Last update of this article: 26th september 2025
Our firm has advised private clients and families for nearly 10 years in international estate and gift taxation, with a sustained focus on France–Italy and France–United States crossborder matters.
On our French, English, and Italian blogs, we regularly analyze these topics for a cross-border audience.
We are receiving an increasing number of inquiries from clients who are designated as beneficiaries of a trust and who reside in France.
After having already published on our blog an article on the links between trusts, life insurance, and indirect gifts,
this article presents, from a Frenchlaw perspective, the civil effects of a foreign trust and its French tax consequences (gift and inheritance duties—DMTG—and the real estate wealth tax—IFI), including the compliance obligations and penalties that may apply.
It is intended for an international audience, with references to official texts and case law.
Civillaw treatment in France
Under French civil law, the trust is a foreign institution.
France does not create a domestic trust, but it recognizes the effects of a foreign trust when it is valid under its governing law and does not contravene French international public policy (in particular, the protection of forcedheirship rights).
In this framework, the Cour de cassation’s “Belvédère” decision admitted mechanisms compatible with trusts and emphasized the parties’ contractual autonomy and choice of the most adequate law for their interests.
The trust therefore need not be reclassified mechanically as a mandate or an indirect gift; it may be taken into account as such, subject to French publicpolicy limits.
Case Law: Cass. com., 13 Sept. 2011, nos 1025.533, 1025.731, 1025.908 — “Belvédère”.
It is also worth citing other decisions that have addressed, in the past, the recognition of the civil effects of a trust in France:
- Paris Court of Appeal, Jan. 10, 1970 — Époux Courtois & consorts de Ganay: recognition in France of a foreign trust valid under its governing law and compatible with public policy.
- Cass. 1st civ., Feb. 20, 1996, no. 93-19.855 — Zieseniss: analysis through the prism of liberalities/indirect gifts when the transfer is effected through the trust.
Unsure how French tax law applies to your US trust or insurance?
Do not hesitate to contact us in order to clarify your situation on these issues; we will be happy to help you.
CONTACT USFrench fiducie vs. foreign trust
The fiducie is a French contract (Civil Code, arts. 2011 et seq.) under which assets are allocated to a fiduciary estate and managed by a fiduciary.
Any liberal intent in a fiducie renders it null (Civil Code, art. 2013).
The trust, by contrast, rests on the legal/equitable split unknown to French civil law and can accommodate a wider range of purposes (management, protection, transmission).
The fiducie serves specific purposes within a strict, contractually predetermined framework under French law.
The trust, by contrast, may grant the trustee broad discretionary powers, combined with exclusion, distribution, and allocation clauses.
The qualification as a trust or a fiducie is therefore determined in concreto, based on the deed and the governing law.
This difference in nature explains why French tax law has developed specific rules for trusts (and not for the fiducie), particularly with respect to gift and inheritance duties (DMTG) and the real estate wealth tax (IFI).
French taxation of trusts (transparency)
The French Tax Code defines the trust and its actors (CGI*, art. 7920 bis) and applies a transparency principle: until an effective transfer occurs, assets placed in trust are deemed not to have left the settlor’s patrimony.
This principle governs both DMTG (gifts and inheritances) and IFI (real estate wealth tax).
*French Tax Code
DMTG (gifts and inheritances)
As a rule, taxation arises when the transfer occurs (gift, attribution, or death).
Where a beneficiary’s share is determined, taxation follows the degree of kinship with the settlor.
Where a global share is due to descendants, the highest bracket of Table I (45% – direct line) applies.
Any residual left in trust upon death is taxed at the highest bracket of Table III (60% – no kinship).
To summarize, there are three common situations where the 60% tax rate (DMTG) applies:
- Residual left in trust at the settlor’s death (CGI, art. 7920 bis, II2c) → 60%.
- Trustee subject to the law of a noncooperative jurisdiction (ETNC; ref. CGI, art. 2380 A, via art. 7920 bis) → 60%.
- Trust created after 11 May 2011 where the settlor was domiciled in France at that time → 60%, irrespective of kinship.
Territorial scope follows CGI, art. 750 ter (domicile and situs rules). CGI, art. 750 ter
Filing deadlines for successions: 6 months (metropolitan France) or 12 months otherwise. CGI, art. 641
IFI (real estate wealth tax)
Realestate assets and the realestate fraction of shares placed in trust are attached to the IFI taxpayer — the settlor or, after death, the deemed settlorbeneficiary — for their fair market value on 1 January (CGI, art. 970).
The IFI return is always filed by the taxpayer, not by the trustee.
A French tax resident is taxable on worldwide real estate; a nonresident is taxable only on Frenchsitus real estate (CGI, art. 964).
IFI scale up to a maximum rate of 1.5% (CGI, art. 977).
Where the taxpayer fails to report IFI on trust assets, the sui generis levy of CGI, CGI, art. 990 Japplies at the highest IFI rate (1.5%); payment is generally ensured by the trustee without releasing the taxpayer’s duty to file.
The trustee is required to ensure payment within the statutory deadlines, without releasing the taxpayer from their own filing obligation.
Compliance obligations
The trustee and the settlor or deemed settlor-beneficiary are required to file various returns depending on events affecting the trust as well as on an annual basis, under penalty of sanctions.
Let us summarize them below:
Obligations of the trustee — CGI, art. 1649 AB and Annex II, art. 369 A
- Event–driven filings (Form 2181-TRUST1) within 1 month following the creation, modification, or termination of trusts that have a nexus with France.
