Swiss family foundation (Familienstiftung) explained

What art. 335 ZGB permits

Art. 335 ZGB is the entire legal basis for a Swiss family foundation, and it is short. Paragraph 1 of the Swiss Civil Code lets a founder tie assets to a family by establishing a foundation, but only to meet defined costs: the upbringing and education of family members, their endowment or establishment in life (the German is Ausstattung), or their support, or a like purpose. Paragraph 2 then prohibits family fideicommissa, the old perpetual entailed estates that passed wealth intact down a bloodline. The two paragraphs work together. One opens a narrow door; the other shuts the dynastic one.

Read the permitted heads closely, because each is life-stage bound. Upbringing and education funds a child through schooling and training. Endowment or establishment helps a younger member start out: a first home, a profession, a business of their own. Support catches genuine need: hardship, illness, a member who cannot provide for themselves. Each is a reason tied to a person's situation. None of them is "because you are family". That distinction is the whole of the law here, and it is where most foreign founders' assumptions break.

What a Swiss family foundation does not do

A Swiss family foundation does not pay the family a living income, and this is the limit that surprises people. A foundation set up to give members an unconditional income for general living costs, what Swiss doctrine calls a Genuss- or Unterhaltsstiftung, an enjoyment or maintenance foundation, is not a permitted purpose under art. 335 and is void. The Federal Supreme Court reads the permitted purposes strictly and treats an open-ended maintenance fund as an attempt to do indirectly what art. 335(2) forbids directly. A distribution has to attach to a qualifying reason. "Quarterly payment to each grandchild for life" is not one.

Three further things it cannot be. It cannot pursue a commercial purpose: a family foundation may hold assets, even an operating company's shares, as endowment, but it may not exist to run a business or to accumulate and grow family wealth for its own sake. It is not tax-exempt: because it serves private family interests, it is taxed as an ordinary legal entity, not granted the exemption a public-benefit foundation can obtain from the cantonal authority. And it does not give the founder lasting control: once endowed, the assets belong to the foundation and serve only the stated purpose, the same letting-go that defines every Swiss foundation. In the structures we are asked to review, the part that bites is almost always this one — a founder wanting a Swiss family foundation to behave like a private bank account the family can draw on at will, which is precisely the shape the law treats as void.

Why Swiss law keeps it this narrow

The narrowness is deliberate, and it dates to the abolition of perpetual family entailments. When the Civil Code was drafted, Switzerland chose to bar the family fideicommissum: wealth could no longer be locked to a bloodline in perpetuity, immune from the heirs' creditors and from division. Art. 335(2) carries that policy. The permitted purposes in paragraph 1 are the narrow exception the legislator was willing to allow, meant for the young, the starting-out and the needy. They were never meant to recreate a dynastic trust under a different name. The courts have guarded that line ever since, striking structures whose substance is wealth-locking dressed as a foundation.

One procedural point shifted recently and matters. Since 1 January 2016, a Swiss family foundation must be entered in the commercial register to gain legal personality; before that, family and ecclesiastical foundations existed without registration. The substantive purpose limits did not change. What changed is visibility and the moment of birth: the foundation now comes into legal existence on registration, which also gives authorities and beneficiaries a public record of it.

One caveat on permanence, as of June 2026. The prohibition on the maintenance foundation is settled law today, but it is under political review. On 12 December 2023 the Swiss Parliament adopted the Burkart motion (20.4445), which instructs the Federal Council to modernise the family foundation and to lift the ban on a purpose of pure family maintenance. A motion is a mandate to draft, not a change in the law: until a bill is passed and in force, art. 335 reads exactly as it does now, and a maintenance foundation set up today is still void. Anyone planning a multi-decade structure should watch where the reform goes while building on the law as it stands today.

Supervision, registration and tax

A Swiss family foundation is registered but, unusually, not placed under standing state foundation supervision. Charitable foundations answer to a supervisory authority, the Federal Supervisory Authority for Foundations or a cantonal one, that reviews their accounts and can intervene. The family foundation is exempt from that ongoing supervision by statute. Beneficiary protection runs instead through the civil courts: a beneficiary or other interested party who thinks the foundation is breaching its purpose, or is void, brings the question before a judge. Lighter oversight is not a lighter standard. The art. 335 purpose limits bind regardless, and a court can declare a non-compliant foundation void.

On tax, the family foundation is a taxpayer. It is assessed on income and capital as a legal entity, at rates set by the canton and commune of its seat, and the exemption available to public-benefit foundations is closed to it because it serves private interests. The Federal Tax Administration and the cantonal authorities also look through to the beneficiaries: distributions can carry consequences for the recipient depending on the canton and on where the beneficiary is resident. None of this defeats the vehicle. It does mean the family foundation is rarely chosen for tax reasons; it is chosen, where it fits, for the durable, registered Swiss home it gives a defined support purpose.

The Liechtenstein foundation as the broader alternative

Liechtenstein allows what Switzerland will not, which is why mobile families so often land there. A Liechtenstein foundation, a Stiftung under the Persons and Companies Act (PGR), can be set up to hold and administer family wealth broadly, make discretionary distributions to beneficiaries, and serve as a long-term private wealth structure across generations. There is no art. 335 ceiling capping it to education and support. For a cross-border family whose actual aim is to hold and pass on wealth, rather than to fund a child's schooling or relieve a relative's hardship, the Liechtenstein foundation is structurally the closer match, and it is a near neighbour, a short drive from the Swiss canton of St. Gallen.

The Liechtenstein route is not a free pass. The foundation carries its own registration and governance, real substance expectations, and a tax and reporting profile that depends heavily on where the family and the beneficiaries live. Common-reporting-standard exchange, the founder's residence and the beneficiaries' residences all feed the analysis, and a structure that looks clean in one country can create exposure in another. The right comparison asks which jurisdiction's foundation law matches this family's genuine purpose, rather than which country is "better". The table below sets the two side by side.

Choosing the vehicle: purpose first

Purpose decides everything, and under Swiss law it decides whether the vehicle is even lawful. Before anyone drafts a deed, the real question is what the family is trying to achieve. If the genuine aim is to fund the upbringing, education, establishment or support of family members, a Swiss family foundation fits, and it gives a durable, registered Swiss structure for exactly those ends. If the aim is broad wealth-holding, discretionary provision, or anything resembling a private maintenance fund, the Swiss family foundation is the wrong tool and a Liechtenstein foundation, a trust, or an ordinary holding structure will serve better. Where the goal is public-benefit giving rather than family provision, the right vehicle is a charitable Swiss foundation, covered in our guide to the Swiss foundation.

This choice rarely stands alone. A family foundation usually sits inside a wider plan that takes in entities, residence and the handover between generations; that whole picture is the subject of our note on wealth structuring, and the rules on who inherits what, including Swiss forced heirship and choice of law, run through succession and estate planning. The common thread is honest scoping. A structure built on the wrong premise is inefficient under Swiss family-foundation law, and worse, it can be void from the start, which is why the purpose comes before the paperwork. For the surrounding private-client topics, our private-clients knowledgebase collects the related guides.