Future For The Trust?
Even the most devoted believer in the rights of humans to dispose
of their own assets and to arrange their affairs to their own benefit
would have to agree that the trust is an anachronism. But then so
is offshore itself. The harmonisers would say that it is irrational
and unacceptable to allow a person to separate himself artificially
from his property for his personal gain. The tax authorities have
dealt with the trust by ignoring it and bypassing it - the few that
haven't yet done so will surely fall into line quite soon. So if
the trust is not a barrier to a tax collector, why, logically, should
it be a barrier to a creditor?
As much as the trust seems to be somehow unethical when used for
personal enrichment or protection in defiance of the public interest,
it is obviously the right instrument when used to hold assets on
behalf of others. The 'Unit Trust', the pensions trustee and other
quasi-public guardians of private interests are eminently acceptable,
superior to the 'Code' equivalents, and would have had to be invented
if they didn't already exist, as is amply proven by their wholesale
adoption in 'Code' countries. A genuine generation-hopping anti-inheritance
tax trust also seems OK, because this is a morally repugnant tax
to many people.
So it's odd, isn't it, that the laws under which individuals
gain protection against 'genuine' creditors through a 'fake' disposal
of assets should if anything have become stronger, not weaker. This
is an area in which the balkanised condition of international law
(non-international law, in other words) shows no signs of the creeping
globalisation affecting other walks of life. Banking, insurance,
pensions, shipping, environment, accounting and a host of other
bodies of law are converging. But not trust law, or the national
court systems which cradle it. Why is this? Is it because lawyers
are rich, too?
Logical or illogical, there is no sign that the trust has run its
course, as our review of the main trust-friendly jurisdictions will
show. Indeed, in 2006 the Swiss parliament
approved the ratification of the Hague Convention on the Law applicable
to Trusts and their Recognition.
Modifications to Swiss law to give effect to the Hague Convention
concerned the Swiss International Private Law rules dealing with
the recognition of foreign decisions and the jurisdiction of Swiss
Courts in trust related matters, as well as the introduction into
the solvency and bankruptcy law of the principle of segregation
of trust assets.
Investec Trust Switzerland Managing Director Xavier Isaac stated
at the time that the ratification had sent a clear signal to the
international finance community that Switzerland recognised the
importance of the Anglo-Saxon trust concept as an essential component
of the wider wealth management proposition and of the need for an
adequate legal framework when dealing with trust structures.
“It is a major development in the trust landscape internationally
and for Switzerland,” he announced, continuing: “Ratification is
great as it dissipates much of the uncertainty for trusts in the
Swiss legal system.”
Mr Isaac added that high net worth individuals (HNWI) coming to
Switzerland expect a secure environment for the structuring and
management of their wealth.
“It is therefore the clients who will benefit most from ratification
as more and more HNWI will continue to place their confidence in
the Swiss financial sector, opening bank accounts and viewing trusts
as sound vehicles for wealth management,” he observed.
“It will also give additional international credibility and standing
to Switzerland as a proper jurisdiction for wealth management activities
in a context where Switzerland is too often the target of some EU
and other countries."
“Switzerland is adjusting its existing rules so that Swiss law
can now interact with trusts from a legal perspective."
“The Swiss Tax Conference is reviewing the tax treatment on trusts.
While the taxation of settlors and beneficiaries in Switzerland
is the most complex and sensitive part of the discussion I hope
that trusts, which have non-resident settlors and beneficiaries
but have Swiss trustees and/or are being administrated in Switzerland,
will be treated on tax neutral basis."