What you need to know about trusts

Primarily associated with common law countries, the concept of trusts is now starting to filter across into civil law-based systems. As common law principles are handled differently in civil law countries, it’s important to understand trusts properly, as well as what the risks are and where they are present.
what is a trust

What you need to know

  • The trust is a long-standing and commonly used instrument in private wealth structuring and succession planning, primarily in common law countries. In civil law countries especially, it is however often regarded with scepticism and in media often displayed as a tool for deceitful planning. One main reason is the lack of understanding of the trust concept and its unique features.
  • The globalisation of families, their wealth structuring and commercial investments have made it inevitable to understand and deal with the common law-based trust and the trust concept is slowly making its way into civil law-based systems. In many civil law countries, the courts attempt to assimilate the trust to their domestic law concepts, implying a degree of uncertainty. Other countries take it further; Switzerland is about to introduce, for the very first time, a Swiss trust.
  • The trust’s inherent flexibility makes it an optimal instrument for adapting to the shifting needs and personal situations of families as well as external changes in laws and regulations. However, its common law principles are interpreted and dealt with differently in civil law countries and aspects relating to ownership and forced heirship rules as well as tax implications must be carefully considered and analysed from a multi-jurisdictional perspective.
Operations Updated on October 21, 2022

Families’ personal situations, as well as their investments, are becoming multi-jurisdictional. In parallel, tax and reporting requirements are becoming more complex. Safe and efficient tax and wealth structuring require, more than ever, flexible solutions and multi-dimensional attention. Wealthy families increasingly consider trusts to meet the complexity of their multi-faceted connections and cross-border activities. However, due to the special features of the trust, it’s not without its challenges. It’s important to understand what the risks are and where they are present. It starts with understanding trusts. We will explore the trust concept from 5 different perspectives, with a special look at Switzerland and its project to introduce a Swiss trust.

What is a trust? Understanding them from every perspective.

A brief history

The trust is, in accordance with its name, based on trust. It goes back to the 12th century and the time of the crusades under the King of England. When a landowner left England to fight in the Crusades he conveyed ownership of his land to a trusted person to hold and manage the estate for the benefit of his family.

About the Authors

Suzanne Lauritzen

Suzanne Lauritzen

Tax & wealth structuring

Suzanne Lauritzen is a private client adviser and facilitator, specialising in international taxation, wealth structuring, family governance and mediation.

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