You set up an English discretionary family trust years ago, on the advice of a London solicitor, to hold the family money outside any one person’s estate. The trust now owns, or is about to receive, a house in the Dordogne, in Provence or on the Atlantic coast. You yourself have moved to France since Brexit, or you plan to. The question that follows is always the same: does France respect the trust screen, so that nobody is taxed until the trustee actually pays something out? The short answer is no. France looks straight through the English trust, treats the settlor or the beneficiaries as if they still owned the assets, and taxes them year after year. In December 2025 the Paris tax court confirmed that approach in two judgments against two beneficiaries of the same Guernsey-law trust, who had argued that a discretionary and irrevocable structure gave them no taxable capacity at all. Both lost. This guide explains, for a British reader, what France calls a trust, which French links switch the French rules on, what the yearly bill looks like for a French house held through a trust, what happens when the settlor dies, and how to challenge an assessment you consider wrong. French terms are translated the first time they appear.

I. Does France recognise my English trust, and when does it start taxing me?

A. What France calls a trust and which French links switch the rules on

French domestic law never imported the English trust. It created its own contract, the fiducie, which is a different animal with a different statute book. When your arrangement comes from England, Wales, Guernsey, Jersey or the Isle of Man, France does not reclassify it as a fiducie. It applies a special tax definition written for foreign trusts. That definition sits in the French tax code, the code général des impôts, at article 792-0 bis, and it reads as follows: “Pour l’application du présent code, on entend par trust l’ensemble des relations juridiques créées dans le droit d’un Etat autre que la France par une personne qui a la qualité de constituant, par acte entre vifs ou à cause de mort, en vue d’y placer des biens ou droits, sous le contrôle d’un administrateur, dans l’intérêt d’un ou de plusieurs bénéficiaires ou pour la réalisation d’un objectif déterminé.” In plain English: any legal relationship created under non-French law by a settlor, the constituant, who places property under the control of a trustee, the administrateur, for beneficiaries, the bénéficiaires, or for a stated purpose, counts as a trust for French tax purposes. Your English family trust, your Guernsey discretionary trust and your Jersey accumulation trust all fall inside that sentence. Nothing in the definition spares trusts set up decades ago, trusts that have never paid out, or trusts whose beneficiaries hold only contingent hopes rather than fixed shares.

The second mechanism to grasp is the deemed settlor. The same article provides: The same article then deems each beneficiary to stand in the settlor’s shoes, for the assets concerned, once the original settlor has died and for assets already taxed through the trust regime, a mechanism introduced by the 2011 amending finance law, the loi de finances rectificative pour 2011, which built the whole French trust tax system. Once the original settlor has died, or once assets have already been taxed through the trust regime, each beneficiary is treated as a settlor in turn for the assets concerned. The tax follow is therefore hereditary: the trust never becomes ownerless for French purposes, and each generation of beneficiaries inherits the tax status along with the economic interest. If you are the adult child of the couple who settled the trust in the nineteen nineties, and both parents have died, France will generally look at you, not at some abstract trust fund, when it asks who is liable.

The rules switch on as soon as one French link exists, and the links are drawn widely. The official tax commentary, the Bulletin officiel des finances publiques, in BOI-DJC-TRUST, lists five alternative triggers for the trustee’s reporting duties: the settlor or deemed settlor is a French tax resident; at least one beneficiary is a French tax resident; at least one trust asset is situated in France; the trustee is a French tax resident; or a non-European Union trustee buys French property or enters a business relationship in France. Any single trigger is enough. A retired couple living year-round near Sarlat, with a Guernsey trustee and a house held through the trust, meets at least two triggers at once. A beneficiary who spends the whole year in Manchester but whose trust holds a Paris flat meets the asset trigger alone. French tax residence itself follows article 4 B of the tax code: “Sont considérées comme ayant leur domicile fiscal en France au sens de l’article 4 A : a. Les personnes qui ont en France leur foyer ou le lieu de leur séjour principal”. Your home, where your family lives and where you spend most nights, decides the matter far more than your passport or your domicile under English law.

