A Swiss account can be opened two ways in this structure: proactively, while the trust is still in its domestic phase, or by the successor trustee after an Event of Duress is declared. Both work. The second one draws an objection worth answering directly — that opening an account once litigation has started looks like a reactive transfer.
It is not, and the reason is a provision drafted years earlier under A.R.S. §29-333.
Key Points
- Swiss private banking operates on a different model than U.S. retail banking, and the distinction is real.
- The account can be opened proactively, before anything happens, with lighter reporting.
- Or by the successor trustee after a trigger — and that is not a new transfer.
- ⚠️ The demand right is papered at formation. Nothing new is created when it is exercised.
- And you cannot stop it — which is the fact that makes an impossibility defense credible.
- U.S. persons are taxed on worldwide income. Nothing here is about hiding anything.
Why Clients Ask About Swiss Banking
The reasons vary, and they are not all about litigation.
Currency diversification. Swiss accounts support a wide range of currencies, which matters for clients with international business, foreign property, or a view on dollar concentration.
Jurisdictional diversification. Holding assets under a different banking system and a different legal framework than the one you live under.
Political and economic stability. Switzerland’s position is a genuine feature rather than a marketing line.
And creditor exposure. An account held by a trust, in a jurisdiction that does not recognize U.S. judgments, sits in a different position than an account in your name at a domestic bank.
What Makes Swiss Private Banking Structurally Different
The U.S. and Swiss models handle deposits differently, and the difference is worth understanding on its own terms.
The U.S. system is a fractional reserve system. Banks lend out the substantial majority of deposits. Since March 2020, the Federal Reserve has set the reserve requirement ratio at zero, meaning there is no regulatory minimum percentage of deposits that must be held back.
That model is not inherently unstable, and deposit insurance covers most depositors. But it does mean your deposit is funding the bank’s lending activity, and 2023 demonstrated that institutions can fail — Silicon Valley Bank, Signature Bank, and First Republic Bank all did.
Swiss private banking operates on a different revenue model. The traditional private banking relationship generates income primarily through custody, management, and transaction fees rather than through the spread on lending depositor funds. Swiss institutions also operate under capital and liquidity requirements that are among the most conservative in the world.
[CONFIRM before republishing: the prior version stated that at a Swiss bank “your money does not go anywhere, it’s not being lent out.” That overstates it — Swiss banks do lend, and the distinction is one of model and regulatory posture rather than an absolute. The revised language above is accurate; verify it reads correctly for your intended emphasis.]
One distinction that matters and rarely gets made. When practitioners in this field talk about Swiss banking, they are generally not talking about UBS or the large universal banks. They are talking about Swiss private banks — smaller institutions whose business is custody and wealth management rather than investment banking and retail lending.
Institutional risk is a real consideration and it cuts across jurisdictions. The question is not only whether a creditor can reach an account, but whether the institution holding it will be there and solvent when you need access. That is a separate risk from litigation exposure, and it is one reason clients diversify across banking systems rather than only across asset classes.
The practical point for asset protection is narrower than the marketing usually suggests. The value is not that Swiss banks are risk-free. It is jurisdictional — a U.S. judgment is not self-executing in Switzerland, and an account held by a foreign trustee is not an account your creditor can levy by serving a domestic bank.
How the Account Actually Opens
Two paths, and the choice depends on whether you would rather have the banking done in advance or handle it if and when it is needed.
Path one: open it proactively, in the domestic phase
The account can be opened while the trust is still domestically classified, long before anything happens. Funded with securities, sitting in place, fully reported.
The reporting in that posture is lighter than most people assume. A foreign financial account is reported on FinCEN Form 114 (FBAR) and, where thresholds are met, Form 8938 under FATCA.
Those are information returns, not additional tax. And critically, they are not Forms 3520 and 3520-A — the foreign trust reporting regime does not apply while the trust satisfies the domestic classification tests.
For clients who would rather not test anything under pressure, this is the clean answer. The banking relationship exists, the account is seasoned, and there is no question to litigate about when it was opened.
Path two: the successor trustee opens it after a trigger
If a credible threat arises, an independent Trust Protector — an attorney exercising professional judgment — may declare an Event of Duress. The Protector may then appoint the pre-committed Special Successor Trustee.
That trustee opens the account, in its own name, as trustee for trust assets.
And the process is not a cold call to a foreign bank, which is what most people picture when they hear this.
An offshore banking intermediary is involved — one familiar with the requirements of asset protection clients and with the institutions that work with them. The client spends time with that intermediary, has real conversations about the options, and ultimately recommends to the trustee which institution they are most comfortable with.
The trustee then opens the account on that recommendation, in its own name as trustee for trust assets.
