Trusts and inheritance: the Federal Court finally draws a clear line

Judgment 5A_89/2024 of 16 December 2024 — a landmark decision

Can the property of a trust of a Swiss estate?
Until recently, the answer was not obvious.
With its stoppage of the December 16, 2024 (5A_89/2024), Federal Court provides a major clarification: the assets of an irrevocable and discretionary trust no longer belong to the settlor's estate.

The context: a foreign tool in a Swiss setting

Le trust is a concept originating from Anglo-Saxon law.
A person (the component) transfers property to a trustee, which manages them on behalf of beneficiaries, according to rules set out in the trust deed.

Since the entry into force of the Hague Convention (2007), Switzerland recognizes trusts established abroad.
But their treatment in Swiss inheritances remained uncertain: should these assets be considered as part of the inheritance?

This is precisely the question that the Federal Court had to decide.

The facts in summary

A man had, during his lifetime, constituted a irrevocable and discretionary trust abroad.
He was a beneficiary during his lifetime, and then, upon his death, two of his children were to become beneficiaries in turn.

Upon his death, other heirs contested the situation:
They argued that the assets placed in the trust should be reinstated in the estate, because according to them they were part of the deceased's estate.

The cantonal courts did not agree among themselves.
The case has therefore been brought to the Federal Court.

What the Federal Court decides

1️⃣ Trust assets are not part of the estate

The Federal Court is categorical:
assets transferred into a trust irrevocable (therefore impossible to modify or dissolve by the constituent) and discretionary (the trustee freely decides the beneficiaries and the timing of distributions) permanently leave the constituent's assets.

In other words, these assets no longer form part of the estate at the time of death.
The settlor had renounced all power over these assets; they now belong to the trust assets, administered by the trustee.

2️⃣ The designation of beneficiaries is not a “liberality” to be reported

The Court also clarifies that having designated certain heirs as beneficiaries of the trust is not a donation or an advance of inheritance within the meaning of Swiss law.
This is a inter vivos act, valid during the lifetime of the constituent, and not a disposition “upon death”.

Practical consequence: the beneficiaries of the trust must not report the value of the trust assets in the distribution of the estate (art. 626 CC), except in exceptional circumstances.

3️⃣ Tax treatment does not change civil reasoning

Although the tax authorities may choose to tax the trust assets as if they were part of the estate, this has no civil implications.
From a succession law perspective, the trust assets remain separate.

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Why this decision is important

This decision marks a decisive step for the legal security of international estate planning involving trusts.

She confirms that:

a well-structured trust can protect assets against inheritance disputes;
the distinction between irrevocability et discretion is essential;
heirs cannot, by simple succession action, “recover” the assets transferred into a legitimate trust.

The Federal Court thus draws a clear line between the constituent's assets and trust assets, by consolidating the compatibility of the trust with the Swiss legal system.

In practice :

For Testators/Planners

Carefully document the creation of the trust (irrevocability, role of the trustee, lack of control by the settlor).
Provide clear clauses to avoid any ambiguity after death.
Keep evidence of the actual loss of control over the transferred assets.

For the heirs

A challenge is only possible if the trust is fictitious, fraudulent or manipulated.
The beneficiaries of a trust are not automatically favored: they depend on the power of the trustee.