Comparison
Trust or foundation? A comparison
Updated: · Leutrim Miftaraj, FLIORE · Editorial standards · Deutsche Fassung
Short answer
A foundation is a legal entity that owns itself and is run by its bodies. A trust is not a legal entity but a legal relationship: the trustee is the legal owner and manages the assets for the beneficiaries. Foundations are rooted in civil-law systems, trusts in common law. Switzerland recognises trusts under the Hague Convention; in German-speaking Europe the foundation is often more familiar.
Side by side
| Foundation | Trust | |
|---|---|---|
| Legal nature | Legal entity with its own personality | Legal relationship, no legal personality |
| Owner of the assets | The foundation itself | The trustee, holding for the beneficiaries |
| Control | Bodies under the articles, state supervision for charitable foundations | Trustee, often overseen by a protector; trust deed |
| Beneficiaries | Under the articles or by-laws | Under the trust deed, often discretionary, with a letter of wishes |
| Legal tradition | Civil law (e.g. Switzerland, Liechtenstein, Austria, Germany) | Common law (e.g. England, Jersey, Guernsey) |
Recognition and tax
Switzerland recognises trusts through the Hague Trust Convention, in force for Switzerland since 1 July 2007; it has no trust law of its own. Germany and Austria are not parties to the convention but tax trusts under their own rules, which are often strict. The taxation of both structures depends heavily on the residence of the founder or settlor and of the beneficiaries – and can differ fundamentally between countries.
Liechtenstein occupies a special position: it has its own trust law (the Treuhänderschaft) as well as a flexible foundation law, which allows trust-like arrangements in a civil-law setting.
Compliance
For both, everyone with influence must be recorded as a beneficial owner or controlling person – for trusts the settlor, trustee, protector and beneficiaries, for foundations the founder, the bodies and the beneficiaries. Register obligations exist in Germany, Austria and Liechtenstein, including for trusts connected to the country. For automatic exchange of information, both structures need a classification and complete data on their controlling persons.
Short checklist
- Clarify residence and tax position of founder or settlor and beneficiaries.
- Decide how much control and flexibility is wanted.
- Check acceptance by the banks to be used.
- Plan for register and AEOI/CRS obligations.
- Document roles and rights so that every bank receives the same information.
In FLIORE
FLIORE treats trusts and foundations as separate mandate types with all roles, validity dates and data for CRS pre-filled, and consolidates their wealth into the family's overall view.
At a glance
| Foundation | Legal entity with bodies, civil-law tradition |
|---|---|
| Trust | Legal relationship, trustee as legal owner, common-law tradition |
| Switzerland | Recognition via the Hague Trust Convention (since 1 July 2007) |
Frequently asked questions
Is a trust recognised in Germany?
Germany is not a party to the Hague Convention, but trusts are captured for tax purposes under specific rules that are often strict.
Which is more flexible?
Trusts are considered very flexible; the Liechtenstein foundation offers comparable design options within civil law.
Who controls a trust?
The trustee, often overseen by a protector; the settlor can reserve certain rights in the trust deed.
Who counts as beneficial owner?
For trusts the settlor, trustee, protector and beneficiaries; for foundations the founder, members of the foundation board, protector and beneficiaries – plus anyone else exercising control.
Sources
- HCCH – Hague Convention on the Law Applicable to Trusts
- FATF – Recommendation 25 (transparency of legal arrangements)
- STEP – Society of Trust and Estate Practitioners
This page provides orientation and does not replace legal or tax advice. The cited legal sources in their applicable version are authoritative.
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