Category: Private Client

Background

Switzerland is an incredibly attractive jurisdiction for international companies and high net worth individuals, seeking economic and political stability.

Reasons Why Switzerland is a Favoured Location

1. Political, financial, social and economic stability

The economy of Switzerland is one of the world’s most advanced economies. The service sector plays a significant economic role, particularly the financial services sector. The economy of Switzerland ranks first in the world in the 2019 Global Innovation Index, and fifth in the 2019 Global Competitiveness Report.

The economy of modern Switzerland is recognised as one of the world’s most stable. In addition, in terms of the ‘human development index’, a statistical composite of life expectancy, education and per capita income, Switzerland ranked second in the world in 2018, with a rating of 0.944

In terms of foreign policy, the country has a long-standing tradition of neutrality, and has been a constitutional democracy since 1848.

The stable political and economic environment of Switzerland makes it an appealing  jurisdiction from an asset protection perspective, with the added benefit of attractive tax regimes for both companies and individuals. These factors, combined with the country’s high regard for personal privacy and confidentiality, attract families and businesses from all over the world.

       2. A favourable tax environment for companies and foreign investors

Switzerland has long been known as a popular location for international trading companies. Due to its business-friendly environment, it has been home to all types of companies, from the headquarters of multinationals to small offices, with one employee.

Switzerland’s attractiveness to foreign investors, will be further enhanced in January 2020, with implementation of the Swiss tax reforms approved by Swiss voters.  Active operational companies will be taxed at between 12% and 14%, which can be reduced to as low as 9% with the application of instruments such as patent box.

Holding companies benefit from a ‘participations value deduction,’ when certain conditions are met. This means that they do not need to pay corporate tax on dividends received from participations and on capital gains.

Dividend distributions from subsidiaries to shareholders based in an EU jurisdiction or in Switzerland, are not taxed. In situations where the shareholders are not located in the EU or in Switzerland, but in a country with which Switzerland has a tax treaty, the withholding tax is generally between 0% and 5%.

        3. Banking advantages

Switzerland is the premier financial destination for international investment and private asset protection. It also offers one of the strongest and most commercial banking centers in the world.

It has a long history and expertise dealing with international currencies and open capital markets. Many banks have dedicated desks for particular jurisdictions, providing specific services to clients.

The main benefits of having a Swiss bank account are the low levels of financial risk and high levels of privacy

There is a wide variety of large domestic and overseas banks, experienced in operating accounts for different industries; trading, commodities, commercial, and also for private individuals.

Switzerland is well-known for its private banks, an exclusive niche for high net worth individuals, which provide sophisticated personal financial services and products to an exclusive clientele.

4. Different types of Swiss corporate structures

As in many countries, Switzerland offers a number of different company structures, these include; Public Limited Companies (SA/AG), Limited Liability Companies (Sarl/GmbH) and branches of foreign companies. Less common than in other jurisdictions are Swiss ‘Associations’: 

Association (Verein)

The Swiss Association is a legal entity which can undertake commercial activities.  Formation is simple and does not require share capital. Members do not share liability for the debts or actions of other members. The identity of members and directors is not public. It is an ideal structure for a business organisation made up of a number of independent offices. This type of structure is often used by multinational professional firms and enables them to operate globally under one branch, whilst maintaining separate profit pools and ringfencing liabilities in each of the countries in which they operate.

5. Trusts and Private Trust Companies as asset protection vehicles 

Widely used in Anglo-Saxon countries, a trust is  flexible and, in the right circumstances, can be an effective asset protection vehicle. It provides anonymity for families, and confidentiality regarding the assets and/or companies held within it. Trusts can be a useful aid in terms of succession planning, and can assist with long term inheritance matters.

A Private Trust Company (PTC) is a corporate entity authorised to act as trustee. The client and his/her family can actively participate in the management of the assets and decision-making processes, as well as sitting on the board of the PTC.

Switzerland recognised trusts with the ratification of The Hague Convention on the Law Applicable to Trusts (1985), on 1 July 2007. Whilst there is no domestic law governing trusts in Switzerland, trusts from other jurisdictions, and their specific rules, are recognised and can be administered in Switzerland.

In Switzerland the settlor (the individual who settles assets into the trust for the benefit of the beneficiaries) can choose the law of any specified trust jurisdiction to govern the trust. For example a Guernsey trust can be established with a Swiss Trustee.

The tax advantages available in using a trust with a Swiss Trustee essentially depend on the tax residence of the settlor and the beneficiaries. Professional advice should be taken.

The Dixcart office in Switzerland is a member of the Swiss Association of Trust Companies (SATC) and is registered with the Association Romande des Intermediaires Financiers in Switzerland (ARIF).

Additional Information 

If you would like additional information regarding the use of Switzerland for asset protection, please contact Christine Breitler at the Dixcart office in Switzerland: advice.switzerland@dixcart.com. Alternatively please speak to your usual Dixcart contact.

