Under Swiss law, a foundation is an independent legal entity that dedicates defined funds permanently to a clearly specified purpose (Art. 80 et seq. Swiss Civil Code). A foundation may be either charitable or private in nature and offers a high degree of permanence and legal certainty.
In practice, establishing a foundation has proven effective in the following scenarios. Frequently, a foundation is set up as part of (international) estate planning or structuring, in which case inheritance and tax considerations must also be considered.
1. Asset Protection and Long-Term Structuring
A foundation may permanently dedicate assets – such as real estate, company shares or bankable assets – to a defined purpose.
Legal independence: the foundation’s assets are separated from the founder’s private assets and do no longer form part of their estate.
Protection against fragmentation: particularly for companies, the foundation prevents ownership interests from being divided or sold off over generations.
Permanence: family situations or personal events have no impact on the continuation of the foundation or its purpose.
2. Succession Planning and Business Continuity
Family and corporate foundations are a proven instrument to secure business succession and preserve family wealth.
Avoidance of inheritance disputes: company shares held in a foundation decouple management from individual inheritance claims.
Long-term orientation: the founder may establish binding rules on corporate strategy and profit distribution in the foundation charter.
Stability across generations: the foundation provides a lasting legal form that does not depend on any specific individual.
Preservation of family wealth for future generations: a foundation ensures that assets remain consolidated and the legacy is left pursuant to clear rules.
3. Charitable Purposes and Tax Benefits
Those wishing to pursue a charitable, cultural or social purpose sustainably may do so particularly effectively through a foundation.
Tax exemption: charitable foundations may, under certain conditions, be exempt from income and capital taxes.
Tax-deductible donations: contributions to tax-exempt foundations are generally deductible for donors.
Sustainable impact: the purpose is binding and can only be amended under strict statutory conditions.
Institutionalised family philanthropy: a foundation allows a family’s cultural or social engagement to be continued across generations.
4. Legal Framework
A foundation is established by public deed or testamentary disposition. The foundation charter must clearly specify the purpose, assets and organisation of the foundation. After incorporation, the foundation is subject to supervision by the competent authority, depending on its activities (Federal Supervisory Authority for Foundations (ESA) or cantonal supervisory authority). Amendments to the foundation’s purpose are only possible in exceptional cases and are subject to strict statutory requirements.
5. Conclusion
A foundation is the right instrument where assets shall be applied and preserved over the long term, bound to a specific purpose and shielded from personal changes. It provides stability, clear structures and – in the case of charitable foundations – tax privileges.
Would you like to secure your assets over the long term, optimise succession planning, or sustainably promote a charitable purpose? Our experts in foundation law will competently support you from the first idea through to the successful implementation of your foundation. We look forward to developing the right solution together with you.
