This article was prepared as a legal studies research paper at the Robert H. McKinney School of Law in Indianapolis by a graduating student, an LL.M. graduate and an associate professor to describe the introduction of trusts in France, a civil law country, and to consider possibilities for future expansion of trust law in that country.1 This topic was intriguing to me as an estate planner because I have some clients who reside or own a residence in a European country.
The article begins with a survey of the common law trust: its origins; the tri-party relationship of trustor, trustee and beneficiary; the various types of trusts; and the numerous reasons for creating one. A reader with a working knowledge of trusts can review this section very quickly because its sole purpose is to set the stage for differentiating between common law and civil law regimes.
The next section explores the fundamental precepts of civil law. Civil law is primarily the product of legislation. Judicial interpretation plays a relatively minor role. The authors stress that the purpose of law in France is to organize society and personal conduct and is interpreted to control personal conduct and decisionmaking in a much broader sense than in a common law jurisdiction. The authors point to two components of civil law in France that have impeded the development of trusts: forced heirship rights and the absolute right of unified and indivisible ownership of property. Thus, the owner of property in France has an absolute right to use and enjoy the property and the right to dispose of it. French law has never recognized the separation of legal and equitable ownership.
The article then explores the limited uses of trusts in France to date and the forces that are likely to propel a broader application of the trust concept. In 2007, French law introduced the “fiducie.” The fiducie is a trust-like legal instrument. It has three parties: a trustor (the constituent), which may be an organization or a natural person; a trustee, which can only be a banking, insurance or financial professional or an attorney; and one or more beneficiaries. However, the only forms of fiducie currently authorized are: (1) a trust to provide a lender with an interest in property that can secure repayment of a debt, and (2) a management trust with the purpose of authorizing the trustee to hold, invest and manage assets for the benefit of the constituent. The fiducie isn’t an instrument for the transmission of wealth from the constituent to the beneficiaries.
In 2012, the European Union states passed a regulation with the goal of harmonizing the laws of succession among the member states. The regulation provides for unity of the succession law, specifies that a succession should be governed by the law of the deceased person’s “habitual residence” and provides for a European Certificate of Succession that allows people to prove, without legal formalities, their statuses and rights as heirs, executors or administrators. All EU member states are required to modify their laws to adopt this regulation by Aug. 17, 2015. The authors predict that compliance with this regulation will cause greater acceptance of the trust concept in France.
The article then discusses the important role that the French notaire is likely to play in promoting the fiducie as a wealth management instrument. Many individuals in the United States find the position of notaire a little mysterious and confuse it with our concept of a notary public. The article does a good job of describing the training and qualifications of a notaire, the role of the notaire to advise clients about wealth planning and asset transfers and the authority of a notaire to authenticate wills, contracts and other legal documents under French law.
This article provided insights into traditional civil law constructs in France and the emergence of a trust-like instrument that may pave the way for trusts to be used as wealth transfer vehicles. However, it left unanswered whether there have been any similar developments in the other EU member states that have civil law traditions. It also predicted that the concept of forced heirship would be incompatible with trusts and would have to be modified. However, the article didn’t discuss the co-existence under the law of many U.S. states of trusts with spousal elective shares, homestead exemptions and other laws that, like forced heirship, protect members of the immediate family from being disinherited.
1. This paper is scheduled to be published by the Robert H. McKinney School of Law Review. The version reviewed here may not be the final published version.