Trustee for a real estate trust: who does what when the trust owns property

When a trust owns a house, an apartment or a rented building, the trustee carries a second job on top of managing money: running a physical asset in a place with its own rules. A trustee real estate trust arrangement works well only if it is clear who decides, who instructs the local agent, and whose law governs each step. This page explains how that work is organised, so that you can judge whether your trustee is doing it properly.

What a trustee real estate trust arrangement covers

The trustee is the legal owner of the trust assets, directly or through a vehicle, and must act in the interest of the beneficiaries under the trust deed. For property, that translates into practical tasks:

• choosing how the property is held;
• checking whether the purchase or transfer is permitted where the property stands;
• appointing and supervising the people who manage it on site;
• collecting rent, paying for upkeep and keeping insurance in place;
• recording decisions, and deciding what happens to the property over the long term.

The service described here covers property held in or through a trust, with the rules of the country where it is located. It is about the trustee's work, not about comparing countries or their tax systems, which depend on your own situation.

Direct holding or a holding company

There are two common routes. Under direct holding, the trustee appears as owner in the land register of the country concerned. Under a holding company, the trustee owns the shares of a company, and the company owns the property.

Neither route is better in general. Some countries recognise a trustee as owner without difficulty; others do not, and a company is then the practical answer. The trustee should explain why a route was chosen, in writing, and record what was considered.

Example: a family established in Lausanne wants to place a holiday home on a foreign coast in trust. Local advisers say that a trustee cannot be entered in the register, so the trustee proposes a company owned by the trust. The family then asks one more question: who will sign for the company when the roof needs repair? That answer belongs in the file from the start.

Buying in Switzerland: the rules on acquisitions by persons abroad

If the property is in Switzerland, the federal rules on acquisitions of real estate by persons abroad (LFAIE) come first. Under Art. 2, acquiring real estate as a person abroad requires an authorisation from the competent cantonal authority.

Art. 2 para. 2 sets out cases where no authorisation is needed, notably a permanent establishment such as a business or a profession, the buyer's main residence at their legal and effective domicile, and other exceptions in Art. 7. A holiday home is not in that list as such.

Art. 5 para. 1 explains who counts as a person abroad. It includes foreign companies, Swiss companies controlled by persons abroad and, under letter d, anyone acquiring on behalf of persons abroad. A trustee buying for a trust with foreign settlors or beneficiaries therefore has to analyse the structure before any contract is signed. The result depends on the canton, the nature of the property and the people behind the trust, so it needs an individual review.

The decision chain for a property held in trust

Each step leaves a document. When a beneficiary later asks why a decision was taken, the trustee should be able to point to the step and the paper behind it. That is also what an independent review of an existing trust looks for.

Who deals with the local agent

The local agent, whether an estate agent, a property manager or a lawyer on site, is usually the first person tenants, neighbours and local offices call. The trustee should not leave that role vague.

A sound arrangement has four features:

1. a written mandate that lists what the agent may do alone, and what needs the trustee's approval;
2. a clear reporting line, so that rents, invoices and incidents reach the trustee on a regular basis;
3. payments made from a trust account, not through private accounts of family members (see your trustee and the trust bank accounts);
4. a contact point in the family if a beneficiary uses the property.

If the family lives in the property, the trustee still stays the decision-maker. The beneficiaries use it; they do not run it by habit. This point often causes friction, and the trustee, protector and beneficiary triangle shows how the roles fit together.

Tenants, upkeep and insurance

For a rented property, the trustee or the company is the landlord. In practice that means lease agreements signed in the right name, deposits held as the local law requires, and works ordered within a budget the trustee has approved. Insurance should name the correct owner, and cover the right risks for the country concerned.

Large works, a sale or a change of use are not for the agent to decide alone. They fall under the trustee's duties described in day-to-day trust administration, and the trustee should keep minutes of the decision.

Foreign property and local law

When the property is outside Switzerland, local law governs the land, the lease and the formalities. The trust itself is a separate question. Switzerland refers to the Hague Convention for the law applicable to trusts, but that convention reserves mandatory rules on inheritance rights. A property abroad may therefore be subject to forced-heirship or registration rules that cut across the trust deed.

For that reason the trustee normally works with a local lawyer, and the compliance and reporting duties of the trustee continue to apply to income from the property. What those duties mean for you depends on your residence and that of the beneficiaries.

Succession planning for family homes

A family home raises feelings that a bank account does not. Who may live there, who pays for upkeep, and what happens if two children want different things? A letter of wishes can set out the family's expectations, while the trust deed fixes the binding rules.

Swiss inheritance law was revised and the reserved share is now half of the statutory entitlement (Art. 471 CC), which gives more room to organise one's estate. That room does not remove foreign rules, and a family with several residences should have the position checked case by case.

What this service does not cover

• Tax advice, or a comparison of countries and their tax regimes.
• Legal representation before foreign courts or land registers, which a local lawyer provides.
• Acting as estate agent, builder or day-to-day property manager.
• Any promise that a structure will be accepted everywhere.

What a confidential assessment establishes

The assessment looks at the trust deed, the way the property is held, the local agent's mandate and the paperwork around rents, insurance and approvals. It sets out which route fits your situation, what local rules need a specialist, and how the trustee would organise the work. Fees depend on the structure and are indicated once the assessment is complete. If you are still comparing providers, read how to choose a trustee in Switzerland first.