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New rules in France mean that expats with trusts may have to take measures to avoid penalties

For those moving to live in France, the list of things to think about before emigrating is substantial. As well as the practical things to deal with, there are likely to be a few legal and financial items too. Unfortunately, that list has just become a bit longer, if we add on trusts and the impact of some new tax rules from 2011, which really start to bite come June 15 this year.

Expats resident in France may have to take action before then, to avoid trust penalties. The outline below will give you an idea of what to look out for, to see if you might be affected.

Why did things change?

The background to all of this was a desire in France to target situations where families have their wealth held in trusts. While trusts are not really part of French law, France has now created a special way to tax them and find out more about the wealth held in them. Disclosure plays an important role in these new rules.

What is a trust?

Trusts are bread and butter in the UK as a way of holding assets for the benefit of more than one generation. They are a useful way of protecting property held outside the estates of family members, yet the trustees can still give access to those assets. People can set them up when alive, or write them into their will. Life insurance (Other OTC: LINS.PK - news) policies can be held in trust, for example, as well as share portfolios and other assets.

To understand the impact of the new French rules, you need to know about the three key parties to a trust:

Settlor: this is the person(s) who set up the trust and gifted the assets to it.

Trustees: these are the people who administer the trust, and the trust property is generally held in their names.

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Take action to avoid French penalties on trusts