Trustee glossary: terms you will meet in a trust deed

A trust deed is written for lawyers, yet it is the family who has to live with it. This trustee glossary starts from the document in your hands: take a word you stumble on, find it below, and read what it means in practice for the person acting as trustee. Terms are listed alphabetically, and the entries that deserve more than a paragraph point to a fuller page.

The entries cover the role of the trustee only. Questions of tax and of the law of other countries depend on your own situation and call for an individual analysis.

A

Accounts

The written record of what the trust owns, what it received and what it paid out over a period. A trustee prepares them so that those entitled to see them can follow what happened to the assets. What you may receive, and in what form, depends on the deed and on the applicable law.

AEOI (automatic exchange of information)

The system under which financial institutions report certain account details to tax authorities, who then pass them on to the authorities of the account holder's country of residence. A trustee usually has to establish how the trust is classified for this purpose and report accordingly.

AMLA (anti-money laundering)

The Swiss anti-money laundering legislation (LBA / AMLA / GwG). It obliges a trustee to identify the people behind the trust, understand where the assets come from and report suspicions. This is why a trustee asks questions that can feel intrusive at the start of a relationship.

Annual audit

A trustee approved under the financial institutions legislation is audited every year by an audit firm, in line with Art. 62 FinIA. The audit looks at the trustee's own compliance, not at whether a particular trust performed well.

B

Beneficial owner

In a trust context, the natural person who ultimately benefits from the assets or controls the structure. Banks and trustees must identify such persons, which can include the settlor, the protector and beneficiaries. See also the definition of a beneficial owner.

Beneficiary

A person, or a class of persons, for whom the trust assets are held. Some beneficiaries have a fixed entitlement; others can only ask the trustee to consider them. What a trustee owes the beneficiaries depends on the type of trust and on the deed.

C

Capital requirement

Art. 22 FinIA sets the minimum capital of asset managers and trustees at CHF 100,000, paid up in cash, together with appropriate guarantees or professional liability insurance. It is one of the conditions that a trustee must meet to obtain approval.

Commercial register

Under Art. 18 FinIA, a trustee with its seat or domicile in Switzerland must be a sole proprietorship, a commercial company or a cooperative, and entered in the commercial register. You can therefore check the legal form and the people behind it in public records.

Co-trustee

One of several trustees appointed together. Unless the deed says otherwise, co-trustees generally have to act jointly, which slows decisions but adds a second pair of eyes. The deed may allow one of them to sign alone for routine matters.

Corporate trustee

A company that acts as trustee, as opposed to a person acting in their own name. It continues to exist when individuals leave or die, and it is the form that the Swiss approval regime is built around. The choice is discussed in individual or corporate trustee.

CRS (Common Reporting Standard)

The OECD standard on which automatic exchange of financial account information is based. Trusts can be reportable in several ways, and the classification affects what the trustee reports and about whom.

D

Deed of retirement and appointment

The document by which one trustee steps down and another takes over, usually in a single act. It records the transfer of the trust property and the new trustee's acceptance. The steps around it are set out in changing trustee step by step.

Discretionary trust

A trust in which the trustee decides whether, when and how much to distribute among a class of beneficiaries. The beneficiaries have no automatic claim to a share, which is why the trustee's judgement, records and the letter of wishes weigh so heavily.

Distribution

A payment or transfer of trust property to a beneficiary. In a discretionary trust it follows a decision of the trustee, minuted and tested against the deed; in a fixed interest trust it follows the entitlement set by the deed.

Due diligence

The checks a trustee carries out before accepting a trust and again at intervals: identity, source of assets, purpose, the people involved. The same word applies when you examine a prospective trustee, which is a different exercise from the one the trustee runs on you.

Duty to preserve value

Under Art. 19 para. 2 FinIA, the trustee manages the separate assets, sees to it that their value is maintained and uses them according to their purpose. It is a short statement of a duty that the deed then fills in with specifics.

E

Exculpation clause

A term of the deed that limits the trustee's liability to the beneficiaries for certain failures. Such clauses have limits and are read narrowly; they do not turn a poor administration into a safe one. See the entry on exculpation clauses.

F

Fee model

The way a trustee is remunerated: a fixed amount, a time-based charge, a share linked to the assets, or a combination. The right model depends on the structure and the workload, and the terms are given after the confidential assessment. The comparison is explained in how trustees are paid.

FINMA

The Swiss Financial Market Supervisory Authority. It grants the authorisation to act as a professional trustee, and subjects trustees to its supervision, while day-to-day checking is delegated to a supervisory body. What FINMA and SO-FIT approval means for a client is covered in a separate guide.