Brexit changed the background without changing the definition. Before 2021 an English trustee was a European Union trustee; since 2021 the United Kingdom, Guernsey, Jersey and the Isle of Man are third countries for European Union law purposes. That matters in two places. First, the anti-avoidance rule of article 123 bis of the tax code taxes a French resident on the undistributed profits of a foreign entity held at ten per cent or more and subject to a privileged tax regime. Since 2022 the statute adds an express presumption under which a settlor or deemed-settlor beneficiary of a trust automatically meets the ten per cent holding test. A settlor or deemed settlor is therefore caught without any further measurement of the interest held. The escape route for trusts from states without full assistance arrangements is narrow, because the taxpayer must show that the structure mainly serves non-tax purposes, and the statute closes the easiest line of defence in advance by providing that rebuttal cannot rest solely on the trust being irrevocable combined with a discretionary trustee. Irrevocable plus discretionary, on its own, proves nothing. That sentence, added to the statute, now mirrors what the courts had already been saying for years, as the December 2025 Paris judgments show.

Second, several exemptions in the trust regime turn on whether the trustee’s home state has signed an administrative assistance convention with France for fighting fraud and evasion. Whether a given Crown Dependency arrangement satisfies each precise test has to be checked file by file, because the income, wealth and succession provisions each phrase the condition slightly differently. The practical point for a British family is that the trust deed’s governing law clause, often chosen decades ago for English-law comfort, now carries French tax consequences that nobody foresaw at the time. Keep the deed, the letters of wishes, the trustee minutes and every amendment together and have them translated, because the French tax office, the administration fiscale, will ask for them, and the Paris courts read them line by line.

B. The yearly bill for holding French property through a trust: wealth tax, the safety levy and the trustee’s filings

The recurring charge is the French wealth tax on property, the impôt sur la fortune immobilière, known as IFI. It taxes the net value of French and, for residents, worldwide property above a threshold, which is currently 1.3 million euros. Article 970 of the tax code pulls trust assets into that tax by adding the 1 January market value of the article 965 property assets placed in the trust to the personal wealth-tax base of the settlor or, as the case may be, of the beneficiary deemed to be a settlor. Article 965 defines the taxable base, essentially the net value of property rights and of shares to the extent they represent property. So the Dordogne house inside your trust is added, at its open-market value on 1 January each year, to the personal IFI base of the settlor or, if the settlor has died, of the beneficiary treated as settlor, with debts deductible under the normal IFI valuation rules. There is only one genuine way out of that inclusion, and it helps almost no British family: “Le premier alinéa du présent article ne s’applique pas aux trusts irrévocables dont les bénéficiaires exclusifs relèvent de l’article 795 ou sont des organismes de même nature relevant de l’article 795-0 A et dont l’administrateur est soumis à la loi d’un Etat ou territoire ayant conclu avec la France une convention d’assistance administrative en vue de lutter contre la fraude et l’évasion fiscales”. Irrevocable charitable trusts for public-interest bodies may escape; the ordinary family trust for spouse and children never does.

Below the IFI threshold, or where the taxpayer has filed properly, a second charge waits in the wings. Article 990 J of the tax code imposes a flat annual levy, the prélèvement sui generis, in these terms: “Les personnes physiques constituants ou bénéficiaires d’un trust défini à l’article 792-0 bis sont soumises à un prélèvement fixé au tarif le plus élevé mentionné au 1 de l’article 977.” The scale in article 977 runs from zero to a top band reading “Supérieure à 10 000 000 € 1,50”, so the highest rate is 1.50 per cent. The levy therefore costs 1.5 per cent each year of the net 1 January value of the property assets in the trust. It works as a backstop: it is not due on assets that were properly included in someone’s IFI base and declared, nor on assets declared under the trust reporting rules by a taxpayer below the IFI threshold, but it falls in full where nothing was declared. The trustee pays it, and the statute sets a hard calendar date: “La consistance et la valeur des actifs mentionnés à l’article 965 placés dans le trust sont déclarées et le prélèvement est acquitté et versé au comptable public compétent par l’administrateur du trust au plus tard le 15 juin de chaque année.” Miss that date, and the family answers with its own money: “A défaut, le constituant et les bénéficiaires, autres que ceux mentionnés aux a et b du présent III, ou leurs héritiers sont solidairement responsables du paiement du prélèvement.” Joint and several liability means the tax office can pursue any one of you for the whole sum.

