A testamentary trust is a trust which is only created after the trustor has died. This sets it apart from a living trust, which is established within the trustor's lifetime.
The terms and conditions governing a testamentary trust are laid out by the trustor in their will, and these are used to create the trust deed. A single will may call for the creation of many different trusts.
This type of trust is often used by individuals who want their assets to be distributed to legal heirs, organizations or other trust beneficiaries by a trustee after their death.
Testamentary trusts provide a useful estate-planning tool for individuals who want to ensure that certain conditions are met before their heirs or other beneficiaries receive inheritances, or that assets left to beneficiaries are used for a specific purpose. By using testamentary trusts rather than creating trusts during their lifetime, trustors retain full control of their assets up until their death – as opposed to transferring ownership of assets to trustees while they are still alive.
The arrangement which constitutes common law trusts is not fully compatible with Swiss civil law, and for this reason, common law trusts are not created under Swiss law. However, trusts established in countries ruled by common law are widely managed in Switzerland. The rules laid out in the Hague Trust Convention govern common law trusts of which residents of Switzerland are either trustors, trustees or trust beneficiaries.
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