How French Courts Analyse Trusts: Lessons from a Recent Criminal Case
Introduction
Trusts occupy a unique and often delicate position under French law. While France does not recognize trusts as independent legal persons in its civil system, it does examine their legal and practical effects in tax, criminal, and inheritance matters. A recent ruling by the Cour de cassation (criminal chamber) illustrates how French judges approach trusts — and, importantly, what they look for when assessing control, ownership, and potential misuse of a trust structure.
This article outlines the court’s reasoning, clarifies the distinction between “beneficial owner” and actual control, and highlights the implications for trustees, settlors, and beneficiaries connected to France.
1. The Case: When Criminal Seizure Meets Trust Law
In a tax fraud case involving approximately €94 million, the French authorities sought to seize assets held within a trust. The Court of Appeal had authorized the seizure based solely on the accused’s status as “beneficial owner” of the trust under French tax law.
The Cour de cassation overturned this decision, ruling that such a designation is insufficient on its own to justify criminal seizure.
This distinction matters, because “beneficial owner” under French tax rules is a disclosure concept — not a presumption of actual control.
2. Beneficial Ownership vs. “Free Disposal”: Two Separate Concepts
Under French criminal law, assets can be seized if the accused:
owns them directly, or
has free disposal over them.
“Free disposal” means the effective ability to use, sell, transfer, or otherwise control the asset.
The court emphasized that the concept of “beneficial owner” (used for tax reporting or anti-money-laundering purposes) does not automatically establish free disposal. It merely identifies individuals connected to the trust — settlor, beneficiary, protector, etc.
To justify seizure, the authorities must show real, factual control over the trust assets.
3. How the Court Says Trusts Must Be Analysed
The ruling clarifies that French courts must examine:
the effective functioning of the trust,
the terms of the trust deed,
the powers of the trustee,
any reserved powers of the settlor,
the rights to distributions,
and the practical decision-making processes.
It is a functional, not formalistic, analysis.
Labels such as settlor, beneficiary, or protector are relevant, but not determinative.
The key question is:
Who, in practice, can make decisions regarding the assets?
This approach requires a detailed factual review — not a shortcut based on formal designation.
4. Trusts Are Not Ignored in France — Nor Are They Presumed Abusive
The judgment confirms two important points:
Trusts are not dismissed as meaningless structures under French law.
Their effects and internal mechanics must be analysed seriously.Trusts are not presumed fraudulent.
A trust may serve legitimate protective or estate planning purposes.
What matters is whether its structure is genuine or whether it conceals actual ownership or control.
This balanced approach is consistent with how French tax authorities and civil courts increasingly treat trusts: with scrutiny, but also with recognition of their legitimacy when properly structured.
5. Practical Implications for Families and Trustees
The ruling reinforces several operational principles:
Proper governance matters.
Trustees must exercise real decision-making power, and their independence should be documented.Documentation is essential.
Minutes, letters of wishes, trust agreements, and distribution guidelines may be examined by French authorities.Settlor reserved powers must be evaluated.
Excessive settlor control increases exposure to claims of free disposal — with consequences in tax, criminal, or inheritance contexts.Distributions to French-resident beneficiaries must be tracked precisely.
The factual pattern of control may shift over time.Sham trusts will not withstand scrutiny.
If the trust is effectively controlled by the settlor, French courts will treat it accordingly.
For legitimate estate planning structures, however, the ruling offers reassurance: properly administered trusts can withstand judicial examination.
Conclusion
The recent Cour de cassation decision illustrates France’s pragmatic yet rigorous approach to trusts. Courts will neither ignore trusts nor assume they are abusive. Instead, they will examine the trust’s actual functioning to determine whether an individual has real control over assets. For international families with trust structures and French connections, this underscores the importance of proper governance, documentation, and legal review.
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