US trusts: how are the settlor and the beneficiaries taxed in France?

Key points

• A very broad definition: for the French tax authorities (article 792-0 bis of the CGI), any US trust – revocable or living trust, irrevocable trust, testamentary trust, dynasty trust – falls within the French trust regime as soon as it has a connection with France: a settlor or beneficiary domiciled in France, or an asset located in France.
• Inheritance tax: on the settlor’s death, the trust assets are taxed in France according to the family relationship between the settlor and each beneficiary. If the shares are not determined, flat rates of 45% or 60% apply.
• Distributions: income distributed by the trust is taxable in France as investment income (article 120, 9° of the CGI), in principle at the 31.4% flat tax in 2026. A distribution of capital is not income, but the burden of proof lies with the beneficiary.
• Filings and penalties: the trustee must declare the trust in France (article 1649 AB of the CGI, Forms 2181-TRUST1 and 2181-TRUST2); failing this, a €20,000 fine applies, together with an annual 1.5% levy (article 990 J of the CGI) on real estate assets not reported for IFI (French real estate wealth tax) purposes.
• Double taxation: the US estate tax and French inheritance tax are not calculated in the same way; the 1978 France–US tax treaty and article 784 A of the CGI allow, subject to conditions, the US tax to be credited.

Summary

The trust is the basic estate planning tool in the United States: it avoids the court-supervised estate procedure (probate) and organizes the management of assets for children or a spouse. France, whose civil law does not recognize the trust, has created a specific tax regime that disregards the US distinction between legal ownership (legal title) and economic ownership (beneficial interest).

As a result, an American living in France, a French national who set up a trust while living in the United States, or a child residing in Paris who is a beneficiary of their American parents’ trust may be taxed in France, and the US trustee must file French returns of which it is often unaware. Upfront analysis avoids tax at the 60% rate and penalties.

What is a trust for the French tax authorities?

Article 792-0 bis of the CGI defines a trust as all the legal relationships created under the law of a State other than France by a person, the settlor (settlor or grantor), who places assets under the control of an administrator (trustee) for the benefit of one or more beneficiaries.

• The type of trust is irrelevant: revocable or irrevocable, discretionary or not, created during lifetime or by will.
• Beneficiary deemed to be the settlor: after the settlor’s death, the beneficiaries are in principle treated as the new settlors for French tax purposes. Obligations and taxes are therefore passed on from one generation to the next.
• Tax transparency: for inheritance tax, IFI and the article 990 J levy, the French tax authorities attribute the trust assets to the settlor or the beneficiaries, as if the trust did not exist.

Which US trusts are affected?

Which taxes apply in France?

1. Inheritance and gift tax

France taxes trust assets in the same cases as an ordinary estate (article 750 ter of the CGI): settlor domiciled in France (all assets), asset located in France, or beneficiary domiciled in France for at least 6 of the last 10 years. Article 792-0 bis then provides as follows:

• Determined share: if, on the settlor’s death, each beneficiary’s share can be identified, the tax is calculated according to the family relationship between the settlor and the beneficiary (€100,000 allowance and progressive scale up to 45% for a child).
• Global share passing to descendants: flat rate of 45%, with no allowance.
• Unallocated assets or other beneficiaries: flat rate of 60%.
• During the settlor’s lifetime: a distribution of capital to a beneficiary may be taxed as a gift, according to the family relationship.

2. Income tax: distributions

Income distributed by a trust to a beneficiary domiciled in France is taxable as investment income (article 120, 9° of the CGI), regardless of the nature of the income received by the trust (dividends, interest, capital gains). In 2026, the flat tax is 31.4% (12.8% income tax and 18.6% social charges), unless the taxpayer opts for the progressive scale.

The return of the capital originally placed in the trust is not taxable on this basis, but the beneficiary must prove it: trust deed, trustee decisions, accounts separating the capital (corpus) from accumulated income. Without these documents, the tax authorities may tax the entire distribution.

3. IFI and the annual 1.5% levy

• IFI: the settlor, or the beneficiary deemed to be the settlor, domiciled in France includes in their real estate wealth tax the real property and real estate holdings owned by the trust (article 970 of the CGI).
• Article 990 J levy: where the assets are not included in a duly filed IFI return, an annual levy of 1.5% applies to the value of the trust’s real estate assets as of January 1. It is payable by the trustee before June 15, and the settlor and the beneficiaries are jointly and severally liable for it.