The paperwork behind those charges rests on the trustee, not on the family, but the family pays the fine when the trustee defaults. Under article 1649 AB of the tax code, as explained in the official commentary, two returns are required: an event-based return covering creation, amendment and termination, with the trust terms attached, and the annual return states the 1 January market value of everything inside. An annual return stating the 1 January market value of everything placed in the trust, including capitalised income, must then be filed each year by 15 June with the non-residents’ tax office, the recette des non-résidents, in French, on the official form 2181-TRUST2. The reported details are then kept for ten years in a register administered under the budget minister, which is an administrative register, not a public one. Many British families discover this duty only when a French notaire, asked to handle a sale or a succession, refuses to move until the trust filings are in order, or when the tax office writes first. A Guernsey or London trustee who has never filed in France is common, and the trust deed sometimes even forbids the trustee from disclosing information, which changes nothing under French law.

The price of silence is fixed and heavy. The official sanctions commentary, BOI-CF-INF-20-10-50, provides for a 20,000 euro fine per breach of the article 1649 AB reporting duties, under article 1736 IV bis of the tax code. Twenty thousand euros per breach, and the commentary adds that under article 1754 of the tax code the settlor and the deemed-settlor beneficiaries are jointly liable with the trustee for that fine where the backstop levy applied. That fine sits on top of the tax itself, on top of late-payment interest, and on top of the 1.5 per cent levy for undeclared years. A family that has held a two-million-euro Provençal villa through an undeclared trust for several years can therefore face the IFI or the levy for each year, plus one or more 20,000 euro fines, plus interest. Regularising late is painful but almost always cheaper than waiting for the tax office to compute the same bill with penalties, because voluntary disclosure at least stops the accumulation of undeclared years and reopens the IFI-declaration shield against the levy.

The English side of the mirror has its own register. His Majesty’s Revenue and Customs, HMRC, runs the Trust Registration Service, and the official guidance requires registration of any UK resident trust liable to Capital Gains Tax, Income Tax, Inheritance Tax or the stamp duties on UK assets or income, adding that deliberately created express trusts must register even with no tax bill unless excluded as Schedule 3A trusts. An express trust deliberately created by deed, which covers nearly every British family trust, is therefore registrable in London at the same time as it is declarable in Paris. The two systems do not talk to each other for these purposes, so registration in one country never excuses filing in the other. Trustees who assumed that a dormant family trust needed no attention anywhere are usually wrong in both countries at once. Full official detail sits on the government’s trust registration guidance, which your trustee should read alongside the French commentary.

II. Passing the house on and fighting the tax office when it says no

A. What happens to the trust assets when the settlor dies: the 45 and 60 per cent bands

Death does not close the French trust file; it opens the succession chapter. Article 750 ter of the tax code already lists, among assets caught by French death and gift duties where the deceased or donor was French-domiciled, “les fonds publics, parts d’intérêts, biens ou droits composant un trust défini à l’article 792-0 bis et produits qui y sont capitalisés”. Article 792-0 bis then grades the bill according to how precisely the trust points at particular beneficiaries. Where a fixed share is due to an identified beneficiary, that share bears death duties according to the family link between the settlor and that beneficiary, so a share passing in substance from parent to child is taxed on the direct-line scale. Where a fixed share is due globally to the settlor’s descendants as a group, the statute sends it to death duties at the rate of the last band of Table I of article 777. Article 777 sets the direct-line scale whose last band reads “Au-delà de 1 805 677 € 45”, so the top direct-line rate is 45 per cent. Everything else, the floating remainder that the trustee may one day appoint among a wider class, bears death duties at the rate of the last band of Table III of the same article 777, and Table III provides that transfers “Entre parents au-delà du 4e degré et entre personnes non-parentes” are taxed at 60 per cent.

