What are the main differences between the two instruments?
Alexandra Geiger
Legal Counsel
Dr. Thomas Müller
Legal Partner
In Switzerland, foundations are well-known instruments to allocate assets to a specific purpose, e.g., a family foundation or an ecosystem-foundation. Trusts, on the other hand, are common in Anglo-Saxon countries. Currently, the Federal Council aims to implement a legal basis for the establishment of a Swiss trusts.
What are the differences between a foundation and a trust? Are foundations and trusts suitable for a decentralised autonomous organisation (DAO) or for estate planning?
The following overview shows the most important differences between these two instruments:
Foundation
Trust
Foundation has an own legal personality
Trust has no legal personality
Foundation (as the legal entity) is the owner of the foundation's assets
Assets are fiduciarily owned by the trustee (civil owner of the assets)
Allocation of the assets for a special purpose
Purpose may be modified restrictively
Allocation of assets is always irrevocable
Swiss family foundations ensuring the maintenance of the family with annual maintenance allowances are prohibited
Allocation of the trust assets in the beneficiaries’ exclusive interest
Power to amend trust may be provided for in trust instrument
Allocation of assets may be made in a revocable manner (revocable trust)
Possibility of unlimited family support and maintenance
A time limitation of the foundation is principally not possible
A time limitation of the trust is possible
Rather rigid limits on the structure
Different ways of structure
Beneficiaries have no enforceable claim (generally)
Beneficiaries have an enforceable right to proper administration
Supervision by an authority
Supervision by a civil court (supervisory jurisdiction)
Foundation is an independent tax subject as a legal entity
Trust is not an independent tax subject (depending on the structure, different tax consequences result)
Foundation must be registered in the commercial register (transparency)
Trust does not have to (and cannot) be registered in the commercial register (non-transparency)
Less flexible instrument for asset structuring and risk allocation
Flexible instrument for asset structuring and risk allocation
This overview represents general differences - deviations in individual cases are possible
MME's foundation and trust team will be happy to advise you on all questions relating to the establishment and planning of trusts and foundations.
