In the UK and other so-called Anglo-Saxon (as the French say) countries, trusts are completely normal, with many people using them for family planning, passing on wealth, and inheritance planning. Trusts are also used to help reduce taxes, which is perfectly legal when done the right way. There is a fundamental difference between “avoiding” tax and “evading” it, even if that distinction sometimes gets blurry when we talk about it.
The trouble starts when trusts run into French law.
Trusts in France
The UK’s HMRC describes a trust as a legal relationship rather than a legal entity. Someone sets up the trust, trustees look after the assets within it, and beneficiaries benefit from them. The trustees hold the assets in their own name, but not for their own benefit. Everything depends on the terms written into the trust.
However, French tax authorities see things very differently. Trusts are often viewed as “opaque” arrangements designed to hide assets. As a result, they are treated with a great deal of suspicion from the outset. The word “evasion” comes up far more often than most British families would expect.
Trusts in France aren’t illegal. What matters is when and why they were set up, how they’re used and whether they’ve been properly declared. Many people come to France with trusts that were established years earlier. Properly declared trusts with clear records are generally accepted as created in good faith.
French lawmakers have tried, and mostly failed, to define how trusts work. This has not been an easy task. Even in the UK, trust law spans into tens of thousands of pages. Expecting France to neatly summarise it was always going to be optimistic.
If you live in France with a trust already setup, it must be declared under article 1649 AB of the French tax code (code général des impôts, or CGI). Once it is declared, you can expect many questions from the tax office. They will want to know who created it, who controls it, and who benefits from it. This can feel quite intrusive, but it is far better than not declaring it at all.
Failing to declare a trust will lead to severe penalties, with the fine being the higher of €20,000 or 12.5% of the trust’s value. With international reporting rules tightening all the time, undeclared trusts rarely remain hidden for long.
The only thing worse than arriving in France with an undeclared trust is setting up a new one after becoming a French tax resident. Since July 2011, any assets placed into a trust by a French resident are treated as a gift to a non-relative beneficiaries and may trigger a 60% gift tax on the amount given (CGI 792-0 bis II-2c & ref CGI 777 table III).
On top of that, French authorities have made it clear that trusts remain firmly in their sights. Public statements from the Ministry of Public Accounts regularly refer to trusts as part of the problem when it comes to hidden assets and tax fraud.
In an interview with Le Monde, the then Minister Delegate for Public Accounts said, “situations in which the current tools of tax control are hindered, including the concealment of assets abroad in tax havens and opaque entities such as trusts, the use of tax exemption firms, and the abusive optimisation of large multinationals.”
Whether that is fair or not, there are very real consequences for mishandling trusts. If you have a trust and think it will not matter in France, it probably will.
So, What About Assurance Vie?
If trusts cause so many problems, how are people supposed to plan in France?
This is where Assurance Vie comes in. Suggesting that France has its own version of a trust often shocks people, especially notaires. I once said exactly that to a French notaire and was met with a look that suggested I had completely lost the plot.
But if you strip things back, the comparison is hard to ignore.
An assurance vie is not a legal person; it is a relationship. The people in that assurance vie relation are the policyholder (the settlor), the assurance vie provider (the trustees), and the beneficiaries.
Using the same logic as the UK’s HMRC definition of a trust, the roles line up neatly. The policyholder provides the property for the assurance vie. The assurance vie provider holds the assets for the beneficiaries. The beneficiaries then benefit from the assurance vie property. It is a relationship governed by a contract, not a separate legal person.
Like a trust, an assurance vie sits outside the estate for inheritance purposes and has its own tax rules. It allows you to name beneficiaries and decide how benefits are passed on. Many contracts include clauses that allow flexibility very similar to what people expect from a trust.
Of course, there are limits. An assurance vie can only hold money and investments, not property or chattels (personal assets). But in most other respects, it works in a similar way.
After a lengthy discussion about beneficiary clauses and policy options, even my initially sceptical notaire eventually agreed that the comparison made sense.
Final Thoughts
An assurance vie is not the only solution for financial and inheritance planning. Just as trusts are not always the right solution in the UK, planning in France rarely comes down to a single option. There are usually several alternatives you could explore. The right one will depend on your own personal circumstances, family dynamics, and where your assets are held.
That is why getting advice from a French-qualified lawyer or tax adviser is vital; mistakes can be costly, while proper planning makes relocation much easier.”