Indian resident settlor: working with a trustee in Switzerland

An Indian resident settlor who places assets with a trustee in Switzerland is dealing with two legal worlds at once. The trustee sits in Geneva or elsewhere in Switzerland and answers to Swiss rules and to the law governing the trust. You, your family and your advisers sit in India and answer to local rules on residence, tax and family property. The trust only works smoothly when these two sides are connected by a clear routine of information.

This page is written for the settlor, not for the lawyer. It explains what a Swiss trustee asks of you and of your local advisers, how the conversation is organised, and what a realistic first year looks like. It does not give Indian legal or tax advice, and it says plainly where that question belongs to an adviser in India.

What a Swiss trustee does for a settlor living in India

A trustee holds the trust assets in its own name, keeps them separate from its own property, and manages them for the beneficiaries or for the purpose set out in the trust deed, accounting for what it does. That is the core of the definition in Article 2 of the Hague Trusts Convention, which also says that powers reserved by the settlor are not by themselves incompatible with the existence of a trust.

For a settlor in India, the trustee's practical job is wider than that definition suggests. It has to know who you are, where the assets come from, who the beneficiaries are and where they live. It then has to keep that knowledge current as your circumstances change. Much of the work is therefore a flow of questions and documents rather than investment decisions.

Choosing the right firm for this is a separate exercise, covered in how to choose a trustee in Switzerland. Here we assume you have a trustee, or are about to appoint one, and want the relationship to run well.

Who talks to whom

The most common source of friction is not the law but the routing of messages. A trustee who hears the same request from the settlor, from a family member and from a chartered accountant, each with a different version, will slow down and ask for everything in writing. A clear chain avoids that.

Two points make this chain work. First, the settlor decides which adviser is authorised to speak for them, and tells the trustee in writing. Second, the trustee does not take legal or tax advice about India from the local adviser as a substitute for its own duties: it records what it was told and continues to apply its own obligations.

What the trustee needs from you

A trustee in Switzerland will ask for information on the settlor, the origin of the assets and the beneficiaries. The exact list depends on the structure and on your situation, and the trustee will explain it at onboarding. In practice the requests fall into a few groups.

The trustee will not accept a vague answer to the local legal and tax rows. It will ask your adviser for a written view, and it will record who gave it and when. A written view from an adviser who knows your whole situation is far more useful than a general statement.

Law of the trust and recognition: what to ask your adviser

Switzerland recognises foreign trusts, and the Federal Office of Justice confirms this has been the case since the Hague Trusts Convention entered into force for Switzerland on 1 July 2007. Switzerland signed the Convention on 3 April 2007 and ratified it on 26 April 2007.

Under Articles 6 and 7 of the Convention, a trust is governed by the law the settlor chooses, expressly or by implication. If that law does not know the institution of the trust, the choice has no effect, and the law with the closest connection applies instead. That closest connection looks at the place of administration, the location of the assets, the trustee's residence and the purposes of the trust.

Article 13 adds a point that matters for any settlor whose family and assets are concentrated in one country: a state is not obliged to recognise a trust whose significant elements, apart from the chosen law, the place of administration and the trustee's habitual residence, are connected essentially with states that do not have the institution of the trust. Article 15 also keeps mandatory rules of the forum, for example on protecting minors, the effects of marriage, succession rights, transfer of title and protection of creditors.

None of this tells you how an Indian authority or court would treat a particular Swiss trust. That question is for a local adviser. A useful brief to give them:

• Will a trust governed by the chosen law be recognised for the purposes that matter to you in India?
• Do Indian family property or succession rules limit what can be placed in the trust or who can benefit?
• Are there reporting steps for you, as a resident, when assets are transferred abroad or when income arises?
• How would distributions to beneficiaries living in India be treated on their side?

The Swiss tax picture, and why India is separate

Swiss tax treatment of a trust depends on its type. For a revocable trust, the assets and their income stay taxable with the settlor at the settlor's place of residence, and a distribution to a beneficiary is treated as a gift at a rate set by the cantons. For an irrevocable fixed interest trust, the beneficiary may be treated like a holder of a usufruct, and creation counts as a gift from the settlor to the beneficiary. For an irrevocable discretionary trust, if the settlor lives abroad when it is created, the assets are attributed neither to the settlor nor to the beneficiary for Swiss tax purposes.

That last sentence is about Swiss tax only. It says nothing about how India taxes a resident settlor or resident beneficiaries, and the trustee will not treat it as an answer to that question. The Indian position is for your local adviser, and the trustee will want to read what they conclude. Where the trust type matters, see the trustee role in revocable and irrevocable trusts.

Reserved powers deserve particular attention. The more control you keep, the more your adviser will want to examine how that control affects tax and recognition at home. The trustee's side of this is explained in settlor reserved powers and the trustee.

A first-year calendar of contacts and reports

Example: a family based in Pune sets up a discretionary trust with a Geneva trustee. The settlor and an adviser in India agree to follow a simple calendar. It is an illustration, not a prescribed timetable.

Each stage ends with something written. The most useful habit for a settlor in India is to answer the mid-year check promptly, even when nothing has changed. Silence is hard for a trustee to interpret.

For the trustee's side of this routine, see compliance and reporting duties and what information your trustee must give you. A letter of wishes is covered in letters of wishes and your trustee.

If you move, or your family does

Residence changes are the main reason a calendar needs rewriting. If you leave India, or a beneficiary moves in or out, the trustee needs to be told early, because the local analysis may change entirely. When the settlor moves country sets out what the trustee does, and the situation of a settlor moving abroad helps you decide whether to keep, change or add a trustee.

Checking your trustee before you rely on it

A settlor living far from Switzerland cannot easily drop in to see how the trustee works. That makes written due diligence more valuable. The trustee due diligence questionnaire is a practical starting point, and the questions it raises are explained in due diligence on your trustee.