Can I protect my assets with a trust?

What is an offshore trust in Switzerland?

The information at Offshore-Citizen describes what trust is and what its benefits are for the trustor and beneficiary. Analyzed the process of creating an international trust in Switzerland and lists the requirements that must be met in order for the activities of such a trust to be transparent.

The legal structure of the trust implies the need for a founder who transfers or allocates assets. The trustee must be an adult in his right mind and be responsible for managing the assets for the benefit of a person or group of persons referred to as beneficiaries. The guarantor supervises the work of the trust, ensuring its compliance with the trust declaration and satisfactory management of the trust.

An offshore trust is a trust in which assets are stored in another country, and the trust is created according to the laws of an offshore jurisdiction. The trustee manages the trust on behalf of the founder of trust management (who transfers the assets to the trust) for the benefit of the nominated beneficiaries.

What is the purpose of creating an offshore trust in Switzerland?

One of the main qualities of the Swiss trust is the possibility of effective tax planning.

Trusts in Switzerland have steadily increased their turnover since July 2007. Thanks to the constantly developing Swiss financial centers, while in neighboring countries there are high tax rates. The Hague Convention on Trusts was signed in 1985 and was enacted by the Federal Government of Switzerland on July 1, 2007. The Convention applies only to trusts that were established on a voluntary basis. It does not apply, for example, to wills. Offshore trusts in Switzerland have the advantage that they can be moved from one jurisdiction to another. This is achieved simply by replacing the trustee or by the law governing the activities of the trust. There is a general misconception that trusts are a complex organization, requiring a lot of time for their creation, and, moreover, intended for very rich people.

Trusts provide an immediate opportunity to effectively and profitably protect your assets and conduct tax planning. Switzerland’s reputation for anonymity is recognized in the business world and among offshore investors. Given the current security procedures, Switzerland is an attractive jurisdiction for creating offshore trusts.

A Swiss offshore trust is a form of a “transparent” organization, which after its creation will not keep instructions on the identity of the founder (as opposed to foundations). Offshore trusts in Switzerland must have a founder who places their assets in trust through a trustee for the benefit of the nominated beneficiary. All this is done under the condition that the instructions contained in the declaration of trust are executed exactly as the founder stated.

Trusts are used mainly by very rich people to protect their private wealth, plan their economic affairs and provide for children or future generations. With this in mind, an attractive feature of the Swiss trust is that potential heirs cannot sue the trust, and the assets of the trust cannot be seized. Many people want to secure their assets, and you, as the founder of the trust, can transfer any assets into it and legally declare that they are not your property. Switzerland was forced to recognize and actively contribute to the creation of trusts since there are many rich and very rich people who keep their assets in trusts.

Advantages of an offshore trust in Switzerland
Switzerland has a very favorable and generally accepted system of preferential taxation. Wealthy people are looking for a place where they can keep assets, which allows them to optimally carry out tax planning, extract the maximum of their assets and protect their wealth from the unstable financial situation in other jurisdictions.

In addition, in Switzerland:

– no hereditary duty

– there is no inheritance tax or the right to an obligatory share in the hereditary mass

– there is no currency control

– there are no reporting requirements for international Swiss trusts

– there are no taxes on wealth and gift

– a high level of asset protection and condition management is ensured

– optimized the economic situation of the founders of trusts.

Creating an offshore fund in Switzerland

Swiss funds are believed to be an alternative to trust. Funds are widely recognized as the preferred tool for protecting the assets of the elite and wealthy people, as they provide the most varied benefits of treating expensive assets.

What is a foundation in Switzerland?

Foundations in Switzerland are created if jurisdiction cannot recognize a particular trust (i.e., if this jurisdiction does not fall under common law jurisdictions), but the foundations are really very similar to trusts in their legal structure, since the funds also there are “founder”, “guarantor”, “beneficiary” and “council members”

A foundation acquires the quality of a legal entity immediately after its establishment, so the foundation becomes the owner of its property. Accordingly, the fund does not belong to anyone and is usually created in the interests of the company’s offshore clients. Funds can own many corporations and assets, can issue instructions for execution, as is done in trusts. There is no requirement for a trustee, participants or shareholders in the fund. Funds in Switzerland are classified according to the tax regime determined by the Federal Government for companies with 20-49% of shares or at least 2 million Swiss francs.

Funds can be used for different purposes, however, the main objectives are commercial, charitable or private interests. Funds are an excellent asset protection tool, and this is appreciated by businessmen of all levels. Moreover, funds can be created for a specific period.

Existing types of funds in Switzerland

Basically, funds are created of two types:

1) Municipal funds and

2) Corporate funds.

According to their types of funds are divided into 4 types:

– Public funds – created by families, groups of individuals, etc.

– Private funds – created by individuals

– State funds

– Mixed funds – are created by any of the above.

Purpose of offshore funds in Switzerland

– Protection of personal status and corporate property

– The Fund is recognized in jurisdictions with both civil and common law

– inheritance planning

– Tax planning of inherited assets

– Prevention of the right to an obligatory share in the hereditary mass

– Management by the corporation is carried out and controlled

– separation of voting and economic benefits

– Profit participation schemes for employees

– Pension Funds

– Art Collecting

– Charity groups of people

– Funds can be successfully used by organizations to create schemes for employee participation in profits, pension schemes, stock operations and insurance.

