For Israeli families with Swiss ties, choosing between a trust and a Swiss foundation is less about fashion and more about governance, taxation, and enforceability across borders. Both vehicles can preserve wealth; they do so in very different legal languages.
Israeli trusts: statute-based, flexible—and closely policed by tax rules
Israel has a full statutory regime in the Trust Law, 1979 that defines creation, duties and remedies in the trustee–beneficiary relationship. Overlaying the private-law framework is a detailed tax regime in the Income Tax Ordinance and administrative guidance that classify trusts by settlor/beneficiary residency (e.g., Israeli Resident Trust, Foreign Resident Settlor Trust, Relatives Trust), with distinct consequences for ongoing income and distributions. The Israeli Tax Authority’s Circular 3/2016 remains the leading administrative guide and is frequently cited in practice.
A headline case for planners is the Supreme Court’s “Galis” ruling (CA 7610/19). The Court held that transferring Israeli real estate into a trust is generally a taxable event (purchase tax and capital gains/betterment), unless tightly confined to the “settlor-as-sole-beneficiary” exception with timely notification to the ITA. The decision aligned real-estate taxation with the trust chapter’s lifecycle approach and curtailed attempts to move Israeli realty into trusts tax-free.
Beyond Galis, Circular 3/2016 tightened several pressure points—among them the post-mortem fate of Relatives Trusts and disclosure of distributions—matters that still drive compliance strategy for Israeli-connected families.
Switzerland and trusts: recognition, not origination—plus a clear tax practice
Switzerland does not have a domestic trust law, but since 1 July 2007 it recognizes foreign-law trusts under the Hague Trust Convention. Parallel changes to Swiss private international law and enforcement statutes were enacted to give that recognition teeth. Practically, this allows Israeli-law or Anglo-trusts to be administered in Switzerland with Swiss fiduciaries and banks.
For tax, the cornerstone is Swiss Tax Conference (SSK) Circular No. 30 (22 Aug 2007): a trust is not a taxable person in Switzerland; instead, tax follows the settlor/beneficiary depending on whether the trust is revocable/irrevocable and discretionary/fixed. This circular underpins cantonal practice and is often paired with advance tax rulings to confirm the classification and incidence in complex cases.
Swiss case law has likewise moved from abstraction to application. In Rybolovlev v. Rybolovleva (Swiss Federal Supreme Court, 2012), the Court grappled with foreign trusts in a Swiss matrimonial context, illustrating how Swiss courts engage with trust effects after the Hague Convention’s entry into force. For planners, the lesson is simple: recognition is real, but Swiss judges will still test control, transparency, and purpose.
Swiss foundations: entity status and hard-wired purpose
A Swiss foundation (Stiftung) is a separate legal entity under Swiss Civil Code arts. 80–89. Assets are endowed to an autonomous body governed by a foundation council and, where required, supervised by an authority. Families often like the institutional permanence and civil-law pedigree, but accept that purpose and statutes are harder to change than the discretionary architecture of a trust. (Taxation is entity-level in Switzerland, though careful structuring—and in charitable settings, exemptions—can narrow the burden; Israeli tax often treats private foreign foundations akin to companies, so distributions may be analysed as dividends.)
Choosing between them
If your priorities are flexibility, staged distributions, and beneficiary-specific discretion (including “wait-and-see” around life events), an Israeli/foreign-law trust administered in Switzerland is usually the better fit—provided you respect Galis on Israeli real estate, align with Circular 3/2016 on reporting and characterization, and obtain Swiss rulings where classification is not black-and-white. If you want institutional governance, civil-law certainty, and a charter that outlives family politics, a Swiss foundation offers permanence (with less day-to-day pliability).