Monaco resident settlor: working with a trustee in Switzerland

A Monaco resident settlor who appoints a trustee in Switzerland is, in practice, running a three-way relationship: you, an adviser or lawyer based near you, and a trustee a short journey away across the border. The trust works best when each of the three knows what the others are responsible for. This page is written for the settlor who asks what a Swiss trustee actually needs from them, and what is left to the people on the Monaco side.

It is general information, not advice. Anything that turns on Monaco law or on your personal tax position belongs with a qualified adviser in Monaco, and we say below what to ask them.

What the trustee does, and what it leaves to others

A trustee holds the trust assets in its own name but separately from its own estate, and must administer them and account for them. That description comes from Article 2 of the Hague Convention on trusts, which also says that powers you reserve as settlor do not, by themselves, stop a trust from being a trust. For a settlor in Monaco, the practical meaning is simple: the trustee in Switzerland is the legal holder and administrator, and you remain the person who explains the objectives, the family and the assets.

What the trustee does not do is act as your Monaco adviser. It will not tell you whether your home jurisdiction recognises the trust, how your own tax authority will treat it, or how local rules on marriage or inheritance interact with it. Those are questions for someone licensed where you live.

Who talks to whom

The usual failure is not a wrong decision but a silence: the local adviser never sees the trustee's annual accounts, or the trustee learns of a change of residence from a bank. The sequence below sets the order in which information should travel.

Notice that the settlor sits at both ends. That is deliberate: the trustee should not need to guess what your local adviser concluded, and your adviser should not need to chase the trustee for documents.

What a Swiss trustee needs from you

A regulated trustee has to know who it is dealing with before it accepts assets. If you want to understand the regulatory background, our page on FINMA and SO-FIT approval explains what supervision means for you as a client. In practice you should expect to supply:

• identity and residence evidence for you, and for any other person who will be treated as a beneficial owner or controller;
• an explanation of where your wealth comes from, with documents that support it;
• a clear list of intended beneficiaries and the countries they live in;
• the assets to be transferred, with proof that you are entitled to transfer them;
• your wishes for distributions, ideally set out in a letter of wishes;
• the name of your local adviser and your permission for the trustee to speak to them.

Gathering these before the first meeting shortens the process and avoids the situation in which a trustee must pause because a document is missing. A related list is on the page about documents to gather, which is aimed at a change of trustee but is a useful model for any file.

What your local advisers should be asked

The facts we can responsibly give you on the Monaco side are none. Whether Monaco recognises a trust, and on what terms, is not something this page can state; it must be sourced from a Monaco lawyer. What we can do is tell you what the question looks like.

The Hague Convention is the starting point for recognition among states that have joined it. Article 11 says a trust validly created under its applicable law is recognised as a trust, and that recognition means at least that the trust assets are separate from the trustee's personal assets and that the trustee can sue and be sued in that capacity. Article 13 adds that a state need not recognise a trust whose significant elements link it essentially to states that do not have the institution. Switzerland ratified the Convention and it has applied there since 1 July 2007. Whether and how it applies to your country of residence, and what mandatory local rules apply to a resident settlor, are for your local adviser. Article 15 reminds you that mandatory rules on matters such as marriage, succession, creditors and the protection of minors are not displaced by the Convention.

Questions worth putting to your Monaco adviser in writing:

• Does Monaco recognise a trust created under the proposed governing law, and what is the source for that answer?
• Does my residence affect the choice of governing law, or the choice of a Swiss trustee?
• How would the trust be treated for my own tax position, for any distribution to a beneficiary, and for any beneficiary who also lives in Monaco?
• Do local rules on marriage or inheritance limit what I can place in the trust?
• Which reports or declarations does my own residence require, and what do you need from the trustee to prepare them?

The Swiss side of the picture

Two Swiss points are worth knowing, and neither replaces local tax advice. The first concerns the governing law. Under Articles 6 and 7 of the Convention, a trust is governed by the law you choose; if that law does not recognise trusts, the choice has no effect and the law with the closest links applies, looking at the place of administration, the location of the assets, the trustee's residence and the purposes of the trust. Counsel chosen for the governing law is part of the structuring work, as the page on appointing a trustee for a new trust describes.

The second is the Swiss tax circular on trusts. For an irrevocable discretionary trust, the circular distinguishes by where the settlor was domiciled when the trust was created: if the settlor was domiciled abroad at that point, the assets are attributed neither to the settlor nor to a beneficiary for Swiss tax purposes. For a revocable trust, assets and income stay with the settlor. For an irrevocable fixed interest trust, the beneficiary may be treated like a life-tenant, and creation counts as a gift from the settlor. These are Swiss rules only; they say nothing about how your country of residence treats the same structure, and that second answer is the one that matters to you personally.

A first-year calendar of contacts and reports

Example: a settlor living in Monaco, whom we will call a family founder, has appointed a trustee in Switzerland and a lawyer near home. A sensible first year might run as follows. The names and timings are illustrative, and your own calendar will depend on the structure.

The trustee's own compliance work is described in compliance and reporting duties, and the information you are entitled to receive is covered in what your trustee must tell you. If you later move away from Monaco, what the trustee does when the settlor moves country sets out how the relationship adapts.

Choosing a trustee from Monaco

Proximity is an advantage: meetings are easy and a trustee can see your adviser in person. It is not a substitute for checking the trustee itself. Use the due diligence guide to test approval, experience with settlors resident abroad and the way the trustee reports. Fees depend on the structure and are indicated after the confidential assessment; the point at this stage is to understand what you would be paying for, not to compare headline figures.