits. The practical side of bringing a trust in is in relocating an existing trust to Switzerland.

Alternatives when a trust is a poor fit

Some families will conclude, after analysis, that a trust is not the right vehicle in the destination country. The usual alternatives are a foundation, a holding company with a shareholders' agreement, a will or succession contract, or a combination. None is superior in the abstract. A foundation has legal personality and is familiar to civil-law authorities, but it works differently from a trust and may bring its own disclosure and governance duties. Common-law and civil-law seats compared lays out the differences, and the settlor relocation page addresses what happens to governing law when the settlor is the one who moves.

Example: a family established in Lausanne, previously resident in a common-law country, holds a discretionary trust created there. The question for them is not whether Switzerland has trusts of its own, but whether the existing trust, with its chosen law and place of administration, will be treated as a trust by Swiss authorities, and how Swiss mandatory rules affect the assets located in Switzerland.

Points to check before and after the move

• Identify the law governing the trust and confirm that it knows the trust
• Confirm where the trust is administered and where the trustee is resident
• List the countries of residence of the settlor and each beneficiary
• Note where the assets are located, and how local law treats each type
• Check whether the destination country is a party to the Convention
• Review marital property and inheritance rules in each relevant country
• Check whether a flee clause or change of trustee is provided for in the trust deed
• Ask what reporting and register duties arise in the new country