LIECHTENSTEIN

2. Trusts

A. Introduction

Being a civil law country, Liechtenstein was unfamiliar with concepts of common law trusts until introduced into Liechtenstein by the PGR in 1926. Liechtenstein trusts are now used and accepted the world over as effective, efficient vehicles for myriad purposes.

Liechtenstein trust law seeks to codify common-law trust principles. A Liechtenstein trust is indistinguishable from and interchangeable with trusts set up in other trust jurisdictions. Even so, the trust instrument can override provisions in the PGR 'if the trust instrument so provides'. Further, the settlor continues to have certain rights and liabilities even after the trust has been set up (unless the trust instrument provides otherwise).

Since 1 April 2006, Liechtenstein has been a member of the Hague Convention on the Law Applicable to Trusts and on their Recognition, 1 July 1985, which seeks to harmonise the private international laws of its signatories.

B. Types Of Most Frequently Used Trusts And Their Uses

The fully discretionary trust is the most popular type. The trustee has overriding discretion as to the appointment of beneficiaries and as to distribution of trust assets. It is not unusual for trusts to have a protector without whose consent the trustee may not appoint or remove beneficiaries or make distributions. Often, the initial settlor will be a nominee. Thus, the protector is often given the power to appoint and remove trustees. There is no perpetuity period in Liechtenstein, so trusts can be of unlimited duration. Nonetheless, it is usual to provide in the trust deed for a maximum of, say, 100 years, in case the trust should ever migrate to another jurisdiction that does have a rule against perpetuities.

Other forms of trust include:

  • life interest or interest in possession trust, where trustees may be required to maintain a fair balance between capital and income beneficiaries
  • asset protection trusts (the PGR permits a clause to be inserted into the trust instrument prohibiting a beneficiary's creditors from claiming against the beneficiary's beneficial interest), and
  • trusts for pension schemes or for collective investment purposes (unit trusts).

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© 2012 Society of Trust & Estate Practitioners