Russian Translation

1. When Might You Consider Using a Will Trust?

Will Trusts can be used to protect property and assets within an estate.

They can be particularly appropriate to provide gifts and inheritance for children from previous relationships and to leave assets to a vulnerable or disabled person.

2. What are Other Potential Uses of Will Trusts?

Will Trusts can also be used for the following:

• To provide income or property for a second spouse during their lifetime, ensuring that the assets then pass to any children from the first marriage, after the death of the surviving parent
• Fund education for children and/or grandchildren
• Protect assets from creditors or divorcing partners.

In situations where it is proposed to pass assets to individuals resident in other countries, whether permanently or temporarily, a Will Trust may secure tax protection for the  beneficiaries, from income and capital taxes, in the country in which they reside.

3. What is a Will Trust?

A Will Trust, also known as a Testamentary Trust, can be created within a will to further increase the protection of assets that are being left to others.

Depending on the circumstances, it might be appropriate to create a formal trust. Trusts are entities that allow someone to benefit from an asset without being the legal owner. The ‘testator’ creates the trust and appoints a person to manage it – the ‘trustee’. The trustee manages the trust on behalf of the ‘beneficiaries’ – who will receive the income from the trust. The trustees will be named in the will and will be relied on to maintain the best interests of the beneficiaries, at all times.

4. Need for Professional Advice

Trusts can be complicated structures with tax implications, and professional advice should always be taken, before establishing one.

The tax position, should be carefully considered in relation to; the trust, the individual settling assets into the trust, and the beneficiaries.

5. Who can be a Beneficiary?

Anyone can be a beneficiary.

They might be:

• A named individual
• A class of individuals, such as ‘my grandchildren and their descendants’
• A charity, or a number of charities
• Another organisation, such a as a company or sports club.

It is possible for individuals who have not yet been born to be beneficiaries, this allows planning for future grandchildren and other descendants.

6. Property Will Trusts

Property Will Trusts are also known as Protective Property Trusts. This type of trust offers additional security for testators who own property and want to secure it for future generations. There are a number of circumstances, as detailed below, where it might be of benefit to have a Property Will Trust:

• Individuals who own a property with another person, including those who are married, unmarried, with or without children
• Individuals wanting to protect against the value of a property being taken into account to pay possible care home fees in the future, a point which is particularly relevant in the UK.

7. Flexible Life Interest Will Trusts

These are often used by individuals who own high value assets, where protection of the value is sought for future generations.

This type of Will Trust guarantees who will benefit from cash assets, property and investments if the testator’s partner; remarries after their death, creates a new will which changes the original wishes, or authorises a nominated individual to receive an income which is generated from the investment, following the death of the testator.

8. Discretionary Will Trusts

A Discretionary Will Trust provides the opportunity to appoint a trustee to manage assets left to a beneficiary who is vulnerable and/or unable to manage his/her inheritance independently.

9. How might a Will Trust be Beneficial in Estate Planning?

The most important element of a Will Trust is that it helps increase certainty as to who will inherit the assets of an estate.

It may also assist in achieving a number of financial objectives:

• Take advantage of inheritance tax, business or agricultural relief, which otherwise might not be available after both an individual and his/her spouse have died
• Discount the taxable value of a family home by splitting ownership between a surviving spouse and a trust
• Help to ensure that a beneficiaries’ access to benefits or state support is not affected by an inheritance.

 How can Dixcart Help?

Dixcart can assist in advising individuals and families regarding establishing a Will Trust.

We have over forty years of experience in assisting individuals in establishing and managing trusts, and we offer trustee services across a number of the Dixcart offices. For further information please speak to the Dixcart office in the UK: advice.uk@dixcart.com or to your usual Dixcart contact.

Please also see our Trusts and Foundations page.

Recent Changes

Recent changes in terms of global tax regulations and increasing international tax transparency are vital to consider when implementing strategies to preserve family wealth and family business ownership structures.

New global regulations include: Common Reporting Standard (‘CRS’), the US Foreign Accounting Tax Compliance Act (‘FATCA’), and several jurisdictions now operate ultimate beneficial ownership registers.

Dixcart Expertise in Relation to Wealth Structures

Dixcart are very familiar with the issues facing families in an ever-changing international world and we have extensive experience in supplying trustee services in a number of jurisdictions.

We also provide advice in terms of the location of family offices, their members and businesses, as well as offering management and coordination for family offices, and liaison across the family members.

Location

It is very important to consider where each of the relevant family members are resident and also where they are tax resident.

Structuring options also need to be considered and/or reviewed. The use and location of holding companies and/or family wealth protection vehicles such as; family investment companies, foundations, trusts needs to be planned carefully.

International investment structures need to be evaluated, including the holding of real estate, from a tax and asset protection perspective, in particular in relation to ‘BEPS’ (Base Erosion and Profit Shifting).

