Case study: how a trust is transferred to Switzerland

This case study shows how a transfer of a trust to Switzerland can unfold in practice. It is fictional and anonymous: the people, the assets and the sequence are an illustration built to show the questions that arise, not a record of a real client. Your own situation will differ, and the right path depends on the trust deed, the law governing the trust, where the settlor and beneficiaries live and what the trust owns.

The starting point

Imagine a family established in Lausanne. A discretionary trust was created years ago by the grandmother, the settlor, with a corporate trustee in an offshore centre. The trust holds a portfolio at two banks and the shares of a small holding company.

Nothing dramatic has happened. But replies take weeks, the trustee's contact person has changed twice, and the adult grandchildren, who are beneficiaries, have never seen an account. The family does not want to dissolve the trust. It wants a trustee it can reach, that is supervised in a place it understands and that keeps proper records.

Why Geneva was considered

The family compared a trustee near home with one in Switzerland, and looked at trustee near you or trustee in Switzerland before choosing. Their reasons were practical: a trustee subject to Swiss financial-market supervision, working in a language the family speaks, within reach of the family's banks.

The question of whether to change at all was tested first. The family weighed switching trustee or staying and fixing the relationship. A written list of failures, and an unsuccessful attempt to resolve them with the current trustee, tipped the decision.

Step one: an independent review before any move

Before approaching candidates, the family's adviser asked for an independent review of the existing trust. The questions it covers are close to those in reviewing an existing trust in ten questions.

The review looked at:

• who holds the power to remove and appoint a trustee under the trust deed;
• whether a protector exists and what the protector may do;
• whether the governing law allows a change of trustee and a change of the place of administration;
• what the trustee's records actually show: minutes, resolutions, distributions, bank mandates;
• what is owned through the holding company, and who sits on its board.

What the deed said

The deed gave the protector the power to appoint and remove trustees. The protector was a long-standing family adviser who had been inactive. That mattered: without a working protector, the route to a new trustee would have been slower and less certain. The family first confirmed the protector was willing to act and had taken independent advice.

Step two: choosing the Geneva trustee

The family used a structured approach, close to the twelve steps to choose a trustee. They checked that the candidate was authorised and affiliated with a supervisory body. Since the FINMA announcement of 7 July 2020, asset managers and trustees had until the end of 2022 to apply for authorisation and prove membership of a supervisory organisation; the first two organisations authorised, with effect from 6 July 2020, were OSIF in Geneva and OSFIN in Neuchâtel. A candidate that cannot show its authorisation and its supervisory body should not progress. More on this is in what FINMA and SO-FIT approval means for you.

They also asked each candidate how it would deal with the handover, who would be the named contact, and how the trustee is paid. The trustee's charges depend on the structure and are indicated after a confidential assessment, so the family compared the models rather than any number.

The handover, step by step

The deed of appointment

The legal act that makes the change effective is a deed of retirement and appointment: the old trustee retires, the new trustee accepts office, and the trust property is vested in the new trustee. Whether the old trustee must be released from liability, and on what terms, is a point to settle in the deed. The family did not accept a broad release without first receiving full accounts.

The handover file

The outgoing trustee was asked for a complete file. The family used the list in the handover file from the outgoing trustee and the list of documents to gather before changing trustee:

• the trust deed and every amendment;
• minutes and resolutions, including distribution decisions;
• any letter of wishes;
• accounts, bank statements and asset registers;
• corporate records of the holding company;
• tax and reporting correspondence.

The old trustee provided most of it, but the minutes of several years were missing. This is not unusual. The new trustee recorded the gaps in a file note, so that the shortfall would be visible and dated, rather than quietly repaired afterwards.

Onboarding and the bank mandate

A trustee in Switzerland is a financial intermediary under anti-money-laundering law: the AMLA treats asset managers and trustees referred to in the financial institutions legislation (FinIA) as financial intermediaries. That has direct consequences at the start of the relationship.

• Identity. Article 3 AMLA requires the contracting party's identity to be verified, on the basis of a supporting document, when a business relationship is established.
• Beneficial owner. Article 4 AMLA requires the intermediary to identify the beneficial owner with the due diligence the circumstances call for and to verify that person's identity. It requires a written declaration, or another form that proves it in text, if the contracting party is not the beneficial owner or if there is doubt.
• Records. Article 7 AMLA obliges the intermediary to establish and keep documents, and Article 8 requires organisational measures.

For a trust, working out who the beneficial owner is takes real care. The family learned that the new trustee would ask about the settlor, the protector and the beneficiaries, and could not skip those questions. See also what a beneficial owner means in a trust.

Moving the bank accounts

The two banks each applied their own onboarding. The new trustee did not simply take over the old mandate: the banks opened or updated the relationship in the name of the new trustee, and applied their own checks. The family expected a delay and kept the old trustee in office for the bank accounts until the new mandates were in place, so that no account was left without someone authorised to act. The practical side is described in your trustee and the trust bank accounts.

The first resolution

Once the mandates were in place, the new trustee held its first meeting and recorded a resolution. In this case it did four things:

1. confirmed acceptance of office and the date from which it acted;
2. noted the contents and the gaps of the handover file;
3. asked the old trustee for the missing records and a full account;
4. set a plan for the first review of the trust, the bank positions and the holding company.

It did not make any distribution at this stage. A distribution made before the records are understood would build on uncertain ground. The resolution also fixed how the trustee would report to the family, in line with what information your trustee must give you.

Limits of this case

• Mandatory rules of the forum can apply alongside the Hague Trust Convention. Article 15 leaves in place the mandatory provisions of the forum on matters such as protection of minors and incapable persons, effects of marriage, succession rights, transfer of title, protection of creditors and good-faith third parties.
• The case does not deal with tax or with the choice of jurisdiction, which depend on residence and need individual advice.
• A transfer can take longer when the old trustee resists, a protector is missing or a bank requires extra steps. See replacing a failing trustee for that situation.