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Trust

Between Flexibility & Simplicity

Settlor

(Transfers ownership of assets, property, rights or securities)

The assets, property, rights or securities are completely removed from the estate.

The Trustee must be a credit institution, an investment firm, an insurance company or a lawyer.

Trustee

(Management for a purpose determined by the Settlor for the benefit of one or more beneficiaries)

Beneficiary

(May be the same person as the Settlor)

The Trust

The trust, French-style

Finally, French law allows the use of trusts, a highly flexible tool that is simple to set up and similar to the Anglo-Saxon trust. The trust was instituted by Act no. 2007-211 of 19 February 2007 and defined in Articles 2011 et seq of the Civil Code as follows:

"A transaction whereby one or more settlors transfer property, rights or securities, or a collection of property, rights or securities, present or future, to one or more trustees who, holding them separate from their own assets, act for a specific purpose for the benefit of one or more beneficiaries.

The transferred assets will form a separate estate, distinct from the trustee’s personal assets. This is how the concept of "special-purpose assets" is recognised in French law.

Initially, the trust was limited to legal entities only, which was abolished with the admission of individuals by Ac 2008 - 776 of 4 August 2008 in its Article 18, as well as by Order 2009 - 112 of 30 January 2009.

However, persons under guardianship and minors are excluded (arts. 509, 5º and 408-1 of the Civil Code).

The trust is a contract. It is based on the will of the parties. It is therefore governed by the general law of obligations.

THE MAIN ADVANTAGE?

Trust allows the transfer of assets and liabilities in a tax-neutral manner.

The potential remedies are numerous and may be of interest to company directors, businesses or individuals wishing to protect a diversified wealth and portfolio management companies.

THE TRUST

what is this tool for?

Corporate officers’ assets suffer from inadequate protection. In a certain number of tax or criminal cases, they cannot be protected by a declaration of exemption from seizure. The trust is then a potential solution.

  • In the event of insolvency proceedings, the possibility of protecting part of the company’s assets.
  • Possibility of allocating a certain asset to a specific debt, the rest of the assets thus being protected.
  • Possibility of isolating the management of goodwill from other activities.
  • In-house management of funds from employee savings plans, thus saving management fees.
  • Cooperation between companies without the creation of a JV (Joint Venture).

  • Protection of estates and transfers with safeguards regarding the disposal of assets.
  • A way of organising the management of an estate in the absence of the owner.
  • For Business Angels:
  • Tax neutrality.
  • There is no limitation on the amounts invested and/or the number of investors.
  • Simplicity of the legal tool.

THE TRUST

How does it work?

The trust was instituted by Act No. 2007-211 of 19 February 2007 and defined in Articles 2011 et seq. of the Civil Code as follows:

"A transaction whereby one or more settlors transfer property, rights or securities, or a collection of property, rights or securities, present or future, to one or more trustees who, holding them separate from their own assets, act for a specific purpose for the benefit of one or more beneficiaries.

The transferred assets will form a separate estate, distinct from the trustee’s personal assets. This is how the concept of "special-purpose assets" is recognised in French law.

Initially, the trust was limited to legal entities only, which was abolished with the admission of individuals by Ac 2008 - 776 of 4 August 2008 in its Article 18, as well as by Order 2009 - 112 of 30 January 2009.

However, persons under guardianship and minors are excluded (arts. 509, 5º and 408-1 of the Civil Code).

The trust is a contract. It is based on the will of the parties. It is therefore governed by the general law of obligations.

The trust must be express, as it cannot be presumed or implied.

THE CONTRACT

Must be concluded in writing and contain the following mandatory information:

  • Indication of the assets (real estate, chattels of all kinds, tangible or intangible, present or future but determinable), securities and rights transferred;
  • Identity of the settlor(s) and trustee(s);
  • Designation of beneficiaries or rules for their designation;
  • Duties of the trustee and scope of its powers;
  • Term of the trust, limited to 99 years (prior to 6 August 2008, the maximum term was 33 years);
  • In the case of a trust concluded as a security, the secured debt and the estimated value of the property or right transferred in the trust assets (Civ. Code, art. 2372-2 and 2488-2, new).

The trust agreement generally ends with the death of an individual settlor, except in the case of a security trust, by its maturity or by the achievement of the purpose pursued when this occurs before its term.

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