The Federal Council has just published a draft bill for consultation. It establishes a trust under Swiss law. This institution would fill an important gap in Swiss estate planning law, as Swiss family foundations can only be used in a limited way and do not allow a coverage of the living expenses of the beneficiaries. The Draft Proposal provides for the introduction of the trust into the contract law (Code of Obligations) under a new title dedicated to trusts (Title 22bis, art. 529 ff). Although the Draft Proposal does not constitue a copy-paste of common law trusts, the characteristics of the Swiss trust would be similar: the trust could thus confer firm rights in favour of beneficiaries (fixed interest trust) or mere expectations (discretionary trust). It could also be either revocable or irrevocable. On the civil level, the rules protecting heirs (forced heirship rules) or spouses would be reserved. From a tax point of view, the current codified practice would be included in the law with respect to revocable trusts and irrevocable fixed interest trusts: the assets and income of revocable trusts would thus remain attributable for tax purposes to the settlor, while those of irrevocable fixed interest trusts would be attributable to the beneficiaries. The novelty is that irrevocable and discretionary trusts would be taxed as such, like foundations, but only for the shares of Swiss resident beneficiaries (the question being how these shares would be determined). Thus, contrary to current practice, the Draft Bill seems to admit that a Swiss resident settlor may divest himself of assets settled to the trust (also) for tax purposes.
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