And the client is not shut out of it. The client is listed as Investment Advisor and Beneficiary of the trust holding the account, and can direct how investments are to be handled.
One operational point that never gets published
Once the trust is triggered, expect to keep it triggered — and the Swiss account open — for a minimum of two years.
That is not a technicality and it is worth knowing before you start. The offshore posture is not something you switch on for a week and unwind when the immediate pressure passes. Untriggering quickly invites exactly the argument that the whole thing was theater.
Two years is the working minimum. Plan for the reporting, the administration, and the cost of that period as part of the decision.
And this is where the objection comes in, so let me take it head on.
⚠️ “Opening an Account After a Lawsuit Starts Is a Reactive Transfer”
This is the most common criticism of the structure, it gets repeated constantly, and it rests on a misunderstanding of what the protective event actually is.
The criticism assumes this sequence: lawsuit arrives, trust does something new, assets move offshore, creditor is defrauded.
That is not the sequence.
The protective event is not the money moving
The offshore trustee is empowered to demand a distribution from the limited partnership upon a pre-defined event. That demand right is written into the partnership agreement at formation, in peacetime, years before any claim exists.
Arizona law is built for exactly this. Under A.R.S. §29-333, a limited partner may withdraw from a limited partnership “at the time or upon the happening of events specified in writing in the partnership agreement.” The distribution consequence is drafted in alongside it, because A.R.S. §29-334(A) sets the default the other way and requires it to be specified.
So the events are defined in the document, in advance, in writing. That is what the statute contemplates and it is what the agreement does.
What “nothing moves at the trigger” actually means
It means no new legal right is created at the trigger.
Every power the trustee exercises was papered earlier. When it demands the distribution and opens the account, it is exercising an entitlement it already held. It is not receiving a new transfer from a debtor.
That distinction is the entire analysis. A fraudulent transfer requires a transfer. The exercise of a pre-existing contractual entitlement by a party who is not the debtor is a different thing, and it is analyzed differently.
And you cannot stop it
This is the part that is counterintuitive and it is the most important sentence on this page.
Once the demand right is exercisable, the client has no power to prevent it. The trustee is not asking permission. The partnership agreement obligates the distribution on a defined event, and the trustee is enforcing its own entitlement.
That is not a weakness in the structure. It is the point.
Why That Makes the Impossibility Analysis Work
Two cases sit on either side of this, and the difference between them is entirely about whether the debtor retained a lever.
In FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 1999) — the Anderson case — the Cook Islands trustee refused the repatriation order, removed the settlors as co-trustees, and refused again when they attempted to install replacements. The FTC then litigated in the Cook Islands and lost, the last time in December 2005. The assets were never repatriated.
And the Andersons went to jail anyway.
They had named themselves trust protectors of their own trust and retained the power to override the duress declaration. Because they could still pick up the phone and remove the trustee, the court found their inability to comply was self-created. That is contempt.
In United States v. Grant, the impossibility defense worked — because control had genuinely been relinquished and the trustee refused. The court also identified a specific drafting flaw: an unrestricted power to remove and replace the trustee. That power is suspended during duress in this instrument.
Where that leaves the analysis
A court asking whether you can comply is asking a factual question.
If you hold a lever, the honest answer is yes — and Anderson is what follows.
If the trustee holds an entitlement you cannot revoke, and your own relevant powers are suspended by the instrument, the honest answer is no. That is not a story you tell a judge. It is a structural fact about documents signed years earlier.
The trustee’s demand right being the trustee’s — and not yours — is precisely what puts you in Grant rather than in Anderson.
The Banking Question Nobody Should Be Guessing About
“There is no guarantee a bank will open an account once litigation has started.”
That is true, and it is true of every bank, in every jurisdiction, for every client. No regulated financial institution can contract in advance to onboard anyone regardless of what due diligence turns up.
But the framing implies something that is not accurate. A bank deciding whether to onboard a client is running a compliance analysis, not a creditor analysis. It cares about source of funds, sanctions exposure, know-your-client documentation, and reputational risk. A pending civil complaint is not disqualifying, and in practice it rarely moves the needle.
What does change a bank’s answer: criminal conduct, money laundering exposure, sanctions issues, or an unusually high public profile.
And there are two things that reduce the question to nothing.
Open the account proactively, in the domestic phase, before anything happens.
Or use a successor trustee that already has established banking relationships in the jurisdiction — which is a function of choosing a regulated institutional trustee rather than an individual.
Tax and Reporting: Nothing Here Is Hidden
U.S. persons are taxed on worldwide income. Interest, dividends, and gains in a Swiss account are reportable on your U.S. return regardless of where the account sits.
