Trusts in the Age of Digital Assets

Few structures in international wealth planning are as misunderstood as the trust.

Personally, it has always been one of my favourite areas. To me, a well-designed trust is a work of art. Few topics combine centuries of legal thinking with such elegance and purpose.

In this episode of our Summer Tax Briefs, our CEO would like to explain why.

"The trust has its roots in centuries of legal history. While the modern trust developed under English common law, its underlying concept reaches back much further. From the Roman fideicommissum to the medieval use during the Crusades, legal systems have long sought ways to protect wealth and provide for future generations.

Its purpose has remained remarkably consistent.

The assets, however, clearly have not.

What once safeguarded castles, land and gold may today safeguard Bitcoin, tokenised securities and other digital assets.

For international tax advisers, this changes the discussion fundamentally.

Digital assets introduce an entirely new layer of tax analysis. Understanding the trust itself is no longer enough.

We must also understand the assets it holds and the tax consequences they create in light of the jurisdictions of the trust, the settlor and the beneficiaries:
🪙 the tax classification of the digital assets
🪙 their valuation for tax purposes
🪙 the taxation of blockchain-based income, including staking rewards and lending income
🪙 the tax implications of transferring digital assets into or out of a trust
🪙 the interaction between the tax treatment of the trust and of the underlying digital assets across multiple jurisdictions and
🪙 international reporting and transparency obligations.

As these structures evolve, we will also need to rethink the roles of the trustee and, where applicable, the protector. Their powers and responsibilities will become an integral part of the tax analysis.

Switzerland offers a particularly interesting perspective.
Although we have no domestic trust law, foreign trusts have long formed part of the local tax practice. The tax treatment depends on their legal characteristics and economic substance.
Whether a trust is revocable or irrevocable, discretionary or fixed-interest remains fundamental to the analysis.

Digital assets add another dimension, requiring careful consideration of their classification and valuation, as well as the resulting international tax implications.

Trusts have stood the test of time.
The assets have changed
The tax analysis continues to evolve, making trusts one of the most intellectually fascinating concepts in international wealth planning.