That 60 per cent rate, the highest in the French succession system, also applies automatically in two warning cases the statute singles out: where the trustee answers to the law of a non-cooperative state or territory, or where the trust was created after 11 May 2011 by a settlor who was then French-domiciled, in which case gift and death duties apply at the rate of the last band of Table III of article 777. A British family that moved to France in 2015 and settled a new Jersey trust in 2018 to receive the French house falls squarely into that second warning case, and the 60 per cent rate then applies regardless of how closely related the beneficiaries are. The trustee pays the duties within the normal succession deadlines and files a detailed estimated return naming the beneficiaries with everything needed to assess and compute the tax; where the trustee sits in a non-cooperative or no-recovery-assistance state and does not pay, the beneficiaries are jointly liable and must file the return themselves. Because the duties on the identified shares are computed by adding the trust assets to the other estate assets for the progressive scale and the family allowances, the trust never enjoys a separate, milder scale: it is dragged into the ordinary French succession computation, usually at its heaviest end.

Two planning points follow directly. First, the English will remains essential but cannot do the whole job. A choice of English law for the succession, which many British owners make under the European Succession Regulation, governs who inherits, while the French tax computation described above governs how much tax is due; the two questions are separate, and getting the first right never fixes the second. Readers who have not yet made that choice should read our companion guide to choosing English law for a French house and keeping children protected before instructing their notaire. Second, lifetime distributions from the trust are taxed as gifts under the same article, with the relationship scale for identified shares and the top Table III rate where the settlor-trust warning conditions are met, so emptying the trust early to dodge the death chapter usually just brings the same rates forward. The consistent lesson is that the trust changes who administers the French house, never the French tax rate applied to it.

B. Two Paris defeats in December 2025: why discretionary and irrevocable did not save the beneficiaries, and how to challenge an assessment

The strongest recent illustration comes from the tax chamber of the Paris judicial court, the tribunal judiciaire de Paris, which on 11 December 2025 gave two judgments, case numbers 23/00260 and 23/00261, against two beneficiaries of the same Guernsey-law trust, called Optima, after an earlier trust called Quorum had transferred its assets to Optima in 2011. The tax office had kept the beneficiaries inside IFI on the trust assets; the beneficiaries had claimed a full discharge, arguing that they drew no taxable capacity from the trust because the trustee held absolute discretion, they controlled nothing, they received no direct or indirect benefit, and the trust was irrevocable. The cases had started with writs served on 20 October 2022, ran through closing submissions in 2025, and were heard on 23 October 2025, which shows the timescale of French tax litigation: over three years from writ to judgment at first instance, with an appeal still available since both judgments were given at first instance. The amount originally in dispute in the lead case was 12,222 euros, a reminder that families litigate these points on principle even where the yearly sum looks modest, because every later year depends on the same principle.

The court’s reasoning is a checklist of everything that fails. It recalled the statutory definition of article 792-0 bis, the IFI inclusion of article 970, and the anti-avoidance presumption of article 123 bis in its post-2022 wording, under which rebuttal cannot rest on irrevocability plus a discretionary trustee alone. It then applied the constitutional safety valve the beneficiaries invoked: decision 2017-679 QPC of 15 December 2017, by the Constitutional Council, the Conseil constitutionnel, which lets a settlor or beneficiary prove that the trust gives no taxable capacity, understood as the direct or indirect advantages, including non-pecuniary ones, the taxpayer may draw from the assets or their income, a valve relayed in the administration’s own commentary at BOI-PAT-IFI-20-20-30-20. The burden of that proof lies on the taxpayer, and the court found it had not been met. The trust deed gave the trustee very broad powers exercisable in absolute discretion, including choosing distributions and moving the trust to another jurisdiction than Guernsey, yet the same deed obliged the trustee to pay an annual sum to a family member, a letter of wishes steered the trustee against selling the main house, a loan had passed through the trustee to a son of the family, the assets had already migrated once from Quorum to Optima, and clause 26 of the deed stated the irrevocability of the settlement terms rather than of the trust itself. The beneficiaries, the court held, kept financial rights in the arrangement. The court therefore held that the claimant, who bore the burden of proof, had not shown that the trust gave him no taxable capacity, and it confirmed the tax office’s tacit rejection, dismissed all of his claims and ordered him to pay the court costs. The companion case against the second beneficiary ends identically, with dismissal, costs, and no order for legal-expenses reimbursement. Two beneficiaries, two dismissals, one message: paper discretion plus a paper letter of wishes does not erase taxable capacity where money, housing or influence actually flows.

