Can we trust the trust?

The june 23, 2020

What is a trust?

The trust is a legal act under Anglo-Saxon law that does not exist in French law. A person, the settlor, places assets in a sort of legal box, under the control of a trusted third party, called an administrator (trustee), in the interest of one or more beneficiaries who may be the constituent himself or his family.

Why create a patrimonial trust?

The purpose of the patrimonial trust is to protect the family. Creating a patrimonial trust is a way of organizing the management or transmission of one's patrimony.

How does a patrimonial trust work?

The trustee is responsible for managing the assets in accordance with what has been decided by the settlor and in the interest of the beneficiaries of the trust. To carry out its mission, it is invested with important powers over property.

The illustration of the trust through the succession of Johnny Hallyday

In 2014, Johnny Hallyday set up a trust in California, the JPS Trust, in which he placed almost all of his property. He designates himself as trustee. The trust designates Laeticia as the sole beneficiary, and its purpose is to maintain the latter a lifestyle in line with that to which the couple has been accustomed during their life together.
The singer had also made a will in California providing that all of his estate would devolve to his wife, Laeticia.

However, in 2019, the High Court of Nanterre considered that, the singer having had his last residence in France, the law applicable to his succession is French law. Therefore, the estate must devolve under French law and it is not certain that the will drawn up in California is valid: this issue has not yet been decided by the French judge. In all cases, David and Laura will collect part of their father's estate.

When a deceased person had his habitual residence in France at the time of his death, it is in principle in France that his entire estate must be settled.

This rule therefore implies that the JPS Trust is also subject to French law.

However, if French law applies, the effects of the trust and the will for the benefit of persons other than the children of the deceased will be confined to a small part of the estate, called the disposable portion.

So, can we trust the trust?

You have to be vigilant about setting up a trust. Established independently of any wealth strategy, the trust can, as evidenced by the succession of Johnny Hallyday, be a source of great legal uncertainty and even contravene the initial objectives of the settlor.

However, it is in the nature of a trust to offer significant security, leaving no room for arbitrariness, and allowing for simplified organization and foresight of the management and transmission of its assets.

To achieve its asset objectives, it is necessary to put in place a comprehensive and coherent asset strategy in order to eliminate any legal uncertainty. This can go through a trust, but also through other mechanisms known to French law, such as dismemberment, mandate with posthumous effect, fiducie-management, etc., depending on the situation and the objectives of each person.

In summary, we can trust the trust when its implementation is carried out within the framework of a relevant strategy, but in many cases, the mechanisms of French law are sufficient to put in place a strategy that perfectly meets the objectives of each one.

 

Do you want to facilitate the management and transmission of your assets?

Our Wealth A7 advisers, mastering both French and Anglo-Saxon law mechanisms, are available to assist you in setting up an effective and coherent wealth strategy.

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Article by : Vincent IZARD

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