Organisation

Key areas that need to be organised to ensure that a Family Office runs as efficiently as possible and achieves its objectives include:

Confidentiality Management

A procedure needs to be developed to deal with relevant confidential information requests from financial institutions and third parties.

Contingency Planning

Rules and procedures should be in place to protect the family business in the case of unexpected events:

• Policies and procedures to underwrite business continuity.
• Use of appropriate legal structures to provide as much asset and wealth protection as possible.
• Consideration of ‘citizenship by investment’ programmes in reputable jurisdictions, to provide options for the tax residence of family members to be diversified.

Family Governance

• Successors need to be identified and their role discussed with them.
• The development of open communication amongst family members regarding decision making strategies and processes.
• A ‘Family Constitution’ is a useful way to formalise family governance and to prevent potential future conflict.
• Creation or identification of education and training programmes, to groom the next generation.

Family Office Advisory Services

• The segregation of the family’s wealth from the family business(es), should be considered.
• Development of a strategy regarding use of the profits arising from the family business and investments, that are not going to be re-invested.
• Creation of a team to manage the wealth.

Succession and Inheritance Planning

• Establishment and/or review of policies and procedures to ensure the adequate preservation and transfer of wealth to the next generation.
• A review of the ownership structure of each family business and other relevant assets.
• Understand how relevant local laws would apply, in relation to inheritance (for example; Civil Law, Sharia Rules etc.).
• Putting in place the most appropriate legal structures such as wills or other legal vehicles to pass wealth to the next generation.

Liaison

Time must to be taken, by those managing the Family Office, to establish and develop close relationships with the relevant family and with other professionals advising them. Dixcart believe this relationship is critical.

As well as providing technical expertise in terms of structuring, professionals at Dixcart also understand family dynamics and frequently assist in offering advice as to how to improve communication and how to avoid potential conflict.

Additional Information

If you would like further information regarding a well-considered and comprehensive approach towards succession planning, please speak to your usual Dixcart contact or to a member of the professional team at the Dixcart office in the UK: advice.uk@dixcart.com.

Please also visit our Family Office page.

Malta private foundations have been used for asset protection and succession planning for several years. Amendments, at the end of 2018 to the ‘Voluntary Organisations Act’ enable foreign organisations, including private foundations, to be redomiciled to Malta.

Malta Foundations

Malta foundations are governed by the ‘Civil Act’ and the ‘Voluntary Organisations Act’ and are constituted as a legal entity. Under Maltese law, a foundation can be set up either as a private foundation or a purpose foundation, and can have any legal and lawful purpose, not only social or charitable.

The main difference between trusts and foundations is that in the case of a trust the settlor settles assets to a trustee to hold for the benefit of the beneficiaries, a foundation entails the creation of an entity with separate legal personality distinct from founders, administrators and beneficiaries.

What are the Potential Tax Advantages in Relation to a Malta Foundation?

Malta foundations can; either be treated as a company which is resident and domiciled in Malta and will therefore benefit from the full imputation system of taxation, OR the administrators may irrevocably elect for the foundation to be treated as a trust for tax purposes.

Election to be treated as a trust gives rise to beneficial private asset planning opportunities, in particular, when the Founder and beneficiaries are not resident and/or domiciled in Malta:

• In these circumstances no tax or duty is payable in Malta upon settlement, or in relation to the income of the foundation.

Re-domiciliation of Foreign Foundations to Malta

• The Process

A foundation formed and incorporated or registered under the laws of a state within the European Union or the European Economic Area, with legislation which is similar in nature to Maltese legislation, can be redomiciled to Malta.

If a foreign foundation is governed by a law which does not provide for continuation, such a foundation may be redomiciled to Malta, if authorised to do so by its instrument of constitution or statute and having filed a request to the Malta Registrar to register as being ‘continued’ in Malta.

Continuation rules can also be applied to foundations incorporated or registered under the laws of other countries, if the Maltese Minister of Justice approves this action by ‘notice’ in relation to a specific country. Such a decision is likely to be reviewed from time to time.

• Registering in Malta

When applying to register in Malta, the foreign foundation needs to register in the same ‘legal form’ that it had under the law of the preceding foreign country. In the event, that a similar ‘legal form’ does not exist under Maltese law, a ‘legal form’ as close as possible needs to be selected and designated.

Continuation, in Malta, of a foreign foundation requires the adoption of Maltese law to govern the statute from the time of registration. Compliance with all matters relevant to the specific legal form of foundation is required as well as compliance with any other applicable law relating to the foundation’s activities or administration.

• Re-domiciliation out of Malta

A Malta foundation may re-domicile to continue in any state within the European Union or the European Economic Area, as long as it is authorised to do so by its instrument of constitution or statute. After the relevant procedures have been followed, the Registrar will terminate the registration of the foundation in Malta.

