Liechtenstein

The inheritance law reform came into force in Liechtenstein on August 1, 2024. It aimed at replicating the revision of the Austrian Inheritance Act in 2015 (Inheritance Law Amendment Act 2015). However, some differences remain between the Austrian and Liechtenstein laws. The majority of the Austrian provisions have been adopted from the Austrian Inheritance Act. By way of example, the testator may now reduce the mandatory share of an heir in the estate by half, provided this is expressly stipulated in the last will. Moreover, being a discretionary beneficiary (in particular, in a foundation or trust) is not considered for the calculation of the (discretionary) beneficiary’s mandatory share. Furthermore, donations made by the deceased to the heirs during his/her lifetime are now “equal” and are to be considered in the calculation of the heir’s mandatory share. The grounds for unworthiness to inherit have been extended as well, as criminal conduct against close relatives and against the estate were added as grounds for excluding a person from becoming an heir. Further, wills which are not handwritten require the execution of three witnesses who now must be present at the same time when the testator signs the document. Finally, the testator must expressly confirm, in handwriting, that the document contains their last will. Last but not least, the limitation periods were adjusted to the extent that all claims arising from inheritance law are now included in § 1487a of the Civil Code and are subject to a relative limitation period of three years and an absolute limitation period of 30 years.

Liechtenstein has implemented the global minimum taxation of the Organization for Economic Cooperation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) in accordance with the Global Anti-Base Erosion (GloBE) model rules as of January 1, 2024. Domestic entities (legal entities, trusts and partnerships) of a multinational enterprise group or a large domestic group are also subject to the minimum taxation under the GloBE model rules, provided that their ultimate parent company has, according to its consolidated financial statements, a consolidated annual turnover of at least EUR 750 million in at least two of the four preceding financial years. An effective minimum tax level of 15% is achieved by levying a Liechtenstein top-up tax (“Qualified Domestic Minimum Top-up Tax”; QDMTT) and an Income Inclusion Rule (IIR) top-up tax. The business units concerned must apply the provisions of the GloBE rules in addition to local tax law. Alongside the GloBE model rules, the local tax regime in Liechtenstein continues to apply. Companies (legal entities) are subject to an annual flat corporate income tax of 12.5%. Even for domestic entities of multinational enterprise groups, Liechtenstein is a jurisdiction with numerous local advantages: although these tax rules aim at eliminating unfair tax competition, Liechtenstein continues to be an attractive jurisdiction for wealth planning, in particular due to its liberal and highly modern corporate law and the efficient rule of law.

Due to the harmonisation of § 579 of the Liechtenstein Civil Code and § 579 of the Austrian Civil Code, the controversial case law of the Austrian Supreme Court on the “unity of documents” also applies in Liechtenstein. This case law required a will not written by the testator to be coherent in form or content. A typewritten will must be recognisable as “one document” either from the external circumstances (e.g., by stapling it together during the execution of the will) or from the content.

Liechtenstein law acknowledges forced heirship rules. This means that certain heirs have a right to receive a minimum amount of the estate regardless of a will of the deceased excluding the heir from succession. However, the forced heirship rules can be avoided legitimately by sophisticated wealth planning. As a general rule, if the founder or settlor survives for a period of two years, the creation of the trust or foundation to which they bequeath their assets and where there are no heirs with forced heirship claims as appointed beneficiaries, and further provided that they divest of reserved powers or any other means of control, the trust or foundation and its assets (located in Liechtenstein) become immune from the clawback of forced heirs (and, mostly, all other potential creditors) in Liechtenstein. Recent case law (a.o. 04 CG.2017.580) deals with the level of control permitted in the circumstances to protect the foundation from the clawback.

Increasingly, wealth planning will require paying attention to gender, religion or similar discrimination issues. The European Court of Human Rights case law appears to have bearings on structuring and wealth planning, where settlors seek to favour, by way of example, male over female beneficiaries. Liechtenstein practice notes that there is a groundbreaking Austrian Supreme Court case where provisions of a family dynasty agreement of a limited liability partnership were considered contra bonos mores and invalid, as they provided that distributions to female beneficiaries required protector consent, whereas such to male beneficiaries did not (6 Ob 55/18h). The Austrian Supreme Court considered such provisions discriminatory and unenforceable, and Liechtenstein courts are likely to consider, and apply, such principles against gender or similar discrimination. However, given the international nexus of most Liechtenstein wealth structures, including trusts and foundations, it will certainly matter where the settlor or founder came from. By way of example, if the settlor of a Liechtenstein trust was based in the Middle East and provided in the Liechtenstein trust deed for Sharia rules (which generally favour male over female heirs and beneficiaries of their estate), it is believed to not be considered discriminatory, as the culture and rules of the settlor’s domicile are deemed to be overruling. Liechtenstein rules against discriminatory treatment may be considered “public policy” and thus may prevail only in extreme circumstances.

