The Swiss Federal Supreme Court recently handed down a significant ruling on the treatment of trusts in inheritance matters. The ruling, handed down on 16 December 2024 (TF 5A_89/2024), provides essential clarifications for inheritance law practitioners and trust professionals.
Although of Anglo-Saxon origin, trusts are increasingly used in Switzerland, particularly by wealthy private clients and expatriates. They are primarily used for asset protection and for estate and tax planning purposes. Foreign trusts have been recognised in Switzerland under the Hague Trust Convention since 2007.
However, the absence of specific regulations on trusts in Swiss law has often led to uncertainties, particularly in matters of inheritance.
This ruling by the Federal Supreme Court clarifies several key points concerning the understanding of trusts in Swiss inheritances:
- Exclusion of trust assets from the estate: The Federal Supreme Court has confirmed that the assets of an irrevocable discretionary trust are separate from and do not form part of the deceased’s estate. This concept is crucial because it ensures that the assets transferred into an irrevocable trust cannot be claimed by the heirs after the settlor’s death.
- No reporting by Trust beneficiaries: The ruling goes further, specifying that the designation of the beneficiaries of a trust does not constitute a gift subject to reporting as part of the liquidation of the estate. This exempts the beneficiaries of an irrevocable discretionary trust from reporting obligations. However, it is important to note that such gifts remain revocable if they violate the reserves of the forced heirs.
This ruling marks a significant stage in the integration of the principles of trust law into Swiss inheritance law. It provides welcome clarification and enhances the predictability of transactions involving trusts in Swiss estates. However, the ruling also highlights the many differences between civil and tax law in understanding fiduciary mechanisms.
In conclusion, this Federal Court ruling helps clarify the rules applicable to trusts in Swiss inheritances, while preserving the integrity of the Swiss legal system. This is a major step forward for legal professionals and their clients, providing greater legal certainty for estate planning.
By Quentin Bärtschi, Kellerhals-Carrard Berne – Switzerland