The Advantages of ‘Continuation’ of a Foundation – Permitted under Maltese Law

Up until the end of 2018, the only way to re-domicile a foundation from a foreign country to Malta was for the foreign foundation to establish a Malta foundation, appoint its assets to it and unwind the pre-existing foundation.

• Malta foundation re-domiciliation rules, introduced on 6 November 2018, allow for an existing foundation to continue under Maltese law. This can avoid adverse tax consequences in relation to the deemed liquidation of the foreign foundation, the distribution of all of its assets to the beneficiaries, and the subsequent establishment of the new Malta foundation.

Additional Information

If you would like any further information on this subject, please contact the Dixcart office in Malta: advice.malta@dixcart.com or your usual Dixcart contact.

Background

Common law countries have traditionally used trusts while civil law countries have historically used foundations. Many individuals in civil law countries remain more comfortable with the concept of a foundation as it is a vehicle that they are familiar with and it is often viewed as being more transparent.

The Government of the Isle of Man offers legislation which provides for the establishment of foundations in the Isle of Man.

Foundations: Key Characteristics

A foundation is an incorporated legal entity, separate from its founder, officers and any beneficiaries.  A foundation is established by a founder who dedicates assets to achieve the objects of the foundation. Assets placed in a foundation become the property of the foundation, both legally and beneficially.

A Foundation Compared to a Trust

Arguments can be made in favour of foundations as opposed to trusts and vice versa. The Isle of Man is a respected jurisdiction and offers the choice of a trust or a foundation, whichever is most suited to a particular situation.

Attractive Characteristics of Foundations

Foundations offer a number of important and distinctive characteristics:

These include:

• A foundation is recognised by law in the majority of European States, and most South American countries.

• A foundation has a separate legal personality and can enter into contracts in its own name.

• A foundation is a registered entity and is therefore relatively transparent, which can be of advantage to financial institutions and authorities when complicated transactions are being entered into.

• Legal charges can be placed against a foundation and can be recorded.

• The removal or addition of beneficiaries can be carried out by an amendment to the constitution documentation.

• A foundation is relatively unlikely to be challenged as a “sham” as it has defined laws and has its own legal personality.

Use of a Foundation for Commercial Purposes

The use of a foundation for commercial purposes can be achieved by inserting one or more underlying companies, with the shares owned 100% by the foundation. This offers all of the protection and advantages of a foundation, while allowing for a wide variety of business to be carried out by the underlying companies.

Additional Benefits of Foundations

• Amendment of Foundation Powers

A foundation can be written in such a manner as to give the founder and beneficiaries specific rights. During the life of the foundation these rights can be altered to take account of changing circumstances. Tax implications need to be taken into consideration when dealing with control, but it is possible to change the foundation rules during its lifetime.

• Family Foundations

A useful benefit for a number of families is that a foundation allows, by simple alteration to the rules, the inclusion or exclusion of beneficiaries. It is also  possible for additional beneficiaries to be required to sign up to the rules of the foundation before they are allowed to become a beneficiary. This is an important control where families have reckless family members or where very specific control is needed from a financial perspective.

• Orphan Vehicles

During its life a foundation may not have any shareholders and/or any beneficiaries. The founder can form a foundation without a named beneficiary, but a procedure can be put in place to appoint one or more in the future. This can be very useful for financial institutions seeking vehicles where securitisation of assets is an issue.  The foundation can act like a “purpose trust” and then, over time, appoint an intended beneficial interest.

Assets can therefore be held in a transparent manner with no owner, which assists confidentiality, and the rules amended at a later date to add one or more beneficiaries.

The Manx Foundation

The Isle of Man Foundations Act 2011 (the ‘Act’) was passed by Tynwald, the Isle of Man Government, in November 2011.

A Manx foundation has the following characteristics:

• Legal Status

A Manx foundation has a legal personality, capable of suing and being sued and holding its assets to achieve its objects.  All questions of law concerning a foundation and the dedication of assets to its purposes are governed exclusively by Manx law and the impact of foreign law is excluded to a great extent.

• Creation

A foundation must have a registered agent licenced to provide corporate services, such as Dixcart, in the Isle of Man. The creation of a Manx foundation is by registration, following application to the registrar using the appropriate forms. The information needs to be filed by the registered agent.

• Management

Management is by a council, which is required to administer the assets of the foundation and carry out its objects.  A council member can be an individual or a corporate body. There are requirements to keep adequate accounting records.  The registered agent must be informed as to where the records are kept and has a statutory right of access to the information.  There is a requirement to file an annual return.

• Supervision of Foundations in the Isle of Man

A distinctive feature with regard to Isle of Man foundations is that, unlike foundations in some other jurisdictions, Manx foundations will not always require a guardian or enforcer (except in respect of non-charitable purposes).  A founder may appoint an enforcer, if they wish to do so, and the enforcer must exercise his/her duties in accordance with the terms of the Act and the rules.

