Concept
The trust is a common law invention, and civil law countries historically did not "see" it: their legal systems have no structure where ownership is split between a trustee and a beneficiary. This creates a problem when a trust has assets or beneficiaries in a civil-law country.
🍓 The 1985 Hague Convention on the Law Applicable to Trusts and on their Recognition gave civil-law countries a framework to recognize foreign trusts—but not all countries participate.
The Hague Convention 1985
The Convention on the Law Applicable to Trusts and on their Recognition (1985) allows participating countries to recognize trusts created under the law of their "home" jurisdiction and to apply that law to them. Not all countries have ratified it: for example, Italy, Switzerland, the Netherlands, and Luxembourg have, but France, Spain, and Germany have not.
What This Means in Practice
In a country that does not recognize trusts, a beneficiary or trust assets may be recharacterized—for example, the property may be treated as the settlor's personal property for purposes of forced heirship or taxation. Therefore, for families from such jurisdictions, a foundation is often more reliable: it is a legal entity and is recognized everywhere.
⚙️ Recognition of a trust for civil law purposes and its tax treatment are separate issues. A country may recognize a trust but tax the beneficiary as if the trust did not exist.
Conclusion
🔗 Related topics
Private Foundations · Private Foundations · How a Trust Works · Asset Protection Trusts · Trust Taxation and CFC
Before establishing a trust for a family from a civil law jurisdiction, check whether that jurisdiction's law recognizes trusts and how it taxes them. Often the answer points toward a foundation or a hybrid structure.
💡 For civil-law families, a foundation is often more convenient—see Private Foundations.
This material is for informational purposes only and does not constitute individual legal advice.
Key factual claims
- The trust is a common law invention, and civil law countries historically did not "see" it: their legal systems have no structure where ownership is split between a trustee and a beneficiary.
- The Convention on the Law Applicable to Trusts and on their Recognition (1985) allows participating countries to recognize trusts created under the law of their "home" jurisdiction and to apply that law to them.