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The National Council has relaxed foundation law. Family foundations in Switzerland will now also be used for estate and asset planning. What’s behind the idea? An overview.
The National Council has decided to relax foundation law – the Council of States had already agreed. Maintenance foundations are intended to make it possible to pass on family assets to heirs without any prerequisites.
What is the idea of the family foundation? It serves to preserve family assets and provide financial support to family members. Construction is currently only permitted in Switzerland for specific purposes. For example, for raising or supporting relatives. Up to now, maintenance foundations that only serve the general subsistence of descendants are not permitted.
There is a risk that unwanted assets will be attracted, whether for tax evasion, money laundering or terrorist financing.
Why does the restriction exist? At the beginning of the 20th century, when the law was drawn up, the legislature wanted to put a stop to feudal structures. Since the Middle Ages, lands could be tied to the family in a so-called family fidei commission. In 1945 there was also a federal court ruling that spoke out against family support foundations. For example, because people feared that heirs would become lazy if they simply got money like that. Since then the ban has remained the same. Switzerland wanted to introduce the Anglo-Saxon construct of trusts. Because implementation would be complicated, this is now being avoided.
What would a family support trust bring? The ban is an old tradition, say supporters. Families would be forced abroad, where foundations and trusts cost a lot. Switzerland would also have to subsequently recognize the foreign constructs, but without being able to control their content. The innovation would also bring more tax revenue. A study by the Bass research institute from 2020 speaks of additional tax revenue of up to 190 million francs.
The risk of money laundering or terrorist financing is no higher.
What do the opponents say? Opponents argue that the maintenance foundation is for the rich. Others see potential for abuse by shielding money from tax authorities or creditors. “There is also a risk that unwanted assets will be attracted, be it for the purposes of tax evasion, money laundering or terrorist financing,” says Hans Michael Riemer, emeritus law professor at the University of Zurich.
What is controversial? The risk of money laundering or terrorist financing is no higher, says Andrea Opel, tax law professor at the University of Lucerne. “The Swiss Family Foundation is embedded in the relevant international measures and reporting obligations of the automatic exchange of information (AEOI) and it stays that way,” Opel continues. She also doesn’t see any potential for tax abuse. The maintenance foundation is not recognized for tax purposes. The assets are attributed to the founder or the beneficiaries.
What will the easing bring to the Swiss financial and foundation center? “Switzerland’s foundation position is being strengthened,” says Dominique Jakob from the Center for Foundation Law at the University of Zurich. He expects more family and more charitable foundations. Today, Switzerland has around 500 family foundations and 13,700 charitable foundations. The amendment to the law promises more orders, particularly for asset managers, lawyers and trustees.
“Tagesschau” 7:30 p.m
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You can see more on the topic this evening at 7:30 p.m. in the “Tagesschau” on SRF 1.