Purpose Trust for Philanthropy: A Giving Family Compares Seats and Swiss Foundations

A purpose trust for philanthropy is a trust with no private beneficiaries to enrich: its assets serve a stated cause, and an enforcer or similar office makes sure the trustee follows it. Families who give regularly often ask the same practical question: should this sit in a trust under the law of a common-law seat, in a Swiss foundation, or in a combination of the two? This page walks through that comparison from the point of view of one kind of reader, a family that already gives and now wants a durable structure.

Who this page is for

Picture a family established in Lausanne, with a business sold some years ago and a long habit of supporting education and medical research through one-off donations. The parents want those causes to continue after them, with a governance model that does not depend on a single family member staying engaged. Their children live in different countries. One of them is a resident of a common-law country.

That profile raises recurring questions:

• Can a trust exist for a cause rather than for people?
• Which legal systems allow it, and on what terms?
• What does Switzerland itself offer, given that it has no domestic trust law?
• What happens if the founders' own residence changes?

None of these has a single answer. They depend on where the founders live, where the assets sit, which countries the beneficiary causes operate in, and how the family wants decisions made.

What a purpose trust can and cannot do

A purpose trust differs from an ordinary family trust in one fundamental way: there are no beneficiaries who can sue to enforce it. Without that natural check, the law of the seat usually supplies a substitute, such as an enforcer, a supervisory authority or a court with power to intervene. Our entries on the purpose trust and the STAR trust explain the terminology.

What it can do:

• Hold assets for a defined cause for a long period, subject to the duration limits of the chosen seat.
• Separate the management of capital from the family's day-to-day involvement.
• Give a named office, the protector or enforcer, defined powers over the trustee.
• Sit beside other structures, including a foundation that handles grant-making.

What it cannot do:

• Make charitable status automatic. Whether donors or the structure receive any tax treatment depends on the country concerned and on recognition by its authorities.
• Remove mandatory rules of a founder's home country, particularly on inheritance.
• Operate with no oversight. A purpose trust that nobody can hold to account is the weakest design, not the strongest.

Purpose vehicles by seat

Jurisdictions that offer purpose-oriented trusts do so in different ways. Some have purpose-trust statutes, some have a general charitable trust tradition, and some rely on foundations instead. The table below is qualitative and meant to orient the discussion, not to replace advice on one specific seat.

Comparing the seats and the Swiss foundation

The main contrast is between two ideas of how to protect a gift. In a common-law trust, the assets are held by a trustee subject to equitable duties, and the deed can be drafted in detail. In a Swiss foundation, a legal entity holds the assets and is governed by its statutes and a foundation board, with a supervisory authority looking at charitable foundations.

The seats differ among themselves, too. Some common-law jurisdictions are reputed for their purpose-trust statutes; others rely mainly on charitable trust case law. For the broader picture, see our comparisons of common-law seats versus civil-law seats and of Jersey with Switzerland. If the family's operating business plays a role, a VISTA trust in the British Virgin Islands shows how a different purpose mechanism works in practice, even though its aim is business continuity rather than giving.

How Switzerland fits

Switzerland has no domestic trust of its own, yet it is not hostile to trusts. It signed the Hague Convention of 1 July 1985 on the law applicable to trusts and on their recognition on 3 April 2007, ratified it on 26 April 2007, and the Convention 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.

Two Convention provisions matter for a giving family. Under Articles 6 and 7, the trust is governed by the law the settlor chose, expressly or by implication. If no law was chosen, the trust is governed by the law with which it has the closest links: the place of administration designated by the settlor, the situation of the assets, the residence of the trustee and the purposes of the trust. If the chosen law does not know the institution of the trust, that choice has no effect and Article 7 applies. This is why the seat of a purpose trust cannot be picked casually: the chosen law must actually recognise purpose trusts. The proper law of a trust and the distinction between governing law and seat are worth reading before any drafting begins.

In practice, many families end up with a hybrid: a foreign trust recognised in Switzerland, together with a Swiss foundation that does the visible grant-making. Our page on combining trusts and foundations across seats and the overview of Switzerland as a trust seat develop this. For a charitable focus specifically, see choosing a seat for charitable and purpose trusts.

Where inheritance rules can interfere

Philanthropic gifts made by will or at death meet a legal obstacle in many civil-law countries: forced heirship. Under the revised Swiss succession law, in force since 1 January 2023, the reserved portion is half of the statutory inheritance entitlement, and it applies in favour of descendants, the spouse or the registered partner. Parents no longer count among the protected heirs. The Federal Office of Justice presents the reform as allowing people to dispose freely of a larger share of their assets, which makes a charitable bequest easier than before.

The Hague Convention keeps the door partly closed, however: Article 15 reserves the mandatory rules of succession law. A trust, even one in a favourable seat, therefore does not shield a gift from a reserved heir's claim if the applicable succession law says otherwise. A change to the Swiss private international law rules on international successions is scheduled to apply from 1 January 2025, so the question of which country's succession law applies to a family with ties to several countries deserves a fresh look. See forced heirship and trusts for the seat-by-seat view.

Points to verify before choosing

Because the answer depends on the family, these are the checks a counsel would typically want settled first:

• Where each founder is resident today, and where they may live in the future
• Which country's succession law could apply, and whether reserved heirs exist
• Whether the causes operate in one country or several, and how those countries treat foreign charities
• Which seat's law truly recognises a purpose trust and gives it an enforcement mechanism
• How the trust or foundation is entered in registers, and what becomes visible
• Which duration limits apply at the seat, and what happens when they are reached
• Whether a bank in the seat is willing to hold and manage the assets

The questions to ask your counsel on the seat turn most of these points into a discussion list.

Illustration: a family weighing both routes

Example: a couple in Lausanne, both retired, want to support medical research for several generations. Their adviser sets out two routes. Under the first, a Swiss foundation receives a portion of their assets and funds named research programmes under a board of independent members and family. Under the second, a trust under a common-law seat holds the long-term capital and an enforcer oversees the trustee, while the foundation does the visible giving.

The couple find that the second route offers more flexibility in drafting but adds a layer to maintain and a second jurisdiction to monitor. They also learn that one child's country applies mandatory inheritance rules that could reach the endowment. They decide to take that point to individual analysis before choosing. The example is fictional and illustrates the reasoning, not a recommendation.