FRANCE Law and Practice Contributed by: Elodie Mulon, Jennifer Tervil, Romane Lemaitre and Emmanuelle Bonboire-Barthélémy, Chauveau Mulon & Associés
3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities To address the lack of civil recognition of trusts while still acknowledging their potential advantages, France introduced in 2007 a legal mechanism that shares cer - tain features with a trust ‒ particularly the tripartite relationship between three parties and a structure designed to withstand the settlor’s insolvency. Law No 2007-211 of 19 February 2007 established the fiducie under French law, defining it as “an operation by which one or more settlors transfer assets, rights or securities, or a set thereof, present or future, to one or more fiduciaries who, keeping them separate from their own estate, act for a specific purpose for the benefit of one or more beneficiaries.” This agreement, governed by Articles 2011 to 2030 of the French Civil Code, can notably be used for asset management on behalf of a vulnerable adult, or for administering corporate assets to facilitate intergenerational wealth transfer. An entrepreneur, for instance, may use it to safeguard professional assets by anticipating personal vulner - ability and avoiding the appointment of an inexpe - rienced court-appointed guardian. The entrepreneur can appoint a fiduciary who will manage the assets and ensure they are transferred under more favourable conditions. However, gratuitous transfers ( fiducie-libé - ralité ) are expressly prohibited. Unlike the trust, which is governed by the rules of equity, the fiducie is a contract subject to the law of obligations, allowing for greater contractual freedom within the limits of what is legally permissible. Never - theless, it must comply with mandatory provisions, and where community property or jointly held assets are involved, it must be executed by notarised deed under penalty of nullity. As for foundations, these are legal arrangements whereby individuals or legal entities irrevocably dedi - cate assets, rights, or resources to the pursuit of a not- for-profit public-interest purpose (Article 18 of Law No 87-571 of 23 July 1987 on philanthropy). Therefore, they are not typically used as estate planning tools
Legal Qualification of Digital Assets Digital assets are defined by Article L. 54-10-1 of the Monetary and Financial Code as including two main categories: • tokens defined in Article L. 552-2, excluding those that meet the characteristics of financial instru - ments or bearer bonds; and • any digital representation of value that is not issued or guaranteed by a central bank or public authority but is accepted as a means of exchange and can be transferred, stored or exchanged electronically. These assets, including cryptocurrencies, do not have the legal status of legal tender. They are considered movable property, which is important for their treat - ment in the context of inheritance. Treatment of Digital Assets in Inheritance In inheritance law, digital assets are treated as mova - ble property. As such, they are included in the taxable base for inheritance taxes when transferred without consideration. This means that their value must be declared and taken into account for the calculation of inheritance or gift taxes, in accordance with the rules applicable to movable property. Digital assets held abroad must be declared by indi - viduals domiciled in France, under Article 1649 bis C of the CGI. This reporting obligation aims to allow the tax administration to control these assets in the context of inheritance. Tax Implications of Transmitting Digital Assets The transmission of digital assets is subject to inher - itance or gift taxes, depending on the nature of the transfer. However, digital assets are not subject to the wealth tax on real estate, as they do not fall under the category of real property. It should also be noted that exchanges between digital assets are excluded from the capital gains tax regime, in accordance with Article 150 VH bis of the CGI. However, if the transmission involves the sale of cryptocurrencies, any capital gains realised may be taxed under the category of non-commercial prof - its (BNC) or industrial and commercial profits (BIC), depending on whether the activity is regular or not.
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