4.7. Trusts

Trusts are legal vehicles commonly used in many countries for the purposes of inheritance planning.

In France, however, the position is less helpful as, whilst the laws have recently been changed to recognise trust structures, they offer no fiscal advantages in inheritance law.

Even if the tax authority or court of law were to recognise the existence of a foreign trust, it is almost certainly to be the case that it will only be applied in relation to that part of the estate that is freely disposable.

In other words, the trust could not override the entrenched rights of protected hiers in French inheritance law. Neither do we believe it could it be used to escape liability to French inheritance tax.

It is possible that international financial advisors might be able to set up an offshore trust structure for you that creates some advantage in exceptional circumstances, but it is also very likely that there will be uncertainty as to it's legal and tax status, and the costs of setting up and running such a structure are unlikely to be a trifling matter!

It is also highly likely that a trust structure will attract the attention of the French tax authorities, who might then decide to take a greater interest in your tax affairs than you would wish!

We do not deny that if you have substantial wealth and/or no children/grandchildren with entrenched inheritance rights, the use of a trust structure to manage a charitable estate would be a sensible step to take.

Nevertheless, for most expats, we consider that those wishing to exercise some control over the future of their estate, and/or reduce liability to inheritance tax, would be best advised to use one or other of the methods given in this guide.