The trustee's role in revocable and irrevocable trusts

The revocable trust trustee role is easy to misread. In a revocable trust the settlor can take the assets back, so many people assume the trustee simply follows orders. In an irrevocable trust the settlor has let go, so others assume the trustee answers to nobody. Neither picture is accurate. In both cases the trustee holds the assets as legal owner, bound by the trust deed and by duties owed to the beneficiaries. What changes is who may give instructions, and how far the trustee can act on them.

This page explains that difference in practical terms, so that you can judge the trade-off between control kept and separation achieved before you choose or change a trustee.

Who can instruct the trustee?

The first question to settle is whether anyone besides the trustee holds power under the deed. The answer decides how much of the day-to-day direction sits with you, with a protector, or with the trustee alone.

The diagram shows a general pattern. The deed always has the last word, and the right reading depends on its exact wording, the law that governs the trust and the facts of your situation.

The trustee in a revocable trust

A revocable trust leaves the settlor with the power to end the arrangement or take back assets. The trustee's work is therefore closer to administration under direction. Typical tasks include:

• holding and recording the assets in the name of the trustee;
• carrying out the settlor's reasonable instructions on investments and distributions;
• keeping accounts, minutes and the identification records that anti-money-laundering rules require;
• checking that each instruction is consistent with the deed.

A good trustee does not become a mere signatory. Even when the settlor holds wide powers, the trustee must be able to refuse an instruction that breaches the deed, the law or its own regulatory duties. You will find more on this boundary in our guide to settlor reserved powers and the trustee relationship.

Tax transparency in outline

For Swiss tax purposes, a revocable trust is generally treated as transparent. The assets and their income stay taxable with the settlor at the place of residence, and a distribution to a beneficiary counts as a gift, with the rate set by each canton. These points come from the Swiss tax circular on trusts and are a general outline only. Your own position depends on where you live and on the type of assets, so the trustee works with your tax adviser rather than replacing them.

The trustee in an irrevocable trust

Once the settlor cannot take the assets back, the trustee's independence grows. The settlor may still write a letter of wishes, but it guides the trustee rather than binding it. The trustee takes the decisions on distributions, investments and record-keeping, and answers to the beneficiaries for them.

Discretionary and fixed interest trusts

The tax and practical picture differs between two common forms:

• In an irrevocable discretionary trust, the settlor's residence when the trust is created matters. If the settlor was domiciled in Switzerland at that point, the assets and their returns remain attributed to the settlor, with the same consequences as in a revocable trust. If the settlor was domiciled abroad, the assets are attributed neither to the settlor nor to a beneficiary.
• In an irrevocable fixed interest trust, a beneficiary may be treated like a usufructuary, so assets and income are attributed to that person for tax. Creating the trust counts as a gift from the settlor to the beneficiary, and distributions are in principle taxable income for the beneficiary, who is also subject to wealth tax on their share.

For the day-to-day work in each form, see the pages on the trustee of a discretionary trust and fixed interest trusts.

Side by side: what changes for the trustee

Building flexibility into an irrevocable structure

Irrevocable does not have to mean rigid. A well-drafted deed can keep room to adapt while keeping real separation between you and the assets. The usual tools are:

1. Protector powers. A protector can consent to or veto certain acts, or replace the trustee. See working with a protector and the trustee, protector and beneficiary triangle.
2. Adaptation clauses. These let the trustee change administrative terms when circumstances shift, without rewriting the whole deed.
3. Reserved powers, kept narrow. Each power you keep can weaken the case that the assets are truly separate, so the choice deserves careful thought.

The more control the settlor retains, the more the structure may look like a revocable one in the eyes of tax authorities and creditors. The trade-off is real, and only an individual analysis can place it.

Example: a revocable trust that becomes irrevocable on death

Example: a widowed entrepreneur living in Lausanne sets up a revocable trust and names her two adult children as beneficiaries. While she is alive, she instructs the trustee, who administers the assets and keeps the records. The deed states that the trust becomes irrevocable at her death.

At that point the trustee's position shifts. No one can take the assets back, the settlor's instructions end, and the deed's rules for the beneficiaries take over. The trustee now relies on the deed, the letter of wishes and any protector. A trustee who already holds complete records, clear minutes and an up-to-date beneficiary file can make that change without disruption. This is why the handover rules should be thought through while the settlor is alive. Our guide on continuity planning when the trustee is not there covers related points.

What this service covers, and what it does not

The service helps you weigh control kept against protection and separation. It covers:

• an explanation of the trade-off between control and separation;
• a general review of creditor and succession implications;
• a discussion of tax transparency with your advisers;
• the design of flexibility inside an irrevocable structure;
• the use of protector powers and adaptation clauses.

It does not replace tax advice for your country of residence, and it does not compare jurisdictions. Fees depend on the structure and are given after the confidential assessment. The assessment helps establish who can currently instruct your trustee, what the deed allows, and which choices remain open to you. If you are comparing trustees, start with how to choose a trustee in Switzerland.