A family foundation is a legal entity which manages assets on behalf of beneficiaries, with beneficiaries being limited to members of an immediate or extended family.
In Switzerland, family foundations are not required to register with a commercial registry and are not subject to regulation. Family foundations under Swiss civil law can be used to accomplish similar functions to trusts under common law, but unlike trusts they are legal entities rather than contracts.
A family foundation must be founded by a person (the founder), which must also set down the foundation’s statutes. A board of directors manages the foundation and its assets in keeping with the foundation statutes. An advisor to the board may also be appointed by the founder to oversee the board.
The circumstances under which family members can benefit from assets managed by a family foundation must be clearly stipulated in the foundation’s statutes. Statutes must be in keeping with Article 335 of the Swiss Civil Code. This law stipulates that beneficiaries can only obtain benefits from a family foundation for the purposes of raising, endowing or supporting family members (or similar purposes). The primary purpose of family foundations is to ensure that family members who are not able to provide for themselves will be provided for. Assets held by a family foundation and their possible capital gains cannot be granted to beneficiaries by the board except under the circumstances stipulated in the Swiss Civil Code.
Family foundations do not benefit from special tax privileges under Swiss law, and assets and income are taxed in a similar way to that of other types of companies. Unlike Swiss family foundations, family foundations registered in the Principality of Liechtenstein benefit from a number of tax privileges and less defined rules stipulating the circumstances under which beneficiaries can benefit from assets.
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