Originally published on 2 September 1999

Liechtenstein Trust Law is a codified synthesis of Anglo-Saxon Trust Law and the ancient Germanic legal custom, namely "Salmannenrecht". Its intent is to provide a legal framework within which specific property (trust property) may be used for the benefit of persons other than the legal owner of such property, meaning that management and control over the property is clearly separated from the beneficial entitlement to such property.

The trust itself is not defined in Liechtenstein legislation, but rather only the trustee. The law stipulates that a trustee is one who owns and administers trust property for the benefit of one or more third persons (beneficiaries). The settlor settles trust property upon trusts stipulated in a written trust deed. The trust is a legal relationship and not a juridical person meaning that the concept of limited liability has no place in trust law.

The Liechtenstein inter vivos trust is not subject to the rule against perpetuities or accumulations or any such similar restriction. The trust must be evidenced in writing and the trust deed must be either registered or deposited with the Liechtenstein Public Registry. If the deed is deposited, the public has no access to the trust deed so that the terms of the trust are not generally known.

Whereas the constitutive documents of a Liechtenstein corporate entity must be drafted in the German language, a trust deed may be drafted entirely in English. Thus, the client may wish his/her personal family solicitor to draft the trust deed.

A trust requires the existence of at least one trustee, trust property and beneficiaries who may be appointed at any indefinite time in the future. A trust may also have a protector. If the powers of the protector are so all encompassing as to render him the de facto trustee, the trust may find itself liable to taxation in the jurisdiction in which the protector lives should the taxation authorities in that jurisdiction deem the same to be appropriate.

A trust may be revocable or irrevocable. Furthermore, the trust deed may determine that a trust may, although initially revocable, become irrevocable at a certain time in the future or upon the happening of a certain event.

It is also possible to establish a trust which is resident in Liechtenstein under the laws of another jurisdiction. Moreover it is also possible to establish a walking trust.

According to Liechtenstein law the trust must have ascertained or ascertainable beneficiaries. Basically the trust legislation does not foresee a purpose trust. A purpose trust as known to the Anglo-Saxon world exists in Liechtenstein Law in the form of an unincorporated endowment

which is a concept that for historic reasons, exists separately from the concept of the trust in Liechtenstein law.

The trust deed may provide for compulsory arbitration and indeed a foreign trust deed must provide for compulsory arbitration in Liechtenstein, for disputes arising between the settlor, the trustee and the beneficiaries.

If the constitutive documents provide accordingly, the trust may have beneficiaries who may be named in the trust deed or the deed may describe the manner of the appointment of the beneficiaries at a later date, possibly by means of a separate instrument. In this way the identity of the beneficiaries may never be revealed to the Public Registry with whom a copy of the trust deed, but not of subsequent instruments must be deposited.

The law places practically no limits whatsoever upon the structuring of beneficial interests which may be absolute, conditional or entirely discretionary. The settlor may for example designate himself as beneficiary for life and provide successive generations with successive life interests in the trust assets. This beneficial entitlement may be conditional or unconditional, discretionary or vested, or subject to future divesting as well as to time limitations or to positive or negative obligations.

Inasmuch as the trust assets will not form part of the settlor's testamentary estate, the legal norms of his personal law can not restrict the structuring of the rights of beneficiaries and remaindermen. Moreover, the trust deed may provide that any person who challenges the same is to be automatically deprived of any entitlement from the trust.

Annual Taxes:

Trusts are subjected to a capital tax on capital and retained earnings. The capital taxes which are levied upon the net worth of the Trust Property are 1 %o of the value of such property:

The capital tax is a minimum of CHF. 1.000,-- per year. Trusts have no further tax liability in the Principality of Liechtenstein.

Please contact Arcomm Trust Company directly for an update on the subject matter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.