Fixed interest trust trustee: what changes when entitlements are fixed

A fixed interest trust trustee works in a different way from the trustee of a flexible structure. The deed says who receives what, and the trustee's task is to carry that out accurately, record it properly and pay it when it falls due. Little is left to personal preference, which is exactly why families choose this form: they want certainty over who receives what.

This page explains what changes in practice for a trustee in Switzerland, starting from the document that drives everything: the beneficiary schedule.

Start with the beneficiary schedule

In a fixed interest trust, the deed (or a schedule attached to it) sets out each beneficiary's share or entitlement. Before anything else, a careful trustee turns that text into a working document that answers four questions for every beneficiary:

• what the entitlement is, as a share of capital, income or both;
• when it becomes payable, and whether any condition applies;
• what happens if the beneficiary dies, cannot be found or disclaims;
• who is entitled to information about it.

Ambiguity here is the main source of later disputes. If the wording of the deed leaves a point open, the trustee should say so early and resolve it through the proper route, rather than improvising at the first payment date.

What the trustee does differently

The Swiss licensing law describes the trustee's core duty in simple terms: under Article 19(2) FinIA (LEFin), the trustee manages the separate assets, preserves their value and uses them according to their purpose. In a fixed interest trust, the purpose is stated in advance, so the duty becomes concrete.

Accounting by entitlement

The trustee must be able to show, at any date, what belongs to each beneficiary. That means keeping the trust's accounts so that income and capital are allocated to each entitlement, with expenses attributed on a basis the deed supports. A single undifferentiated pot is not enough.

Timely payment

Because beneficiaries hold defined rights, late or short payment is a breach, not a matter of taste. The trustee therefore needs a calendar of payment dates, enough liquid assets set aside to meet them and a record of each payment made. If the trust holds assets that cannot easily be sold, the trustee should plan the liquidity well before a payment falls due. Our page on day-to-day trust administration describes how this routine works.

Narrow discretion

Discretion does not disappear. The trustee still chooses investments, decides how to preserve value and handles unforeseen events. What it loses is the power to decide who benefits and by how much. The diagram below sets the two models side by side.

For the discretionary model, see the trustee of a discretionary trust.

A worked illustration

Example: a family established in Lausanne creates a trust for two adult children, each with a fixed share of the assets. The deed says income is paid out regularly and capital is divided between them when the settlor dies.

The trustee builds two sub-accounts, one per child, and allocates dividends, rent and costs to each according to the deed. When one child asks for the accounts, the trustee can produce them without reconstruction. When the settlor dies, the trustee applies the capital split exactly as written, instead of weighing the children's circumstances. If one child later runs into difficulty, the trustee cannot redirect that share to the other, however sympathetic the case. A situation of that kind would need a different design from the start.

The example is an illustration only. Each real trust depends on its own deed.

Information and the beneficiary's position

Because beneficiaries hold defined entitlements, they have a stronger claim to see how their share is doing than the object of a purely discretionary power. The detail depends on the deed and the governing law, but a trustee should expect regular requests for statements. Our guides on what a trustee owes the beneficiaries and the information your trustee must give you go further, and a case about adult children asking for accounts shows how this plays out.

Swiss regulation and the fixed interest trust

A trustee operating in Switzerland on a professional basis is a financial institution under Article 2(1)(b) FinIA (LEFin). The Federal Council's licensing framework means the trustee is supervised: FINMA grants the authorisation, and day-to-day oversight is carried out by a supervisory organisation that FINMA itself authorises and supervises. SO-FIT is one such body.

For a fixed interest trust, supervision matters because the trustee's obligations are measurable. Missed payments, unexplained allocations or poor records are easy to spot in an annual audit. See compliance and reporting duties for what is expected each year.

Tax points the trustee should flag

This page does not cover tax by country, but the trustee should know the Swiss federal position for an irrevocable fixed interest trust. According to the federal circular on trust taxation, the beneficiary may be treated like a usufructuary, so the assets and income are attributed to that person for tax purposes. Creating the trust counts as a gift from the settlor to the beneficiary. Distributions are in principle taxable income under Article 16(1) of the Federal Direct Tax Act (LIFD), and the beneficiary is subject to wealth tax on their share.

Treatment differs for revocable and discretionary trusts, and it depends on the settlor's residence, the beneficiaries' countries and the canton. A tailored analysis is needed. For the contrast between trust types, read the trustee's role in revocable and irrevocable trusts.

What this service covers

For a fixed interest trust, the service covers:

• reading the deed and building the beneficiary schedule;
• keeping accounts that follow each entitlement;
• planning and making payments on the dates the deed sets;
• giving beneficiaries the information they are entitled to;
• following the deed in a straightforward administration, which suits families who want equal sharing among heirs.

It does not cover tax advice for your country of residence, changing the shares set in the deed, or a comparison between jurisdictions. If you want to alter a fixed entitlement, that is a question about the deed and its amendment powers, which a protector or the court may hold.

What the confidential assessment establishes

The confidential assessment lets us look at your situation before anything is agreed. It typically clarifies whether the trust is really fixed, what the deed requires, whether the current or proposed trustee can meet the schedule and which records are missing. Trustee remuneration depends on the structure and is explained after the assessment; for background, see how trustees are paid.