Guide to French Inheritance Laws and Taxes

  1. Introduction
  2. French Inheritance Laws
  3. French Inheritance Tax
  4. Inheritance Planning in France

4. Inheritance Planning in France

Property Ownership Options

  1. Buy 'En Tontine'
  2. Buy using a Property Company

Juridical Options

  1. Adopt a French Marriage Contract
  2. Enter into a French Civil Partnership
  3. Make a Family Inheritance Pact
  4. Make a Will
  5. Create a Trust Structure
  6. European Succession Law

Financial Planning Options

  1. Buy or Improve with a Mortgage
  2. Make a Gift Between Man and Wife
  3. Make a Gift to Children/Grandchildren
  4. Make a Gift to Others
  5. Take out Life Insurance

4.7. Create a Trust Structure

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 French law recognise trust structures (fiducie) abroad they do not exist in France and offer no fiscal advantages in inheritance law or any other form of taxation.

Proceeds of a trust are subject to personal income tax on distribution.

Trusts are also subject to tougher annual taxation and disclosure requirements and potentially high rates of inheritance tax.

You can read more about the tax treatment of trusts in an article we published in our Newsletter at Trusts in France.

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. Only if used in tandem with European Succession law, granting the right of individuals to adopt the inheritance laws of their home country would it be possible to circumvent French inheritance laws. However, it is not the trust that grants such exemption, but European law.

Neither could it be used to escape liability to French inheritance tax.

International financial advisors may well be able to set up an offshore trust structure for you that creates some advantage, 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! There is an obligation in France for trustees to file an annual return of assets held by the trust.

We do not deny that the use of a trust structure to manage a charitable estate can sometimes be a useful step.

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.

In short, there is a big health warning about the use of trust structures in France.

Next: European Succession Law

Back: Make a Will

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