FinIA (LEFin / FinIG)

The Federal Act on Financial Institutions. Art. 2 para. 1 let. b classes trustees as financial institutions alongside asset managers, managers of collective assets, fund management companies and securities firms.

Fixed interest trust

A trust in which the deed gives each beneficiary a defined entitlement, such as the income or a stated share of the capital. The trustee has less room for judgement than in a discretionary trust, but still administers, invests and keeps the records.

H

Hague Convention

The 1985 Hague Convention on the law applicable to trusts and on their recognition. Art. 17 para. 2 FinIA defines a trustee by reference to a trust deed within the meaning of that Convention. For applicable law, Swiss private international law refers to it in Art. 149c PILA, while Art. 15 of the Convention preserves mandatory rules on inheritance rights.

I

Individual trustee

A natural person acting as trustee. A relative, friend or adviser can serve, with the benefit of personal knowledge of the family and the drawback that illness, death or a conflict of interest may interrupt the trusteeship. The practical consequences appear in the situation of a trustee who has died or retired.

Irrevocable trust

A trust that the settlor cannot simply undo once assets have been transferred. The trustee's duties run towards the beneficiaries and the purpose in the deed, not towards the person who funded it.

L

Letter of wishes

A non-binding note from the settlor that tells the trustee how the settlor would like discretions to be exercised. The trustee takes it into account without being bound by it. Keeping it current is part of a good relationship; see letters of wishes and your trustee.

M

Minutes

The written record of a trustee's decision: what was decided, why, on what information and by whom. Minutes are the first thing an independent reviewer asks to see, and gaps in them are a recognised warning sign.

P

Private trust company

A company set up to act as trustee of one family's trust or trusts, usually with family members involved in its governance. It gives the family more proximity but also asks for professional support to meet the same standards of administration.

Professional activity

Under Art. 3 FinIA, an activity is professional when it is an independent economic activity carried out to obtain a regular income. Under Art. 17 para. 2 FinIA, only a person who acts as a trustee in that way is a trustee in the regulatory sense.

Protector

A person appointed by the deed to oversee the trustee, often with powers to consent to certain decisions or to replace the trustee. The role carries limits and obligations of its own. The practice is set out in working with a protector.

Qualified persons

Art. 20 FinIA requires the management of a trustee to include at least two persons with adequate training and sufficient professional experience. For a client, it means that the approval rests on the competence of a team, not on a single individual.

R

Reserved powers

Powers that the settlor keeps for themselves in the deed, such as approving investments or changing beneficiaries. Too many can call into question whether the trustee is truly in charge; the balance is explained in settlor reserved powers and the trustee.

Revocable trust

A trust that the settlor can end or alter, taking the assets back. The trustee still administers the assets, but acts closely in line with the settlor's instructions while the power lasts.

S

Settlor

The person who creates the trust and transfers assets to it, also called the constituent or, in German, the Errichter. After the transfer, the settlor's role is defined by what the deed allows.

SO-FIT

A non-profit association authorised by FINMA that acts both as a self-regulatory organisation for anti-money laundering and as a prudential supervisory body for asset managers and trustees. Other supervisory bodies exist, among them OSIF, AOOS and OSFINcontrol.

Successor trustee

The person or company named in the deed, or entitled by its mechanism, to take over when the current trustee can no longer act. A named successor shortens the gap; the glossary entry on the successor trustee explains the practical points.

Supervisory body

An organisation authorised and supervised by FINMA that checks on an ongoing basis whether a trustee still meets the approval conditions. Changes of relevant facts must be notified to it in advance.

T

Termination of the trust

The end of the trust, through the expiry of its term, the achievement of its purpose, the exercise of a power or a court decision. The trustee then settles liabilities, prepares final accounts and distributes the remaining assets as the deed directs.

Trust deed

The document that creates the trust and sets out the parties, the powers of the trustee, the beneficiaries, the rules on replacing the trustee and the governing law. If you read one document to understand the arrangement, it is this one; reviewing an existing trust starts from it.

Trust property

The assets held by the trustee under the trust, kept apart from the trustee's own estate. The trustee holds legal title but must treat them as dedicated to the purpose and the beneficiaries.

Trustee

The person or company that holds and manages the trust property according to the deed, for the beneficiaries or a defined purpose. Art. 17 para. 2 FinIA applies the term to those who do so professionally under a trust within the meaning of the Hague Convention.