Main Potential Benefits

An Isle of Man foundation offers the following potential benefits:

• Asset protection
• Effective tax planning
• No restriction on the assets that can be held or on the corporations holding the assets
• Potential for tax-deductible donations
• Potentially reduced tax liabilities on the assets held
• Structured management.

Summary

Foundations are available in the Isle of Man, for families and individuals who are more comfortable with such a vehicle, rather than a common law trust.  Foundations offer another useful tool in terms of wealth planning and asset protection.

Additional Information

If you require additional information regarding foundations in the Isle of Man, please speak to your usual contact or to the Dixcart office in the Isle of Man: advice.iom@dixcart.com.

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority

Dixcart Expertise in Family Wealth Planning

The Dixcart Group has over forty-five years’ family wealth planning experience and assists clients in running and managing Family Offices.

We are very familiar with the issues facing families in this ever-changing international world and have extensive experience in providing trustee services in a number of jurisdictions.

We take time to establish and develop close relationships with the relevant family and with the other professionals advising them. As well as providing technical expertise in terms of structuring we also understand family dynamics and frequently assist in offering advice as to how to improve communication and how to avoid potential conflict, before it happens.

Recent Changes

Recent changes in terms of global tax regulations and increasing international tax transparency are vital to take into consideration in relation to the implementation of strategies to preserve family wealth and family business ownership structures.

Relatively new global regulations include: Common Reporting Standard (‘CRS’), the US Foreign Accounting Tax Compliance Act (‘FATCA’), and numerous ultimate beneficial ownership registers, which have been implemented across a variety of jurisdictions.

What are the Key Considerations to Achieve Effective Wealth Management?

Please see below the key areas that need consideration in relation to the management of wealth and succession planning, and the type of reviews that need to take place on a regular basis.

Succession and Inheritance Planning

• Set up or review policies and procedures to ensure the adequate preservation and transfer of wealth to the next generation.
• Review the ownership structure of any family businesses and other relevant assets.
• Understand how relevant local laws would apply, in relation to inheritance (for example; Civil Law, Shari’a Rules etc.).

Structuring and Tax Advice

• Consider where all relevant family members are resident and also tax resident.
• Consider or review structuring options (e.g. use of holding companies and/or family wealth protection vehicles such as; family investment companies, foundations, trusts etc.
• Review international investment structures, including the holding of real estate, from a tax and asset protection perspective, in particular in relation to ‘BEPS’. 

Confidentiality Management

A procedure needs to be developed to deal with relevant confidential information requests from financial institutions and third parties.

Family Governance

• Successors need to be identified and their role discussed with them.
• Develop open communication amongst family members regarding decision making strategies and processes.
• A ‘Family Constitution’ is a useful way to formalise family governance and to prevent potential future conflict.
• Create or identify education and training programmes to groom the next generation.

Contingency Planning

Rules and procedures (such as shareholder agreements or trust documentation forming a ‘Family Constitution’)  should be in place to protect the family business in the case of unexpected events:

• Policies and procedures to underwrite business continuity.
• Use of appropriate legal structures to provide as much asset and wealth protection as possible.
• Consider ‘citizenship by investment’ programmes in reputable jurisdictions, to provide opportunities for the tax residence of family members to potentially be diversified.

Family Office Advisory Services

• Consider the segregation of the family’s wealth from the family business(es).
• Develop a strategy regarding the use of the profits derived from the family business and investments, that is not going to be re-invested.
• Create a team to manage the wealth (a Family Office).

Additional Information

If you would like further information regarding a well-considered and comprehensive approach towards succession planning, please speak to your usual Dixcart contact or to a member of the professional team at the Dixcart office in the UK: advice.uk@dixcart.com.

Please also see our Private Client page.

The Dixcart office in Switzerland is a member of the Swiss Association of Trust Companies (SATC) and is registered with the Association Romande des Intermediaires Financiers in Switzerland (ARIF). We advise on how to structure wealth in Switzerland, the use of Swiss Trustees, Trusts and Private Trust Companies, and matters relating to family governance, donation and succession.

Switzerland and the Use of Trusts

Switzerland does not have specific Trust Law, but recognised trusts with the ratification of The Hague Convention on the Law Applicable to Trusts (1985) on 1 July 2007.

Whilst there is no domestic law governing trusts in Switzerland, trusts from other jurisdictions, and their specific rules, are recognised and can be administered in Switzerland.

In Switzerland the Settlor (the individual who settles assets into the trust for the benefit of the Beneficiaries) can choose the law of any specified trust jurisdiction to govern the trust. For example a Guernsey trust can be established with a Swiss Trustee. The Trustee holds and manages the assets in the trust on behalf of the Beneficiaries.

Why Use a Trust?

