IFI and trusts: what the decision of the Paris judicial court on December 11, 2025 changes.
In December 2025, the Paris Judicial Court made an important ruling for beneficiaries of foreign trusts and their liability to the Real Estate Wealth Tax (IFI).
The judgment clarifies in which cases a beneficiary of a trust — even irrevocable and discretionary — can be considered to have a contributory capacity regarding the assets placed in the trust.
This decision, which relies on the jurisprudence of the Constitutional Council, has notable practical consequences, particularly for leaders or partners of start-ups who have structured part of their wealth abroad through trust-type vehicles.
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1. Context: the link between trusts and IFI
Trusts, often used by international entrepreneurs to organize the management and transmission of their wealth, pose a complex question regarding French taxation.
In terms of IFI, Article 885 G ter of the General Tax Code (CGI) provides that real estate assets transferred or placed in a trust can be linked to the taxable base of the settlor, the beneficiary, or, failing that, the trustee.
However, since the decision of the Constitutional Council No. 2017-679 QPC of December 15, 2017, an essential nuance has been admitted: a taxpayer can escape IFI taxation if they prove that the assets in question do not confer any contributory capacity, meaning no direct or indirect economic advantage.
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2. The case judged by the Paris court in December 2025
The dispute concerned a taxpayer beneficiary of a Guernsey law trust.
The latter contested his liability to IFI on real estate assets held by the trust, advancing two arguments:
- the trust was irrevocable, so he could not recover the assets;
- the trustee had discretionary power, meaning the beneficiary had no control over management or distributions.
The problem: during the same year, the beneficiary had received €116,711 in distributions from the trust, while the disputed IFI concerned an amount of about €12,000.
For the court (TJ Paris, December 11, 2025, No. 23/00260), this situation revealed that the beneficiary derived a concrete economic advantage from the trust. Therefore, he could not demonstrate the absence of contributory capacity required to escape IFI.
In other words, despite the irrevocability of the trust and the trustee's discretion, the actual financial flows prove the existence of a personal benefit justifying IFI taxation.
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3. Key takeaway: contributory capacity takes precedence over legal structure
This decision confirms a pragmatic approach by the tax administration and the courts: what matters is not the form of the trust, but the economic reality.
Irrevocability or the trustee's discretionary power alone are not sufficient to prove the absence of contributory capacity. It is the concrete benefit derived — distributions, received advantages, provision of assets — that establishes liability to IFI.
In practice, two situations must be distinguished:
- The beneficiary receives no distributions or advantages: they can invoke the absence of contributory capacity, but the burden of proof lies with them.
- The beneficiary receives income or indirectly enjoys the assets: they become taxable in proportion to the value of the real estate assets included in the trust.
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4. What lessons for leaders and entrepreneurs?
Many expatriate leaders or investors use trusts to organize the holding of real estate assets, often inherited from a previous wealth structuring (for example, through a foreign holding).
This judicial decision highlights several points of caution.
a) The risk of IFI for beneficiaries who are French tax residents
Even if a trust is managed abroad, a beneficiary tax resident in France remains subject to IFI on the real estate assets they control, directly or indirectly, or from which they derive a profit.
Complex structures do not mechanically protect against taxation.
b) The importance of traceability of flows
Financial distributions are a determining element of analysis.
Receiving income from the trust may be sufficient to characterize a taxable advantage, even if the beneficiary has no power over the management of the assets.
c) The benefit of regular wealth and tax audits
An annual evaluation of the situation by a tax lawyer is essential to:
- identify risks of liability to IFI,
- document proof of the absence of contributory capacity (if applicable),
- anticipate the safest reporting strategy.
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5. PRAX Avocats' approach: legal analysis and tailored support
At PRAX Avocats, we assist entrepreneurs and leaders in securing their wealth and tax strategy, whether it involves structuring an investment project, managing holdings, or clarifying the tax implications of a trust.
Our method is based on four principles:
- Tailored analysis: each wealth and each structure is unique and deserves an adapted approach.
- Cross-disciplinary approach: we combine our expertise in business law, tax law, and private international law.
- Pedagogy: our role is to clearly explain the legal implications, even when the mechanisms seem technical.
- Anticipation: identifying tax risks in advance helps avoid reassessments and disputes.
For start-ups and international leaders, this integrated approach is essential: the boundary between professional structuring (via companies or holdings) and wealth structuring (via trusts or funds) is often thin.
Rigorous legal support helps prevent past management choices from resulting, years later, in unanticipated tax consequences.
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6. In summary: proof, transparency, and support
The decision of December 11, 2025, reminds us of a simple but crucial principle: substance prevails over form.
A trust does not automatically protect a beneficiary from IFI if they derive concrete economic advantages from it.
The key lies in the proof of the absence of contributory capacity, which must be solid, documented, and consistent with actual financial flows.
In a context where tax transparency has become the norm, entrepreneurs and leaders must approach the management of their international wealth with method, caution, and support.
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Need clarity on your wealth situation or that of your business?
For personalized and secure legal support for your wealth or professional structuring, contact PRAX Avocats.
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