Trust and foundation combined: what the trustee does across the structure

A trust and foundation combined trustee is a trustee who looks after a trust that does not stand alone: it owns a holding company, controls an operating business, or works alongside a foundation set up for a related purpose. The trustee is still the person who holds the trust assets and answers for them. What changes is the number of places where decisions are taken, and therefore the number of places where something can go unrecorded.

This page explains how a trustee in Switzerland approaches that situation, who acts at each level, and what you should be able to see before you rely on the arrangement.

Why structures get combined

Few families start with a layered structure. It usually grows. A trust is set up first, then a company is added to hold a portfolio or a property, later a foundation appears for a charitable or family purpose, and an adviser in another country suggests one more vehicle. Each step may be sensible on its own. Together they can leave nobody holding the whole picture.

Under the Hague Trusts Convention, a trust is a legal relationship in which assets are placed under a trustee's control for beneficiaries or a stated purpose. The assets form a separate fund, the title stands in the trustee's name, and the trustee must manage and account. That definition does not change when companies sit underneath. It means the trustee remains accountable for what the trust owns, including the shares of any company it holds.

The structure chart and who acts at each level

Start with a chart. It is the entry point of any serious review, because it shows which entity owns which, and who has the power to sign at each step.

The chart makes one point obvious: the trustee does not run every entity. It owns, appoints and supervises. Directors run companies, a foundation council runs a foundation, and the trustee has to be sure each of them acts within the trust's purpose.

What the trustee does at each level

At the trust

The trustee applies the trust deed, takes decisions on distributions, keeps minutes and keeps the trust accounts. If the deed reserves powers to the settlor or gives a role to a protector, the trustee works within those limits. The Convention accepts that reserved powers and a beneficiary-trustee are not in themselves incompatible with a trust, but they affect how the structure is read, so they should be written down clearly. See settlor reserved powers and the trustee and the trustee, protector and beneficiary triangle.

At the underlying company

The trustee, or a private trust company acting for it, normally controls the shares and chooses the directors. It then needs a reliable flow of information: financial statements, board decisions, loans between entities and the identity of the person who ultimately benefits. Where the company holds a family business, the questions differ from those for a passive portfolio; a trustee for a trust holding a family business covers that case.

At the foundation

A foundation is not a trust. It is a legal person with a council, and the council owes duties of its own. When a trust and a foundation sit side by side, the trustee's job is to avoid two bodies pursuing contradictory aims with the same assets. That means a documented understanding of which entity decides what, and a way to resolve conflicts. Trustee or foundation council sets out the difference in who looks after the assets.

Using a private trust company

In some structures the trustee is a private trust company that belongs to the family or the structure itself. A professional trustee may then sit on its board or provide its administration. This can suit complex holdings, but it adds a layer that also needs governance. Read trustee services to a private trust company before deciding whether the extra layer is worth having.

What the service covers

The combined-structures service is organised around five tasks:

• Mapping each entity's role. Who owns what, who signs, who is a director, and what each entity is for.
• Layering the trust, holding company and foundation. Checking that each layer has a reason to exist and that none contradicts another.
• Governance links. Written lines between entities: who instructs whom, who reports to whom, and how decisions are minuted.
• Private trust company where useful. Considering whether such a company would simplify decisions or only add cost and process.
• Cross-border coordination with advisers. Working with your lawyers and accountants in other countries so that local advice and the trustee's records agree.

It is not a tax opinion, a comparison of countries or a legal ruling on how any state will treat your structure. Those questions depend on residence, the location of assets and the nature of the entities, and call for individual analysis.

Example: a trust that owns a company that owns a portfolio

Example: a family established in Lausanne has a discretionary trust. The trustee owns a holding company, and that company holds an investment portfolio through a custody account. Years later the family adds a foundation to support local education.

The trustee's questions are practical. Who sits on the holding company's board, and does the trustee have the minutes? Does the custody account reflect the real ownership chain? Does the foundation's council know what the trust deed says about distributions? Can the trustee explain, in a single page, why each entity exists? If any answer is vague, the structure needs attention before it needs expansion. Trustee and trust bank accounts explains what the trustee should see on the banking side.

Recognition and mandatory rules

Foreign trusts have been recognised in Switzerland since the Hague Convention entered into force for the country on 1 July 2007. A trust validly created under its governing law is recognised as a trust, which at a minimum means its assets are separate from the trustee's own estate and the trustee can act in court in that capacity. The Convention does not, however, override the mandatory rules of the forum, such as those protecting creditors, protecting minors, or governing succession and transfers of property. In a layered structure, those rules can apply at several levels, which is another reason to keep the paper trail complete.

Questions to ask before you rely on the structure

• Is there a current chart showing every entity and its owner?
• Does each entity have a documented purpose?
• Do you know who may sign for each entity?
• Are board and council decisions recorded and available to the trustee?
• Does the trustee receive regular reports from each underlying entity?

A structure you cannot draw is a structure you cannot supervise. If you want a neutral second opinion, an independent review of the trust and its trustee can start from the chart. Ongoing duties are described in compliance and reporting: what your trustee must do.

What the confidential assessment establishes

The confidential assessment lets the trustee read your deed and chart, identify gaps in the governance links, and say whether a combined structure can be administered coherently from Switzerland. Fees depend on the structure and are indicated after that assessment.