A trust is a very flexible instrument and is particularly useful for estate planning, wealth management and asset protection.

At a basic level, the concept of a trust is relatively simple: the Settlor places assets in the legal custody of another (Trustee), who holds the assets for the benefit of a third party (Beneficiary). The trust is not a separate legal entity, but more of a legal obligation agreed between two parties: the Settlor and the Trustee.

Trustees owe a fiduciary duty to both the Settlor and the Beneficiaries, as well as to the trust itself. Depending on the jurisdiction under whose laws the trust is constituted, the trust can either have a pre-determined life span or be indefinite. Trusts are intrinsically very flexible.

Why use a Swiss Trustee?

There are a number of reasons why use of a Swiss Trustee can be advantageous:

• Swiss economic, political and legal stability provides a solid base for the provision of local administration services.
• Switzerland has a number of favourable and well developed banking laws, and has been a popular international private banking centre for many years. It is a jurisdiction with a good reputation and offers a high quality of knowledgeable professionals working within asset management, tax planning and private banking.
• Switzerland has a well deserved reputation for discreet professional support when managing the affairs of wealthy private individuals.
• Switzerland is located in the centre of Europe where many affluent individuals are based. Swiss Trustees therefore offer the advantage of being able to provide frequent and high quality support as they can regularly meet appropriate clients in Switzerland.

Taxation of Trusts in Switzerland

The Hague Convention (Article. 19) stipulates that the Convention does not prejudice the powers of sovereign states in fiscal matters. Consequently Switzerland has maintained its sovereignty in relation to the tax treatment of trusts.

The tax advantages available in using a trust with a Swiss Trustee essentially depend on the tax residence of the Settlor and the Beneficiaries.

In terms of Swiss Law:

• A Swiss resident Trustee is not liable to Swiss income tax or capital gains tax on the assets held under management in a trust.
• Settlors and Beneficiaries are exempt from Swiss taxation as long as they are not considered to be Swiss residents.

Regulation of Swiss Trustees

Swiss Trustees have to be registered as financial intermediaries in accordance with Swiss Anti Money Laundering Law. They can be registered with the Central Regulatory Authority or with a self-regulatory organisation (SRO), which must be recognised by the Swiss Federal State.

Annual Accounts

The Swiss Association of Trust Companies (SATC) provides in its Code of Ethics and Business Conduct that: “A Member must keep adequate, suitably detailed and orderly records for each trust. A Member must ensure that records are maintained for an appropriate number of years.”

Protection

Under Common Law the Trustee is the owner of the assets and is required to administer the trust assets separately from his own assets. In the event of death or bankruptcy of the Trustee, the assets are not considered as belonging to the Trustee but are submitted to the trust’s protection and held separately for the Beneficiaries. The trust’s assets are therefore segregated from the Trustee’s estate.

Confidentiality in Switzerland

Switzerland is well known for its commitment to banking services, professional confidentiality and commercial competence.

SATC provides that: “Any and all information related to a trusteeship and acquired by a Member must be kept strictly confidential by the Member, its directors, officers and other employees.”

A breach of confidentiality, whether professional or commercial, would only be permitted by law in the event of criminal liability.

Summary

An English, Guernsey, Isle of Man or Maltese Law based trust with Swiss Trustees can offer a number of tax efficiencies as well as advantages in terms of wealth preservation and confidentiality. Dixcart can establish and manage such trust structures.

Additional Information

If you would like more information on this subject please speak to Christine Breitler at the Dixcart office in Geneva: advice.switzerland@dixcart.com or to your usual Dixcart contact.

Please also see our Trusts and Foundations page for further information.

Dixcart Trustees (Switzerland) SA is a member of SATC and registered with ARIF Switzerland

Alternative project finance has become increasingly popular since the financial crisis of 2008. Businesses continue to diversify their funding arrangements by considering alternative finance structures. These structures can take a number of different forms, with the most common being equity and debt based alternative investments.

How Can Dixcart Assist with the Organisation of these Arrangements?

Dixcart establishes workable structures to enable clients to raise the funds they require, from both direct high net worth sophisticated investors and via Self Invested Personal Pensions (SIPPs) and Small Self Administered Schemes (SSAS), whilst also ensuring that the structures are compliant with financial services legislation.

Dixcart works with specialist corporate lawyers who provide advice on the most appropriate alternative structures to comply with complex financial services legislation and the associated rules and regulations established by the Guernsey Financial Conduct Authority.

How Does a Dixcart Security Trust Arrangement Work?

The Dixcart Security Trust Arrangement (STA) is generally introduced by the fundraising party via a Security Trust Deed. The security trustee holds a charge over the investment assets and is empowered to act on behalf of the investors should the terms of the investment return not be fulfilled.

The parties to the agreement are:

1. The company seeking to raise funds
2. The investors
3. The security trustee

What are the Benefits of using Dixcart as the Security Trustee?