Because in the course of the Covid-19 pandemic it was de facto impossible to consult a lawyer or notary due to the contact restrictions imposed by the authorities in many places, the will forms of the testator’s own handwritten will and the so-called emergency gained more relevance during this period. If a testator wishes to establish a will in writing and without witnesses, then they must handwrite the will on their own and sign it (§ 578 Civil Code). Although the date and place of the establishment of the will is not prescribed by law, it is strongly recommended for reasons of proof and to avoid later disputes. According to § 597 Civil Code, an emergency will can only be considered as an option if there is an imminent danger that the testator will die or lose the ability to testify before they can declare their last will in another way. In such cases, the testator may also testify orally or in writing with the assistance of two witnesses. However, a last will declared in this way loses its validity three months after the aforementioned imminent danger ceases to exist.

Trusts under Liechtenstein law have recently come under criticism on various occasions. In response to this criticism, which mainly related to the case law of the Liechtenstein Supreme Courts and their interpretation of the law on trusts, the Government of Liechtenstein has examined the potential reform of Liechtenstein trust law in more detail and evaluated the potential need for improvements. The draft bill in particular aims to “develop” some levels of control and respective mechanisms, so that at least one “participant” in a trust is entitled to information and disclosure rights in order to ultimately enable effective control of the trust administration. The core of this draft bill is therefore the mandatory provision of at least one so-called information holder, who has comprehensive and unrestricted information and disclosure rights by virtue of law. The new law leaves it to the settlor to decide whether these rights are granted to the settlor, the beneficiaries and/or other parties involved, such as an advisory board (protector), an auditor or even a third person so trusted by the settlor. In this way, preference should continue to be given to the settlor’s private autonomous structuring and the settlor can decide what type of governance they want the trust to apply.

New rules governing Liechtenstein fiduciaries and professional trustees seek to ensure best practice standards and the avoidance of conflicts of interests. If such conflicts occur, professional fiduciaries are obliged to disclose such conflicts to beneficiaries and seek to avoid or manage them diligently. Frequent audits of fiduciaries by independent auditors have also been introduced to assess whether and to what extent fiduciaries are fully compliant with these standards, including Anti-Money Laundering (AML) Rules. Certainly, such AML rules are one of the most serious and efficiently enforced of all international financial centres. Further, new rules ensure that directors of Liechtenstein companies are fit and proper. Persons who were convicted of certain (insolvency and monetary) criminal acts, in Liechtenstein or abroad, are not eligible to become board members of foundations or trustees of trusts (Article 180b of the Persons and Companies Act).

Many cases heard in Liechtenstein courts deal with the liability of Liechtenstein fiduciaries. Generally, it is accepted that fiduciaries, trustees and directors may call to their defence the Business Judgment Rule (BJR). The BJR provides that they are immune from liability if in the preparation and proper act of decision making they follow certain technical procedures, mainly aimed at documenting a well-balanced weighing of pros and cons in the interest of the company and its stakeholders (e.g., beneficiaries of a trust), and provided that there is no conflict of interest (Article 182 of the Persons and Companies Act).

In recent case law, the rights of beneficiaries were the main focus of the courts in Liechtenstein. Beneficiaries’ rights to information are instrumental for the enforcement of “foundation governance” in the case of foundations which are not subjected to the supervision of the Foundation Supervisory Authority (STIFA). Thanks to information rights, the beneficiaries may effectively monitor the activities of such foundations. If beneficiaries discover or suspect that the foundation council has breached its duties, the beneficiaries can report their discovery or suspicion to a judge responsible for supervising the foundation. The judge must officially investigate the report and, if necessary, take appropriate supervisory measures. In Liechtenstein, these proceedings are conducted in what is known as “non-contentious proceedings” (Ausserstreitverfahren). Note that the distinction between civil litigation under the “ordinary” civil procedure rules and the proceedings under the “non-contentious” procedure rules are rather arbitrary and can be traced back to historical developments. Litigation under the “non-

As of January 1, 2025, the “Marriage for All” law came into force in Liechtenstein. The Marriage Act has been amended to ensure that the legal institution of civil marriage will be equally open to both same-sex and opposite-sex couples. Although the law on registered partnerships for same-sex couples, introduced in 2011, will remain in force, it will lose much of its practical significance. Couples in registered partnerships will have the freedom to choose whether they wish to maintain their existing partnership or convert it into a marriage through a simple procedure. However, for succession purposes, the same rules apply to same-sex marriages as to

In 2022, the Liechtenstein legislator explicitly clarified that board meetings can also be held in hybrid or electronic form. In a hybrid meeting, there is a meeting location where individual board members physically meet while the other board members join electronically. In a virtual meeting, on the other hand, discussions take place and resolutions are resolved exclusively by electronic means.