What assets can be in an offshore fund in Switzerland?

You can keep several types of assets in an offshore fund, since:

– Shares and securities of private and public corporations

– investment plans portfolios

– Property in the form of real estate and intellectual property

– Bank deposits

– Life insurance policies.

The advantages of creating a fund in Switzerland

Swiss funds entered into agreements on the avoidance of double taxation, which provides an almost zero rate of taxation of income of non-residents.

Geographically, Switzerland is located very well, occupying a strategic position, so it is convenient to create funds here. Switzerland is also known for its stable economy and powerful financial structures, which provides offshore foundations of funds with a high level of confidentiality when creating funds.

Other benefits of the foundation in Switzerland include:

– The efficient asset management system

– Structured management and state distribution system

– Reduced Inheritance Tax

– Payment of reasonable compensation for services rendered to the fund

– Non-taxable contributions to the fund

– The Fund may own many corporations and assets without limiting the nature of the assets.

– The Foundation can formulate strict instructions for execution, as is done with declarations of trusts.

The Trust’s Effectiveness in a Context of Transmission

The Trust’s Effectiveness in a Context of Transmission

Observation: a need for a patrimonial organization not currently satisfied:

Framing the management of the properties that he plans to transmit to his descendants is a wish often expressed by the future with variable motives:

  • the wealth is complex (certain transfers of family businesses),
  • it is important to ensure the durability of a group of properties that have been put together for a particular purpose (successions of collectors or artists, management of historic castles that have kept their furniture),
  • we are in the presence of heirs who do not have the necessary competence for the management of inheritance and who must be assisted or even protected against their own prodigality.

It is frequently stated that the succession reform implemented by the law of 23 June 2006 (Law No. 2006-728) would have provided individuals with effective tools for organizing such estate planning.

The following are cited:

  • the creation of the posthumous mandate ( civ., sections 812 to 812-7 );
  • the liberalization of gradual liberalities ( civ, articles 1048 to 1056 ) and residual liberties ( civil code, articles 1057 to 1061 )

Although some progress has been made since 2006, the tools available to the deceased who wish to organize the management of the estate on behalf of his heirs are still insufficient and fragile in many cases:

  • The posthumous mandator : must be justified by a serious and legitimate interest (C. civ 812-1-1) which interest gives more and more often to litigation (Cass civ 1, June 10, 2015, n ° 14- 10.377 and 14-12.553, Delarue), and has a very limited duration (at most 2 years in principle, exceptionally 5) much too small compared to the organizational needs expressed by the future applicants. adapted to manage a relatively short transition period after death, but which is not intended to organize the situation in the long term.

In addition, the mandatary may only perform conservatory or administrative acts.

More serious, the device is based on the fiction of a mandate that does not remove the heirs the right to intervene themselves and sell the property … thus dropping the mandate (Cass civ 1, May 12, 2010, Bull civ I, No. 117). The latter becomes more effective only by means of additional engineering that may consist of the de cujus to house during his lifetime the assets in a SAS whose statutes include an inalienability clause and bring the mandate to effect posthumously on the actions of society, but this complicates the scheme and illustrates the intrinsic fragility of such a mandate used alone.

  • Gradual and residual donations have only been very successful in practice and seem to have been implemented only in rare cases. They are sometimes presented as having a purpose close to the trust. We are not convinced because the primary purpose of this device is to ensure a double successive transmission by organizing the “return” of the property upon the death of the first beneficiary to the benefit of the second beneficiary. However, its scheme does not allow the first beneficiary to manage the property while it holds it on behalf of the second beneficiary, or to issue income to the latter until the death of the institute.
  • Civil society: in the absence of suitable succession mechanisms, the future owner often resorts to an older engineering solution consisting in creating a civil society placed under the control of a manager of an irrevocable trust, and with “tailor-made” status, which serves as a management vehicle for the assets under consideration. The fact that this traditional solution is still preferred today to the new tools resulting from the 2006 reform demonstrates the relative inefficiency of these. But, it is itself sometimes difficult to implement insofar as it is difficult with regard to the social interest to provide in the statutes the conditions under which the manager will be authorized to issue capital or income funds. descendants become associated according to their personal needs.

On the other hand, management trust appears as an alternative technique that is more efficient and better adapted to such objectives: it makes it possible to isolate the assets in a patrimony of assignment, sheltered from the creditors, and by entrusting them to the management a trustee, a qualified and independent professional, who will have sufficient and flexible powers, determined from the contract of trust or ad hoc on a case-by-case basis, to be able to manage the long-term assets with a view to the satisfaction of personal needs beneficiaries, and the preservation of the heritage, without having to respect a social interest distinct from the interests of the constituents of the trust.

The current civil and tax prohibition of the gift-giving trust does not remove any interest in the trust in a context of transmission. In many cases, it can be used in addition to the liberality or succession and allows to ensure the locking desired by the settlor or to optimize the management of undivided or dismembered assets.