• Competitive and Flexible Cost Structure
  • Use of a Security Trust Arrangement can be a less expensive on-going alternative to using a standard fundraising model.
  • A Security Trust Arrangement offers flexibility in terms of the potential to add extra levels of fund raising through the issue of additional equity or debt instruments.
• Expertise
  • The Dixcart Group was established in 1972 and has in excess of 45 years’ experience in acting as a professional, independent trustee on a wide range of corporate and private matters.
  • Dixcart Trust Corporation Limited is a licensed fiduciary and is regulated by the Guernsey Financial Services Commission.

Additional Information

If you require additional information regarding Dixcart acting as a security trustee, please contact John Nelson (advice.guernsey@dixcart.com) at Dixcart Trust Corporation Limited, the Dixcart company in Guernsey. Alternatively please speak to your usual Dixcart contact.

Dixcart Trust Corporation Limited, Guernsey: Full Fiduciary Licence granted by the Guernsey Financial Services Commission. Guernsey registered company number: 6512.

Updated October 2018

Asset protection and wealth preservation continues to be a primary focus for high net worth individuals.

However, the ever increasing international mobility of individuals and their families means that the traditional Common Law jurisdiction solution of a Trust, or Civil Law jurisdiction solution of a Foundation may not, in isolation, prove to be optimum solutions for an individual’s needs as they find themselves moving between Common and Civil Law jurisdictions.

For example, a Non Domiciled individual currently resident in a Common Law jurisdiction, such as the UK, could benefit from the creation of an offshore Trust structure to hold their non UK situs assets because Trusts are recognised under Common Law and their tax treatment is clearly defined. However, should the individual subsequently relocate to a Civil Law jurisdiction which does not recognise Trusts, the asset protection afforded could be considerably eroded.

Conversely an individual currently resident in a Civil Law jurisdiction could reasonably be advised that the creation of a Foundation would be a useful planning tool.  However, should the individual find that their professional or family commitments bring them to a Common Law jurisdiction, let us use the UK again as our example, they could find that the tax treatment of a Foundation is not as beneficial or certain as that of a Trust.

A Possible Solution

Individual circumstance will need to be reviewed, however, one possible solution to the above scenario is the creation of a Trust-Foundation hybrid, whereby an Isle of Man Foundation is created with the sole purpose of acting as Trustee of an Isle of Man Trust.

The Trust is settled in the usual way with all assets being under the legal but not beneficial ownership of the Foundation as Trustee. The Foundation is obliged to handle the Trust assets in accordance with the provisions of the Trust instrument and has a fiduciary duty to the Trust Beneficiaries.

As such, from a Common Law perspective this is a recognisable Trust structure with clearly defined treatment.

However, should the structure be challenged within a Civil Law jurisdiction where the concept of a Trust is not readily accepted, and creditors “look through” the Trust to the legal owner of the assets, the courts would recognise the legal status of the Foundation, thus preserving the asset protection.

Basic Structure chart 

A very simple example of such a structure would be:

Additional Information

If you require any further information regarding the above article, please speak to your usual Dixcart contact or to Paul Harvey at the Dixcart office in the Isle of Man: paul.harvey@dixcart.com.

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority

As families become increasingly international the importance of having a will is increased further. With family members located in different countries, it is vital that appropriate wills are drafted and, subsequently, regularly reviewed and amended to reflect any variation in circumstances. Often the jurisdictions where assets are located and/or where family members reside will be subject to change.

1. Are wills only applicable to wealthy individuals?

This is a common misconception. You do not have to be wealthy to have a will. Everyone over the age of 18 should have a will.

If you draw up a personal balance sheet and take into account your current property, business and investment values, you may be surprised at exactly how much you have to dispose of.

Often, forgotten “hidden” assets include intellectual property rights, pension rights, insurance policies and all of your electronic data, which should form part of your estate planning (these assets may not necessarily form part of your estate for will-writing purposes).

Do not forget to take into account assets you may inherit in the future, as well as capital distributions from a trust. If you have multiple assets and multiple heirs, you have assets in more than one country, or you would like to leave specific items to specific people or to a charity of your choice, then you must make a will.

2. An individual already has a will. Why should they make a new one?

Your will must be tailor-made to fit your current personal and financial circumstances and wishes.

If you already have a will, you should review it regularly (at least on an annual basis), as it is surprising how quickly a will becomes outdated. Your financial position will almost certainly change and births, marriages, divorces or deaths in the family, or a move to another country, can all impact on the validity and efficacy of your will. Tax laws, tax residency status, and other legal and financial matters change frequently and each can have a significant impact on the legitimacy of your will.

3. If an individual does not have a will, do his/her assets automatically go to his/her spouse/civil partner and children in some sort of equal formula?