If you receive an IFI assessment, a backstop levy notice or a 20,000 euro fine connected with a trust, the route those two families took is the route available to you. The pattern is a written claim to the tax office first, then, after an express or tacit rejection, a writ to the judicial court, which in Paris means the specialised tax chamber that decided the Optima cases. Build the file the way the losing files show it must be built: complete trust deeds with every amendment, letters of wishes, trustee resolutions on distributions, bank statements showing who actually received or used what, valuations at each 1 January, copies of every 2181 event and annual return filed, and proof of UK Trust Registration Service registration where relevant. Argue capacity, not labels: what the court weighs is who could use the house, who received money, who directed the trustee and who could remove or replace the trustee, never the adjectives discretionary and irrevocable standing alone. Where the file shows genuine non-receipt, for example a beneficiary who truly never benefited while another branch of the family enjoyed everything, the constitutional valve remains open and should be argued with evidence for each year, because IFI is an annual tax and capacity is assessed year by year. Where the file instead shows family use of the villa, school fees paid, or loans routed through the trustee, settlement or regularisation will usually cost less than three more years of litigation ending the Optima way.

Regularisation itself follows a fixed order. First, reconstruct the trust history from creation, listing settlors, trustees, protectors, beneficiaries and every distribution or appointment, with dates. Second, have the trustee file the missing event returns and the missing annual 1 January valuations, in French, through the non-residents’ office, keeping proof of filing for each year. Third, correct the personal returns: include the property in the IFI base of the settlor or deemed-settlor beneficiary for each open year, or document below-threshold status, so that the filed declarations switch off the 1.5 per cent backstop levy for those years under article 990 J. Fourth, deal with the fines: the 20,000 euro penalty per breach and the joint liability of settlor and beneficiaries mean the trustee’s filing failure becomes the family’s debt, and any claim for leniency must be reasoned with facts, not with surprise at a system that has existed since 2011. Throughout, keep the English and French positions consistent: a distribution described as capital to HMRC and as nothing to Paris, or a beneficiary disclaimed in London but disclosed in Paris, creates the kind of contradiction the Optima court exploited. Coherence across both countries is not courtesy; it is evidence.

Conclusion

An English family trust holding a French house, or holding the money that will one day buy it, lives under French tax rules from the moment a settlor, a beneficiary, the trustee or an asset touches France. The definition in article 792-0 bis catches the arrangement, the reporting duties fall on the trustee with a 15 June deadline each year, the IFI inclusion of article 970 taxes the settlor or the deemed-settlor beneficiary on each 1 January value, the 1.5 per cent levy of article 990 J backstops every undeclared year, the 20,000 euro fine punishes each reporting breach, and the succession scale takes up to 45 per cent in the direct line and 60 per cent beyond it. The two Paris judgments of December 2025 prove that none of this yields to the words discretionary and irrevocable alone: the court read the deed, the letter of wishes, the loan and the earlier migration of assets, found real financial rights behind the paper discretion, and dismissed both claims with costs. The families who fare best are those who file early, value honestly, keep London and Paris filings consistent, and challenge assessments with evidence of real non-receipt rather than with adjectives. The trust can still administer the French house efficiently across generations; it simply cannot make the French tax disappear.