Recognition of foreign family foundations in Switzerland

The Swiss Civil Code provides for a de facto prohibition of family maintenance foundations and therefore limits the use of foundations. Consequently, foundations are settled in other jurisdictions like Liechtenstein or Panama. These jurisdictions provide for flexible rules on the drafting of the foundation purpose as well as on the powers a founder may retain. Foundations have been more commonly asked for in estate planning in recent years. However, in a pure Swiss estate where the testator, the heirs and most assets are located in Switzerland, the use of a Swiss Family Foundation has rarely been considered. Since families are often spread over different countries and continents and assets are located in various jurisdictions, contributions of assets to a foundation may still be an optimal solution, also because these assets no longer fall within the scope of the estate. This article is analysing how foreign foundations, using Liechtenstein Foundations as an example, are recognized in Switzerland both for civil and for tax law purposes.

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