- Annual filing (Form 2181-TRUST2) no later than 15 June, stating the fair market value on 1 January of the trust’s assets/rights/capitalised income.
- Sanction → €20,000 per breach
Obligations of the IFI taxpayer (settlor or deemed settlor-beneficiary):
- IFI return (annual): inclusion of trust real-estate assets attached to the taxpayer (CGI, art. 970)
- Non-resident: limited to property located in France (CGI, art. 964)
Sanction → failure to declare IFI triggers the sui generis levy of art. 990 J at 1.5% (maximum IFI rate) (CGI, art. 990 J)
Unsure how French tax law applies to your US trust or insurance?
Do not hesitate to contact us in order to clarify your situation on these issues; we will be happy to help you.
CONTACT USTax treaties — Focus on France-Canada
Double taxation treaties on income and wealth may affect the amount of wealth tax due in France.
They may either allow taxation of wealth in both States, with a foreign tax credit in the State of residence for the tax paid in the State of situs of the assets, or they may allocate the taxing right exclusively to one of the two States.
For example, the 1975 France–Canada Convention recognizes, for Canada, the trust as a person (art. 3) and includes specific provisions on wealth tax (art. 22).
Under this Convention, a trust established in Canada is treated as a Canadian resident for treaty purposes.
As a result, the taxation of trust assets other than immovable property, shares in companies, and movable property of permanent establishments listed in Article 22, paragraphs 1–4 of the Convention falls exclusively within Canada’s jurisdiction.
It should be noted that the sui generis levy of CGI, art. 990 J referred to above, remains outside the scope of tax treaties, as this levy is a special charge normally not covered by international conventions.
Qualification scenarios (practical)
Below is a summary of the different types of trusts, indicating their French tax consequences case by case, together with practical examples:
Revocable, non-discretionary trust
- Typical features: settlor retains revocation powers, named beneficiaries.
- DMTG: taxation at the time of the gift/attribution or at death, depending on the kinship with the settlor.
- IFI: assets attached to the settlor while alive; after death, transferred to the deemed settlor-beneficiary if conditions are met.
- Example: a US revocable living trust with full revocation powers → DMTG at death according to kinship; IFI declared by the settlor residing in France.
Irrevocable, discretionary trust
- Typical features: no vested rights, potential beneficiaries, distributions at the trustee’s discretion.
- DMTG: at the settlor’s death, if a residual remains in trust or shares are undetermined, the 60% rate applies; if a global share is due to descendants, the top rate of Table I (45%) applies.
- IFI: attached to the settlor while alive; after death, to the deemed settlor-beneficiary.
- Example: a Canadian discretionary trust with no vested rights → IFI declared by the settlor residing in France; at death, possible 60% taxation on the residual.
Trust created after 11 May 2011 (settlor domiciled in France at that time)
- DMTG: 60%, regardless of the beneficiary’s status.
IFI: common rules (CGI, art. 970)
Conclusion
The trust is a complex instrument, at the crossroads of civil law (international validity, public policy, forced heirship) and French taxation (DMTG, IFI, reporting obligations).
Transparency remains the guiding principle, meaning that:
- DMTG are due at the time of transfer according to the kinship with the settlor (with specific 60% cases).
- IFI is declared by the taxpayer (settlor or deemed settlor-beneficiary) — non-residents are taxable only on property located in France.
In addition, tax treaties, particularly the France–Canada treaty, may lead to different outcomes, especially where the trust itself is a Canadian resident, which requires case-by-case analysis.
Key reminders:
60% (DMTG):
-
- Residual assets left in trust at the settlor’s death.
- Trustee located in a non-cooperative jurisdiction (ETNC).
- Trust created after May 11, 2011, where the settlor was domiciled in France at that date.
Reporting obligations:
- Trustee — TRUST1 (event-driven): within 1 month of creation, modification, or termination.
- Trustee — TRUST2 (annual): by 15 June, stating the fair market value on 1 January.
- IFI taxpayer — annual IFI return; in case of failure: sui generis levy (CGI, art. 990 J) at 1.5%.
Given the technicality and the estate planning stakes, this area requires the assistance of an international tax lawyer, and in the most complex cases, the cooperation of a professional specialized in the jurisdiction where the trust was created.
Our firm, specialized in international private client and tax law and supported by an extensive network of international partnerships, is available for an initial consultation to identify the issues requiring deeper analysis and to design the most appropriate guidance.
We assist Franco-American families with cross-border estate and tax matters.
Let’s discuss your situation - confidentially and without obligation.
CONTACT USWas this article helpful to you?
To stay informed and up-to-date on these topics, follow us on LinkedIn.
The opinion expressed in this article is for informational purposes only.
This article does not constitute legal advice.
In addition, it is important to remind that each client’s tax issue is different because each client’s personal situation is different.
Should you have a similar tax issue, please contact us for an initial discussion of your case.
MORE POSTS IN OUR BLOG:
Frequently Asked Questions
Yes. If the policy is held by an irrevocable trust and the settlor has no redemption rights, payments to beneficiaries may be taxed as indirect gifts.
The Court ruled that beneficiaries receiving funds via the trust, not directly from the life policy, triggered French transfer duties.
By consulting a cross-border tax lawyer before setting up an irrevocable trust involving life insurance.