Recently, it was proposed that the son of a client, who resides in France, be appointed as executor and trustee of a highly protective UK trust will.

While the intention — keeping control within the family — was understandable, our analysis revealed that doing so could seriously compromise the integrity and protection of the structure.

Here’s why.

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1. France Does Not Recognise UK-Style Trusts

France operates under a civil law system and does not recognise common law trusts.

Under French tax law (Articles 792-0 bis and 990 J of the French Tax Code), France applies a “look-through” approach. The French authorities treat the trust assets as if they still belong directly to the settlor or beneficiaries, rather than the trust itself.

This approach effectively removes the privacy and asset protection that a UK discretionary trust is designed to provide.

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2. French Taxation and Penalties

If any trustee or beneficiary is resident in France, the French tax authorities can impose:

• Annual wealth tax (IFI) on the French resident’s share of trust assets;

• Gift or inheritance tax, as if the trust did not exist; and

• Severe penalties for non-declaration — including fines of up to €20,000 per breach or 12.5% of the trust’s value.

Even though the trust is governed by UK law, a French-resident trustee would still be personally responsible for filing annual trust declarations (Forms 2181-TRUST1 and 2181-TRUST2).

Failure to comply can lead to substantial financial consequences.

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3. Practical and Administrative Challenges

Appointing a trustee or executor living in France can make estate administration significantly more complex:

• Obtaining UK probate from abroad is slower and more expensive;

• Documentation often needs notarisation in both jurisdictions;

• Communication with HMRC, UK banks, and the Probate Registry can be delayed;

• The trustee may need to travel to the UK for key administrative steps.

These factors increase both cost and risk.

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4. Risk of the Trust Becoming Non-UK Resident

If all trustees are resident outside the UK, HMRC may classify the trust as non-UK resident for tax purposes.

This can lead to:

• Unfavourable UK tax treatment, and

• The loss of legal protections available to UK-resident trusts.

For this reason, we strongly recommend having at least one UK-resident trustee to maintain the trust’s UK tax status and compliance.

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5. Cross-Border Compliance and Reputational Risk

A French-resident trustee exposes the trust and family to dual reporting obligations in both the UK and France.

This increases the risk of unintended tax liabilities, delays, or audits, and undermines the stability that our trust structures are designed to deliver.