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Trusts USA
By Marc Uzan, French tax lawyer in Paris
US trusts: how are the settlor and the beneficiaries taxed in France?
Tax lawyer in Paris – revocable trusts, irrevocable trusts and Franco-American estates
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 in principle taxed in France, in the cases provided for by law, 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 in principle 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 property wealth tax) purposes.
- Double taxation: the 1978 France–US tax treaty and article 784 A of the CGI allow, subject to conditions, the tax paid in the United States to be credited in France.
Summary
The trust is widely used in the United States to organise the transfer and management of assets, for example for the benefit of children or a spouse. France, whose civil law does not recognise the trust, has created a specific tax regime that disregards the distinction, specific to trusts, 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 in principle file French returns of which it is often unaware. Upfront analysis by a lawyer may, depending on the case, limit the risk of tax at the 60% rate and of 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?
| Type of trust | Features | Point to watch in France |
|---|---|---|
| Revocable trust / living trust | The settlor retains control and may amend or revoke the trust. | It is indeed a trust within the meaning of article 792-0 bis. The assets are in principle taxed on the settlor’s death; real estate is included in the settlor’s IFI if resident in France. |
| Irrevocable trust (including ILIT, dynasty trust) | The settlor can no longer amend it or take the assets back. | For French tax purposes, the assets in principle remain taxable on the settlor’s death, after which the beneficiaries become deemed settlors. |
| Testamentary trust | Created by will upon death. | The transfer follows French inheritance rules; the continuing trust remains subject to the reporting obligations. |
| QDOT (Qualified Domestic Trust) | A trust set up for a surviving spouse who is not a US citizen. | The spouse is in principle exempt from inheritance tax in France (article 796-0 bis), but the trust still has to be reported. |
| Retirement plans held through a trust | Retirement savings linked to employment or professional activity. | Exemption from the article 990 J levy subject to conditions; the Conseil d’État has extended it to individual plans (CE, 7 May 2026, No. 511615). |
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 property 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 inform them. As each situation needs to be analysed, a lawyer’s advice makes it possible to assess whether a regularisation may be appropriate. See also the page on foreign bank accounts.
How to avoid double taxation?
- 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?
- Review of the trust deed by a lawyer: settlor, beneficiaries, trustee powers, revocable or discretionary nature.
- Review of past French filings (2181-TRUST, IFI, income); depending on the case, a regularisation may be considered with your lawyer.
- Documentation of the initial capital, so that future distributions are, in principle, not taxed as income.
- Planning ahead for the settlor’s death: allocation of shares among beneficiaries, which may, depending on the case, help avoid the 45% and 60% rates, and coordination with the will and the choice of law.
- Coordination with US advisers (attorney, trustee, CPA) to gather the documents needed for the French filings and for crediting the tax paid in the United States.
Do your parents have a US living trust? The guide US living trust: what France taxes on the death of the settlor explains, with worked examples, the tax due in France and how to prepare for it.
What I see in my cases
The trusts I come across are set up and managed abroad, and some of their beneficiaries live in France. With US living trusts, what is most surprising are the tax consequences in France: complex taxation and returns, forms 2181-TRUST1 and 2181-TRUST2, that are very little known, sometimes even to the tax authorities themselves.
In the current budgetary context, the tax authorities are paying increasing attention to trusts and to assets held abroad. Hence the value of clear returns and of a file capable of explaining the structure of the trust simply.
Why use a tax lawyer?
- Characterisation of the trust under French tax law and determination of who is taxable.
- Preparation or regularisation of 2181-TRUST filings, limiting penalties as far as possible.
- Characterisation of distributions (capital or income) and defence of that characterisation in the event of a tax audit.
- Organisation of the transfer of wealth and, where possible, credit in France for the tax paid in the United States.
FAQ
I live in France and am a beneficiary of my American parents’ trust: do I have to pay tax in France?
In principle, yes, in several cases. Income distributions received are in principle subject to income tax in France. On the settlor’s death, the assets passing to you may also be subject to French inheritance tax, in particular if you have been domiciled in France for at least 6 of the last 10 years, subject to the France–US tax treaty. Finally, the trust must in principle be reported in France.
Is my US living trust recognized in France?
France does not recognize the trust under its civil law, but it does take it into account for tax purposes. A living trust is a trust within the meaning of article 792-0 bis: if it has a connection with France, it must in principle be declared and its assets are taxed on the settlor’s death as if they still belonged to the settlor. It may also need to be checked for compliance with the French forced heirship rules (réserve héréditaire) where French law governs the succession.
The trustee has never declared the trust in France: what are the risks?
Depending on the case, a fine of €20,000 per missing return, the annual 1.5% levy on real estate assets not reported for IFI purposes, and an 80% surcharge on the tax evaded. The settlor and the beneficiaries may be held jointly and severally liable for payment. As each situation needs to be analysed, a lawyer’s advice makes it possible to assess whether a voluntary regularisation may be appropriate; in some cases, it may limit the consequences.
Is a trust distribution always taxable?
Not necessarily. Distributed income is in principle taxable, but the return of the capital placed in the trust is in principle not subject to income tax. This must, however, be proven with the trust deed, the trustee’s decisions and accounts distinguishing capital from income. A distribution of capital may, on the other hand, be subject to gift or inheritance tax.
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.
QDOT: a US trust set up for a surviving 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
Maître Marc Uzan has been a tax lawyer at the Paris Bar since 2008 and practices tax law exclusively. A graduate of the Master's program in taxation at Université Paris XII 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 October 1, 2026. The information above is general in nature and does not replace an analysis of your personal situation.
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