The abovementioned draft law on the “further development” of control mechanisms for trusts (see above, Section 2.1) also provides that, in order to ensure continuous and effective monitoring of the trustee’s activities, supervisory proceedings may in the future be initiated by an application from the settlor or the person entitled to information (in addition to the trustee’s application). This means that both the settlor and the person entitled to information have standing to apply for information, thus granting them the respective control. Conversely, and in contrast to the previous legal situation, the supervisory procedure is not to be initiated by a mere notification, but is to be initiated upon application by the aforementioned persons. The settlor, the trustee and the person entitled to information will have legal standing in the supervisory proceedings, so that they must be heard as parties and also have the corresponding right to appeal. Other parties involved will only have the right to file a complaint, as is currently the case, which obliges the court of first instance, in its capacity as supervisory court, to examine immediately whether supervisory proceedings should be initiated. The right to file an application and be considered in the supervisory proceedings as a party is intended to counter criticism of the Liechtenstein Supreme Court’s decision of March 3, 2017, according to which beneficiaries were generally denied the right to file an application to initiate supervisory proceedings and appeal in dismissal proceedings against the trustee; in short, beneficiaries had limited standing and thus limited control.

In trust and estate litigation, supervisory court proceedings initiated by beneficiaries to set aside board resolutions of foundations and trusts or to remove board members or trustees are more and more frequent in Liechtenstein. Some of the reported cases deal with the obvious trend of foundation governing bodies to vary the constituting documents and to opt for the foundation to be subjected to compulsory government supervision, an act often considered by beneficiaries as a hostile attempt to deprive them of their right to information. In many cases, the courts rejected such attempts as unlawful, as they could eliminate the beneficiaries’ right to information and thus the checks and balances within the foundation governance.

The Liechtenstein Supreme Court recently decided that where there is uncertainty as to whether the removal of the trustee and the appointment of another party as the new trustee was lawful, the applicant’s claim for a declaration that they remain the trustee may be coupled with an application for interim relief. In this case, there was a risk of “imminent irretrievable damage” because the mere fact that an allegedly wrongly appointed trustee acted as trustee constituted such irreparable damage as required by procedural laws (LES 2024, 215).

In another case, the Liechtenstein Supreme Court recently ruled that even in the case of the establishment of a trust by an indirect representative of the principal, the principal is to be regarded as the economic settlor. Furthermore, such economic settlor is entitled to the right of information vis-à-vis the trustees of the trust or foundation. These rights need not be explicitly provided in the trust deed (LES 2024, 113).

One of the hot topics in Liechtenstein is the amendment of statutes and byelaws of foundations, whereby the following explanations also apply to trusts. Any settlor may reserve the power to amend such foundation or trust documents. However, by doing so, it is assumed that the settlor has not separated him or herself from the assets contributed to the foundation. This can have prejudicial effects from a tax and asset-protection perspective. Hence, settlors usually favour an irrevocable and discretionary foundation or trust over a revocable setup. In practice, most statutes provide that the foundation council, or trustees respectively, may amend the statutes and byelaws of the foundation. If the council considers the amendment of the statutes or byelaws, they may not undermine the purpose of the foundation. Some changes are deemed an amendment of the purpose of the foundation and other changes are considered to be merely “other content”. The differentiation is critical and instrumental. The purpose of the foundation may only be amended in narrow circumstances, e.g., if the purpose became illegal or if the circumstances have changed so that the original purpose is unattainable. Conversely, “other content” may be changed more easily as long there is a reasonable justification for such change (e.g., the change makes the foundation more efficient in terms of management, or it helps the foundation to avoid unnecessary tax payments). In practice, the question of whether an amendment changes the purpose of the foundation or just changes “other content” is challenging and not always evident. For example, the Supreme Court ruled recently that the addition of new beneficiaries to the class of beneficiaries is a change of purpose if the new beneficiaries were not considered from the outset of the foundation. Further, the Court of Appeal ruled in a recent, groundbreaking case that the power of variation of foundation documents did not automatically entail the power to amend the purpose, unless the clause providing such power allowed for such amendment of purpose explicitly. Practitioners have criticised these rulings, as they may prove to render necessary and justified adjustments of foundations after real-life events almost impossible. If, for example, the settlor names his or her children as beneficiaries of a foundation and later becomes estranged from his or her children, current case law generally exposes the nomination of new beneficiaries to subsequent challenge (even if such new beneficiaries were only discretionary beneficiaries). Practice will show how the courts will handle such cases. In any case, it is crucial to obtain proper legal advice upon the establishment of the foundation, or upon the exercise of such powers, and to plan for such future developments.

During the pandemic, the Liechtenstein courts and authorities showed remarkable flexibility when it came to witness questioning via video conference. Unfortunately, this has not (yet) led to a sustainable change in procedural rules. From our experience, judges have started requesting the personal appearance of witnesses again, which can be a problem for foreign witnesses and parties.