And a Swiss bank may issue you a Form 1099. This surprises people who assume foreign institutions do not participate in U.S. reporting.
Swiss banks operating under a Qualified Intermediary agreement with the IRS assume certain U.S. withholding and reporting obligations, which can include issuing Forms 1099 to U.S. account holders on reportable income. Whether you receive one depends on the institution’s QI status and the type of income — confirm with the specific bank rather than assuming either way.
If there is no interest or dividend income, there is nothing to report as income — though the account itself is still reportable on the forms below.
Account reporting depends on classification.
While the trust is domestically classified: FinCEN Form 114 (FBAR) and, where thresholds are met, Form 8938.
If the trust becomes foreign for U.S. tax purposes: Forms 3520 and 3520-A become applicable. Those are informational returns, not additional tax — but the penalties under IRC §6677 for failure to file are severe, and coordination with your CPA is not optional.
And Swiss bank secrecy in the popular sense no longer exists. Switzerland participates in automatic exchange of information, and Swiss institutions report U.S. account holders. Protection here comes from jurisdictional structure, not from concealment — and anyone selling you the latter is selling you a problem.
Practical Questions
Minimums start around $1 million, with some institutions accepting a lower opening balance — often in the range of $500,000 — where the bank understands it is a starting balance and additional funding is coming. Confirm with the specific institution, since thresholds vary and change.
Multi-currency capability is standard at the private banking level and is one of the genuine practical advantages.
Non-residents can open Swiss accounts legally, subject to identification, proof of address, and source-of-funds documentation.
Costs include account opening, maintenance, transaction charges, and where applicable, management fees on assets under management.
FAQs
Can an offshore account be opened after a trust is triggered? Yes. Banks run compliance analysis rather than creditor analysis, and a pending civil complaint is generally not disqualifying. The account is opened by the successor trustee in its own name, as trustee for trust assets.
Isn’t opening an account after a lawsuit a reactive transfer? No, because the protective event is not the money moving. The trustee’s right to demand a distribution from the partnership is written into the partnership agreement at formation, under A.R.S. §29-333. At the trigger, no new legal right is created — the trustee exercises an entitlement it already held.
Can I stop the trustee from making that demand? No. And that is the point. If you could stop it, a court could order you to — which is exactly what happened in FTC v. Affordable Media.
Can the account be opened before anything happens? Yes, and for many clients that is the better answer. The account can be opened while the trust is domestically classified, with reporting on FBAR and Form 8938 rather than Forms 3520 and 3520-A.
Are Swiss accounts still secret? No. Switzerland participates in automatic information exchange and Swiss institutions report U.S. account holders. Protection comes from jurisdictional structure, not concealment.
Do I pay U.S. tax on a Swiss account? Yes. U.S. persons are taxed on worldwide income. A Swiss bank operating under a Qualified Intermediary agreement with the IRS may issue you a Form 1099 on reportable income, much as a U.S. bank would. If there is no interest or dividend income, there is nothing to report as income — but the account itself remains reportable.
How long does the trust stay triggered? Plan on a minimum of two years with the trust triggered and the offshore account open. Untriggering quickly undermines the position and invites the argument that the structure was never serious.
Who picks the bank? You do, effectively. An offshore banking intermediary familiar with these structures walks you through the options, you recommend the institution you are most comfortable with, and the trustee opens the account on that recommendation. You are then listed as Investment Advisor and Beneficiary and can direct how investments are handled.
What reporting applies? FBAR and, where thresholds are met, Form 8938, while the trust is domestically classified. Forms 3520 and 3520-A if the trust becomes foreign for tax purposes.
How is Swiss banking different from U.S. banking? The U.S. system is fractional reserve, and since March 2020 the Federal Reserve has set the reserve requirement at zero. Swiss private banking generates revenue primarily through fees rather than lending spread and operates under more conservative capital and liquidity requirements.
What actually protects the account? Not secrecy. A U.S. judgment is not self-executing in Switzerland, and an account held by a foreign trustee is not one a creditor can reach by serving a domestic bank.
The Bottom Line
Swiss banking is a jurisdictional tool, not a hiding place. Everything is reported. U.S. tax is owed. The protection comes from where the account sits and who controls it.
And the objection about opening an account after a trigger has a specific answer. The trustee’s demand right exists at formation, under a statute written for exactly this purpose. Nothing new is created when it is exercised — and the fact that you cannot stop it is what separates this from the structure that sent the Andersons to jail.
That is not a detail. It is the whole difference between an impossibility defense that holds and one a court treats as self-created.
Structure before stress.
📞 For a confidential legal consultation, contact Bradley Legal Corp. at (888) 773-9399, or complete the intake questionnaire at btblegal.com.
By: Brian T. Bradley, Esq.
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