The Hidden Risks of Naming a French-Resident Trustee

Ray Best
Nov 26, 2025
3 min read

Updated: Dec 9, 2025

Understanding the Legal and Tax Pitfalls of Cross-Border Estate Planning

At Wills, Tax & Trusts Ltd, we work exclusively with accountants and professional advisers to protect the wealth, values, and intentions of high-net-worth families. We build our estate planning strategies to last, but a simple misstep in execution can weaken even the strongest structures.

One such risk is the appointment of a non-UK resident trustee or executor, particularly in jurisdictions like France. While keeping control "in the family" often feels intuitive, cross-border legal and tax exposure can dramatically erode the protection benefits of a UK trust will.

Trust & Estate Planning - Wills, Tax & Trusts.

The Case: A French-Resident Trustee

We recently advised on a case where a client wanted to appoint their son, living in France, as both executor and trustee under a UK discretionary trust will. The intention was entirely reasonable: maintain family control and continuity.

However, from a planning and compliance perspective, the consequences would have compromised the integrity of the entire structure.

Here's why.

France Does Not Recognise UK-Style Trusts

France operates under a civil law system. It does not recognise UK discretionary trusts in the same way the UK does under common law. Instead, under French tax rules (articles 792-0 bis and 990 J of the French Tax Code), a "look-through" approach is applied.

This means the trust's assets are treated as if they still belong to the settlor or beneficiaries, stripping away the very privacy, separation, and asset protection that the UK trust was created to provide.

Exposure to French Tax and Penalties

If any trustee or beneficiary is a French resident, the trust becomes subject to French tax reporting and penalties:

Annual Wealth Tax (IFI) may apply to the French resident's share of trust assets.
Gift or inheritance tax may be imposed as if no trust exists.
Non-declaration penalties can reach €20,000 per breach or 12.5% of trust value.

Even if the trust is governed entirely by UK law, a French-resident trustee is personally responsible for submitting annual forms (2181-TRUST1 and 2181-TRUST2) to French tax authorities.

Failure to comply can result in severe financial consequences for both the trustee and the estate.

Administrative Delays and Cross-Jurisdictional Friction

From a practical standpoint, having a non-UK trustee introduces unnecessary administrative complexity:

Executors based abroad significantly delay UK probate processes.
Documentation often requires notarisation in both countries.
Communication with HMRC, UK banks, and the Probate Registry becomes more difficult.
The trustees may need to travel to the UK for key actions.

These delays increase costs and put the estate's administration at risk of non-compliance or mismanagement.

UK Tax Status May Be Lost

HMRC determines a trust's tax residence based on the location of its trustees. If all trustees are non-UK residents, the trust may be deemed non-UK for tax purposes.

This could result in:

Unfavourable tax treatment under UK law.
Loss of access to specific UK legal protections and reliefs.

To maintain tax efficiency and compliance, at least one trustee must remain a UK resident.

Dual Reporting and Reputational Risk

Appointing a trustee with overseas residence—especially in a jurisdiction that treats trusts unfavorably—exposes the structure to:

Dual reporting requirements.
Increased audit risk and scrutiny.
Misaligned tax outcomes between jurisdictions.

Most importantly, it undermines the clarity and stability your clients are relying on when they invest in structured, long-term estate planning.

Our Recommendations

At Wills, Tax & Trusts Ltd, we take a risk-based, practical approach to family wealth protection. In cases involving international family members, we advise the following:

Keep trustees and executors UK residents, ideally with professional support.
Involve overseas relatives as consultants or non-controlling advisers, rather than as formal appointees.
Always seek specialist cross-border legal and tax advice when family members live abroad.

By preserving UK-based control, your clients can retain the full protective power of their discretionary trust structure - and avoid costly compliance failures or administrative delays.