MONACO Law and Practice Contributed by: Donald Manasse, Donald Manasse Law Offices
3.2 Recognition of Trusts Trusts are recognised in Monaco under Law 214 of 1936 if constituted in that manner, or under the Hague Convention. There is a possibility of conflict if the settlor’s nationality provides for forced heirship, and a reserved heir does not receive an unfettered right to their reserved portion of the estate. The transfer of assets to the trust may then be subject to the rapport or “claw back” action. 3.3 Taxation of Trusts, Foundations and Similar Entities Located in Other Jurisdictions There are no tax consequences for a citizen or resi - dent of Monaco who serves as a fiduciary or benefits from a trust. 3.4 Tax Consequences of Fiduciary and Beneficiary Roles There are no published cases or instances where the fact that a beneficiary or settlor is also a fiduciary has led to a determination that a trust is to be disregarded. The use of corporate vehicles in Monaco is limited by the fact that most Monaco corporations require authorisations from the government to come into existence. Those that do not, such as civil non- trading companies, are unlimited liability companies. Civil companies are often used to purchase property, and are not regarded as “asset protection vehicles”. However, the statutes (by-laws) of the companies, set - ting out share ownership, are not public, and there - fore afford a certain level of privacy as to ownership. This does not prevent creditors that have a legitimate interest from obtaining a court order to produce the statutes, and thereafter alleging that the companies are fictitious, in order to freeze the assets held. Asset protection planning in Monaco today creates a repu - tational risk, and will certainly raise questions with the banking establishments. 4.2 Succession Planning The use of family offices to professionalise the man - agement of family assets and allow a smoother transi - tion to a more trained next generation is widespread 4. Family Business Planning 4.1 Asset Protection
in Monaco. Family constitutions are rare but not unknown, particularly in ultra-high net worth families. The fact that rights waivers on future successions are generally invalid prevents binding decisions in that respect. However, clarity and good records of gifts made and financial support given to family members will minimise – although not eliminate – the likelihood of conflicts. 4.3 Transfer of Partial Interest Lack of marketability and control is one viable crite - ria to lower fair market value, particularly as regards shares of civil companies holding property in Monaco or France. There is an anecdote of Voltaire and Frederic the Great of Prussia seeing a family in the square and the King remarking how happy they were. Voltaire replied that this was because they had not had to divide the estate. Wealth disputes in families are triggered in Monaco, as elsewhere, by a sense that the aggrieved party has been unfairly treated, or that another party took an unfair advantage. With trusts and similar entities, there may be resentment among the beneficiaries at having third-party non-family members seemingly control the wealth, and receiving fees for doing so, or because of a lack of transparency in the management of the assets. The disputes may result in civil lawsuits and sometimes criminal charges being levelled against the members of the family and the beneficiaries of the estate. 5.2 Mechanism for Compensation If Monaco law applies, the Civil Code provides for structured methods of compensating aggrieved par - ties, such as the rapport , which is a claw back in val - ue of the thing gifted or disposed of. There can be a determination that a sale at less than the fair market price was in fact a “disguised gift” that justifies com - pensation. The compensation awarded in this manner by the courts will then be taken into account in the division of the estate. Failure to report the existence 5. Wealth Disputes 5.1 Trends Driving Disputes
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