UAE resident settlor: working with a trustee in Switzerland

A UAE resident settlor who appoints a trustee in Switzerland is entering a relationship with three moving parts: you, the people who advise you where you live, and a regulated trustee in Geneva or elsewhere in Switzerland. The structure works when each of the three knows what the others are responsible for. This page looks at the practical side of that arrangement for a settlor living in the United Arab Emirates or elsewhere in the Gulf: what the trustee asks of you, what it expects from your local advisers, and how contact is organised across time zones, banks and family members.

It is general information, not advice. Whether a trust is recognised where you live, and how it is taxed there, are questions for an adviser qualified in that country. The sections below say what to ask them rather than answering for them.

What a Swiss trustee does for a settlor abroad

The trustee holds title to the trust assets, administers them under the trust deed and accounts for them to the beneficiaries. The Hague Convention on trusts describes this in plain terms: assets are placed under the control of a trustee for the benefit of a beneficiary or for a stated purpose, they form a separate fund, and the trustee must manage them and account for them. The same Convention accepts that a settlor may reserve certain powers without that being inconsistent with the existence of a trust. The extent of those powers is a design choice with consequences; our page on settlor reserved powers explains how it affects the relationship.

Switzerland has applied the Convention since 1 July 2007, and the Federal Office of Justice confirms that foreign trusts are recognised in Switzerland from that date. That is a statement about Switzerland. It does not tell you how the country where you live treats the same trust, which is why the local adviser is a necessary part of the picture, not an optional extra.

For a settlor abroad, the trustee's work has a particular shape. It cannot rely on meeting you in person every few weeks, so it builds its knowledge of you through documents, scheduled calls and your advisers. A trustee who is approved by the supervisory authority also carries anti-money-laundering duties that do not pause because the client lives far away. Read what FINMA and SO-FIT approval means for you before you rely on any trustee's status.

Who talks to whom

The most common source of friction is not the trust law. It is an unclear line of communication: the trustee writes to the settlor, the settlor forwards to a lawyer, the lawyer replies to a bank, and nobody can say who has the latest version of a document. A simple rule helps: the trustee deals directly with you on decisions, with your local adviser on questions of your local law and tax, and with banks on account matters in its own name as trustee.

Two practical points follow. First, the local adviser should speak to the trustee in writing, with the settlor in copy, so that advice on local rules reaches the trust file. Second, no adviser instructs the trustee on the settlor's behalf unless the settlor has said so in a document the trustee has seen. Without that, a well-meant message from an adviser is information, not an instruction.

What the trustee needs from you

Before accepting a settlor, a regulated trustee has to know who you are, where the assets come from and why you want a trust. For a settlor in the UAE the questions are the same in nature as for anyone else, but the paperwork often crosses several offices, so it pays to prepare it early.

Expect follow-up questions. They are not a sign of distrust. A trustee that asks nothing is the one to worry about. If you want to see the kind of questions you should put to the trustee in return, use the trustee due diligence questionnaire and the method for choosing a trustee.

What the trustee needs from your local advisers

Your local lawyer and tax adviser are not there to second-guess the trustee. Their task is narrower and just as important. The trustee in Switzerland is not qualified to opine on the law of the country where you live, and a good one says so.

Ask your local adviser to put the following in writing for the trustee file:

• whether a trust governed by Swiss or another foreign law is recognised where you live, and with what limits;
• how your local rules treat a settlor who keeps powers, and how that differs if the trust is revocable or irrevocable;
• whether a transfer to the trustee triggers any filing, approval or declaration in your country;
• how distributions to family members living in other countries are treated for them;
• who in your family might be affected by mandatory local rules on inheritance or marriage.

The last point matters because the Hague Convention does not displace mandatory rules of the forum. Among the matters it lists are the protection of minors and persons lacking capacity, the effects of marriage, succession rights, the transfer of title and the protection of creditors and of good-faith third parties. Whether any of them bites in your case depends on the courts and the law involved, which is exactly what the local adviser is for. The Convention also allows a state not to recognise a trust whose significant elements connect essentially to states that do not know the institution of the trust. Whether that reasoning could ever be relied on against a trust with a Swiss trustee is, again, a question for local counsel.

Tax: what is Swiss, what is not

The Swiss federal tax administration's circular on trusts sets out how Switzerland treats the main types. For a settlor who does not live in Switzerland, the following points are relevant, always with the caveat that they describe Swiss treatment only:

• A revocable trust is looked through: the assets and their income stay taxable with the settlor at the settlor's place of residence. For you, that is where you live, so the answer comes from your local adviser.
• For an irrevocable discretionary trust, if the settlor lives abroad when the trust is created, the assets are attributed neither to the settlor nor to the beneficiary under that Swiss approach.
• For an irrevocable fixed interest trust, the beneficiary may be treated like a holder of a usufruct, and the creation is a gift from the settlor to the beneficiary.

None of this says how your country taxes you, the trust or the beneficiaries, and the two analyses may not point the same way. Our page on what happens when the settlor moves country covers the trustee's role if your residence changes.

Time zones, banks and family

Practical arrangements are where relationships succeed or fail, so agree them at the outset.

Time zones. The Gulf is several hours ahead of Switzerland, and the working week there does not match the Swiss one. Agree fixed windows for calls, and agree what counts as urgent. A written summary after each call, sent by the trustee, removes the usual doubt about what was decided.

Banks. Accounts for the trust are opened in the name of the trustee, not in yours. That is a consequence of the trustee holding title, and it is why bank onboarding asks about the trust and not only about you. Allow time for the bank's own checks. Our page on the trustee and the trust bank accounts explains who signs what.

Family. Decide early who in the family will hear from the trustee, and in what form. Adult children, a spouse and a protector have different rights and different needs. If you plan to name a protector, read working with a protector first, because the role needs a clear line to the trustee.

A first-year calendar of contacts and reports

This is an illustration, not a standard. Example: a family based in Dubai sets up a discretionary trust with a trustee in Geneva, with a local lawyer and an accountant on the family side.

• Before signing. Discussion of objectives; local adviser's written note on recognition and tax; trustee's due diligence; choice of governing law. Contact is frequent and mostly by video call.
• Signing and funding. Execution of the trust deed, transfer of the first assets, opening of the trustee's accounts. The trustee confirms in writing what has been received.
• First quarter after funding. The trustee sends a first statement of assets, a note of decisions taken, and a reminder of any information it still needs from you. A call with you and your adviser follows.
• Mid-year. A review call on investments and on any distribution requests, with the trustee's minutes sent afterwards. The local adviser is asked whether anything has changed in the rules that apply to you.
• Year end. Accounts are prepared, and the trustee asks you to confirm your residence, your contact details and any change in beneficiaries or family circumstances.
• Early the following year. The trustee issues the annual accounts and the information needed for tax reporting where it applies, and the parties plan the next year's calendar.

Details of what a trustee reports and when are in compliance and reporting duties and in the information your trustee must give you.