What filings and what penalties?

The administrator of a trust whose settlor or a beneficiary is domiciled in France, or which holds an asset located in France, must declare (article 1649 AB of the CGI):

• Form 2181-TRUST1: the creation, amendment or termination of the trust, within one month of the event;
• Form 2181-TRUST2: the value of the trust assets as of January 1, each year before June 15;
• New filing upon transfer: the Law of 25 June 2026 on combating social and tax fraud created an obligation to declare, at the time of the transfer, the identity of the beneficiaries and the information used to calculate the tax.

Penalties: a fine of €20,000 per failure (article 1736, IV bis of the CGI), an 80% surcharge on the tax evaded (article 1729-0 A), extended in 2026 to all assets placed in trust, and an extended limitation period for the tax authorities. Trusts are also recorded in the register of trusts kept by the tax authorities.

In practice, many US trustees are unaware of these formalities: it often falls to the settlor or the beneficiary residing in France to alert them and to regularize the situation, preferably before any tax audit. See also our page on foreign bank accounts.

How do US and French taxes interact?

• Estate tax: US citizens and residents benefit from an exemption of $15 million per person for deaths occurring in 2026. An estate may therefore escape US tax while still bearing French inheritance tax, which applies above €100,000 per child.
• Mismatched rules: an irrevocable trust removes the assets from the US estate, but not from the French estate; conversely, a grantor trust that is transparent in the United States may generate distributions taxable in France.
• Treaty of 24 November 1978: it allocates taxing rights over estates and gifts and provides for a tax credit; applying it to a trust requires identifying the actual deceased or donor and the situation of each asset. Failing that, article 784 A of the CGI allows, subject to conditions, foreign tax paid on assets located outside France to be credited.
• Treaty of 31 August 1994 (income taxes): it applies to distributed income and may give rise to a tax credit for US withholding taxes.
• 1.5% levy: recent case law holds that tax treaties do not automatically override this levy; a case-by-case analysis is required.

How to secure a US trust connected with France?

1. Review the trust deed: settlor, beneficiaries, trustee powers, revocable or discretionary nature.
2. Check past French filings (2181-TRUST, IFI, income) and regularize if necessary.
3. Document the initial capital so that future distributions are not taxed as income.
4. Plan ahead for the settlor’s death: allocate shares among beneficiaries to avoid the 45% and 60% rates, and coordinate with the will and the choice of law.
5. Coordinate with US advisers (attorney, trustee, CPA) to align valuations, timing and tax credits.

Why use a tax lawyer?

• Characterize the trust under French tax law and determine who is taxable.
• Prepare or regularize 2181-TRUST filings and limit penalties.
• Characterize distributions (capital or income) and defend that characterization in the event of a tax audit.
• Structure the transfer of wealth and coordinate French and US taxes.

FAQ

Glossary

Settlor / grantor (constituant): the person who creates the trust and transfers assets to it.

Trustee (administrateur): the person or institution that manages the trust assets.

Revocable trust: a trust that the settlor may amend or revoke during their lifetime.

Grantor trust: a trust whose income is taxed in the settlor’s name in the United States.

QDOT: a trust allowing the US marital deduction for a spouse who is not a US citizen.

Beneficiary deemed to be the settlor (bénéficiaire réputé constituant): a beneficiary treated as the settlor by the French tax authorities after the settlor’s death.

Further reading

• Articles 750 ter, 784 A, 792-0 bis, 970, 990 J, 1649 AB, 1729-0 A and 1736 of the CGI.
• BOI-DJC-TRUST and BOI-ENR-DMTG-30: French tax authorities’ guidelines on the taxation of trusts.
• France–United States tax treaty of 24 November 1978 (estates and gifts) and treaty of 31 August 1994 (income taxes).
• See also: France – United States inheritance, UK trusts, USA or UK / France inheritance.

About the author

Me Marc Uzan is a tax lawyer in Paris who has practiced tax law exclusively for more than 20 years. A graduate of the Master’s program in taxation at the Paris University of Law and of ESSEC, and holder of the DSCG, he assists individuals and families with their international tax matters: cross-border inheritance and gifts, foreign accounts, impatriation and expatriation, tax audits.

Page updated on September 26, 2026. The information above is general in nature and does not replace an analysis of your personal situation.

Book an appointment with Me Uzan – consultation at the office (Paris 9th arrondissement), by video call or by telephone.