Failing to draft a will, or having a will declared invalid on your death, will mean that you die intestate and this may have the following results:

• The applicable law usually provides a fixed, arbitrary and potentially impractical formula for the division of your estate, which may not accord with your actual wishes.
• Distant relatives or even the state may benefit from your estate and your spouse/civil partner may not receive the full share of their inheritance.
• Your heirs may be left with a legal battle or have to share indivisible or illiquid assets with your blood relatives.
• An executor/administrator/trustee not known to you or your family may be appointed. ‘Third party’ executors and trustees usually charge the maximum allowable professional fees and are unlikely to deal with the realisation of assets and the administration of your estate in a sympathetic manner.
• There could be no guardian of your choice for your minor children, which could have a huge detrimental effect on them.
• Bank accounts could be ‘frozen’ for a lengthy period of time, resulting in cash flow problems and could potentially cause creditors to take a firmer, more aggressive approach with regard to the repayment of claims.
• Business bank accounts may be ‘frozen’ if monies owing by the deceased are payable to third parties and are unable to be repaid in a timely manner by the estate, leaving the business in a vulnerable position.
• Before an executor is appointed or if a will is being challenged, assets are at risk and insurance policies may not be able to be claimed, even if they fall outside of the estate.
• Intestacy, a court case, or other challenges to a will can generally result in embarrassment, stress and complications for your family, and a financial mess to clear up, and with potentially little time to sort it out, this only exacerbates the problems.
• The cost of winding up your estate will increase, often significantly, as additional legal and other costs will be incurred.

4. If someone has lived in different jurisdictions and has acquired assets, including fixed property, does he/she need more than one will to cover these?

You can have one “worldwide” will to cover your assets in all jurisdictions, but it is not advisable.

If you have significant assets in multiple jurisdictions, you should have separate wills to cater for each jurisdiction and below are a few reasons why:

• Where fixed (immovable) property is concerned in certain jurisdictions a property transfer may only be legally effected by way of a valid (local) will.
• There are significant differences in the inheritance laws and practices between Common Law and Civil Law countries. In addition, if you have assets in the UAE or other countries with a Muslim majority, you will also have to consider Sharia Law, which will dictate strictly who gets what and also dictates the appointment of temporary guardians. It is essential for an expatriate living in such a country to ensure that a will is drafted (and properly registered) for them according to their particular national laws, to cover their assets within that jurisdiction and the appointment of resident guardians. This will effectively alter the way inheritance and guardianship laws and practices could be applied by the courts in that country. If they do not do this, then normal Sharia Law will apply. Local authorities will apply their local laws and protocols strictly and are not usually sympathetic to a particular family’s needs, concerns or wishes.
• Preparing a separate valid will per jurisdiction will assist you and your executors in separating your assets, subject to inheritance tax and death duties in the various jurisdictions, and potentially avoid paying double tax on the same assets. This is particularly important in jurisdictions which do not have inheritance taxes/death duties, so that those assets do not fall into your estate where death duties are to be paid.
• It makes the appointment of a locally qualified and court-recognised executor easier, and significantly reduces time, costs and complications across jurisdictions, particularly where one professional company is dealing with the entire international estate.
• Wills need to be “ring-fenced” per jurisdiction, and it is therefore preferable to get professional advice per jurisdiction.For example, if you have multiple wills that are specifically limited to UK, South African, US and Australian assets, but you also have assets in the Isle of Man, you would die intestate in the Isle of Man if you do not have a Manx will (with the added probate costs associated with winding up an intestate estate in an offshore jurisdiction). Probate may not be avoidable by Manx laws, but having a separate Manx will to cover Isle of Man assets will create certainty, avoid delays and a potential court application.

It is vital that each jurisdictional will caters for local laws and taxes, and does not revoke or cancel any other will, or create ambiguity.

What Would Dixcart Recommend?

International families should consider the use of universal executors and trustees (usually one multi-jurisdictional international firm or trust company) who know them and their family personally, have been involved in planning their estate around the world, and who have a working knowledge of their businesses and properties. This would help to ensure that their entire estate and all of their assets are protected, and can be dealt with “under one roof” promptly, confidentially, seamlessly and at a reduced cost.

A final point: make sure that your chosen executors and trustees have the legal and fiduciary capacity to be appointed as such in all of the jurisdictions where you have a will. In most countries, the relevant probate authorities follow strict processes and ‘screening’ procedures to appoint executors and trustees, to ensure that the estate and heirs are protected. Make sure that your nominated executor and trustee will not be disqualified or have to provide a bond of security, which will cause confusion and delays, and may result in having to appoint another person in their place.

Additional Information

If you require further information regarding wills or multi-jurisdictional wills, or have any questions regarding estate planning, inheritance tax planning, or probate in the countries where you own assets, please speak to Peter Robertson at the Dixcart office in the UK: advice.uk@dixcart.com, or your usual Dixcart contact.

Please see our Private Client information.

Updated: January 2020