On this page
- Myth 1: "The trustee owns the assets, so they are no longer mine"
- Myth 2: "The trustee is FINMA-approved, so there is no risk"
- Myth 3: "All trustees do the same job, so the cheapest is fine"
- Myth 4: "The settlor can instruct the trustee freely"
- Myth 5: "Changing trustee is impossible, or ruinously disruptive"
- Frequently asked questions
Most trustee myths are heard first in a meeting, in a single sentence: "He only holds the assets", "She is approved, so I can relax", "We just need the cheapest one". Each contains something true, which is why it survives. This page takes five of them in turn, gives a short answer, and then explains what is accurate and what needs nuance. It is general information: how any of this applies to you depends on your trust deed, your residence and the assets involved.
Myth 1: "The trustee owns the assets, so they are no longer mine"
Short answer: the trustee holds legal title, but must use the assets for the beneficiaries or the stated purpose, never for their own benefit.
A trustee does hold the assets in their name. That is why the myth feels plausible. But the Swiss financial institutions rules describe the trustee's task as managing a separate pool of assets, keeping its value and using it according to its purpose (Article 19 paragraph 2 FinIA). The assets are kept apart from the trustee's own estate. They are not a personal holding.
Three points of nuance matter in practice:
- Your position depends on the type of trust. In a revocable or irrevocable trust, the settlor's remaining rights differ considerably.
- Beneficiaries have a claim to proper administration. The question of what a trustee owes the beneficiaries is separate from who holds title.
- A settlor who keeps too much control can blur the picture. See Myth 4.
Example: a family in Lausanne says the trustee "owns the villa". The accurate reply is that the trustee is the registered holder, the villa belongs to the trust fund, and the trustee must decide about it in line with the deed.
Myth 2: "The trustee is FINMA-approved, so there is no risk"
Short answer: approval shows that a regulated framework applies. It does not predict quality, fit or behaviour.
Under the FinIA, trustees are financial institutions, alongside asset managers (Article 2 paragraph 1 letter b). A professional trustee needs authorisation from FINMA. Day-to-day checking that the conditions are still met is carried out by a supervisory organisation, itself authorised and supervised by FINMA. Changes to the facts on which authorisation rests must be reported to that organisation in advance. The wider meaning of FINMA and SO-FIT approval is worth reading before you rely on it.
The framework has real content. A trustee seated in Switzerland must be a sole proprietorship, a commercial company or a cooperative, entered in the commercial register (Article 18). Senior management must include at least two qualified people with suitable training and experience (Article 20). Authorised firms are audited annually by an audit firm (Article 62). The minimum capital is CHF 100,000, paid in cash, with appropriate guarantees or professional liability insurance (Article 22).
What the framework does not tell you:
- whether the trustee understands a family business or a property portfolio;
- whether the team will still be the same in five years;
- how quickly it answers beneficiaries;
- whether its culture suits your family.
For that you need due diligence on your trustee, not only a check of the register. Approval is a floor, not a verdict.
Myth 3: "All trustees do the same job, so the cheapest is fine"
Short answer: the work behind a trusteeship varies widely, and a low charge can mean thin attention.
A trustee's work is more than signing: decisions, minutes, bank oversight, reporting and relations with beneficiaries. A firm that charges little may deliver little of this, or may recover the difference through extras. Some trusts are simple. Others hold a company, property or a complicated family, and need more senior time.
How the trustee is paid also shapes behaviour. A model that rewards activity differs from one that rewards holding assets. Our guides on how trustees are paid and on fee models side by side explain the structures. Fees depend on the structure and are given after a confidential assessment; this page quotes none.
A better question than "who is cheapest?" is "what exactly is included, and what is charged separately?" Ask for the scope in writing before comparing anything.
Myth 4: "The settlor can instruct the trustee freely"
Short answer: the settlor can only do what the trust deed reserves to them. Beyond that, the trustee must decide independently.
Many settlors expect to say "sell this" or "pay that" and have it done. If the trustee simply obeys, the structure may be in difficulty: the trust could be treated as a sham, and the trustee would not be acting as a trustee at all. A trustee who acts only on instruction is not exercising the judgement the role requires.
The deed may reserve certain powers to the settlor, such as changing a protector or being consulted on investments. These are described in settlor reserved powers and the trustee relationship. A letter of wishes is the proper channel for guidance: the trustee considers it, but it is not binding.
Example: a founder in Zurich asks the trustee to lend trust money to his new venture at once. The trustee has to weigh the beneficiaries' interests, the terms and the deed, and may decline. That is the trustee doing the job properly, not being obstructive.
Myth 5: "Changing trustee is impossible, or ruinously disruptive"
Short answer: a change is possible in most structures, and it is a managed process. How easy depends on the deed.
People stay with a trustee they are unhappy with because they believe leaving is impossible. In reality the deed usually says who can remove and appoint a trustee, often the settlor, a protector or the beneficiaries by some mechanism. Where it is silent, the applicable law and, if needed, a court may supply the answer. A deed of retirement and appointment is the usual document that records the change.
A change involves a handover file, bank account transfers and notification of third parties, and it takes preparation. Our step-by-step guide to changing trustee sets out the sequence, and switch trustee or stay and fix the relationship helps decide whether a change is really needed. Sometimes it is not: a frank conversation or a protector's intervention solves the problem.
Nuances to keep in mind: a change can have tax or reporting consequences depending on where you and the beneficiaries live, and the outgoing trustee may need to complete accounts first. Get individual advice before acting.
Frequently asked questions
Which of these myths is the most costly in practice?
The approval myth, in our experience of the questions people ask. It leads to no questions being asked at all. Families who treat regulation as a guarantee of quality often skip the checks that would reveal a poor fit.
Is a Swiss trustee always regulated?
A person who professionally manages a separate pool of assets for a beneficiary or a purpose under a trust within the meaning of the 1985 Hague Convention is a trustee under Article 17 paragraph 2 FinIA. Activity is professional when it is an independent economic activity carried out to earn a regular income (Article 3). Such trustees need authorisation. Whether a particular arrangement, for instance a family member acting without payment, falls inside the definition depends on the facts.
Who supervises a trustee day to day?
FINMA grants the authorisation and supervises. It involves a supervisory organisation, which does the ongoing checks. SO-FIT is one such organisation authorised by FINMA. FINMA publishes lists of authorised trustees and of supervisory organisations, which you can consult.
Does a trustee have to follow my letter of wishes?
No. The trustee takes a letter of wishes into account and usually follows it where it is reasonable, but it is guidance, not an order. The deed and the beneficiaries' interests come first.
Can I remove my trustee myself?
Only if the deed gives you that power, or gives it to someone you can influence, such as a protector. Otherwise the route depends on the governing law. Read the deed first, then see replacing a failing trustee.
Is a more expensive trustee a better trustee?
Not necessarily. Cost tells you little by itself. Compare scope, seniority of the people handling your file, responsiveness and track record rather than the headline charge.
Where should I start if I doubt my current trustee?
Start with an independent review of the existing trust and its trustee. It separates real problems from impressions and tells you whether you need a fix or a change.
Sources
Considering a trust, or reviewing one?
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