Guide To Setting Up A Trust In Monaco

Although not a tax haven anymore, Monaco is indeed a haven of tranquillity, not only to reduce your tax burden but also to escape from violence and chaos happening in many parts of the world. This sovereign state offers high-quality educational, banking and healthcare services, making it an excellent place for individuals eager to care for their families in every aspect, including finances.

If you're considering setting up a trust in Monaco, this guide will provide you with valuable information and advice. Trusts offer a range of benefits, such as lifetime planning, asset protection, and succession planning. The process of establishing a trust involves several formalities, but with the right guidance, it can be a straightforward and rewarding endeavor.

In Monaco, settlors can create trusts to manage their assets and protect their wealth. Trusts provide a flexible and efficient means of asset management, allowing settlors to designate specific beneficiaries and ensure their assets are handled according to their wishes. Monaco's trust laws are well-established, and the jurisdiction offers favorable tax rates, making it an attractive choice for individuals looking to set up a trust.

TAXES IN MONACO

The Principality is well-known for its low taxes, casinos, luxury, business-friendly environment and high-net-worth individuals. Direct taxation is almost non-existent, and capital gains or property are not taxed either, except in the case of rental property (only 1% of the annual rent plus other charges) or the profits gained on the sale of Real Estate (33.33%). There are no wealth taxes or dividend taxes for local companies' shares. Generally, there is no corporate income tax except for certain businesses considered in a treaty between France and Monaco. Namely, companies must show that at least 75% of their profits are gained domestically. Otherwise, they are subject to a rate of 33.3%.

However, inheritance and gift taxes are often not considered. Forced heirship applies in the Principality. Estate taxation works as follows:

• Spouse and direct beneficiary: 0%
• Partners under civil union: 4%
• Sibling: 8%
• Uncle, aunt, nephew, niece: 10%
• Other relatives: 1 %
• Unrelated beneficiaries: 16%.

Only French citizens can avoid double taxation. It must be noted that French citizens residing in the Principality are subject to French income tax because of the 1963 Bilateral Convention between France and Monaco.

Although “trust” is a Common Law term, Monaco recognizes Trusts despite being a Civil Law jurisdiction. Let us see what they can offer.

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When setting up a trust in Monaco, it is essential to seek professional advice from experienced trust specialists or legal advisors

HOW TO SET UP A TRUST IN MONACO

Firstly, if an individual intends to set up a trust (whether inter vivos or will) in Monaco, he must possess the nationality of a country that adopted trusts. For example, Canada, the US, and the UK. Once this condition is met, a trust can be formed following the law of the grantor’s country.

When setting up a trust in Monaco, it is essential to seek professional advice from experienced trust specialists or legal advisors. They can guide you through the process, explain the intricacies of the local laws, and assist in choosing the most suitable trust structure for your needs. Their expertise will ensure that all the necessary formalities and legal requirements are fulfilled, providing you with peace of mind and credibility.

For the trust to be valid, the grantor must appoint a morally capable individual recognized by Monaco Authorities. To avoid the forced heirship laws, a will, according to Law 214, must be formulated. This number refers to the Monaco Law on Trusts of 1936, amended later. The text must be written in a particular way, as the aforesaid law states. A notary will sign the trust in the presence of four witnesses (or two notaries and two witnesses). Alternatively, this can be given to the notary in a sealed envelope in the presence of four witnesses. In both cases, a certificate of conformity (issued by a qualified foreign jurisconsult recognized by the Monegasque authorities) accompanies the will. Furthermore, the jurisconsult certifies that the will shall comply with the testamentary dispositions' rules.

Acts related to the constitution or the transfer of a Trust are liable to a proportional registration fee ranging between 1.3 and 1.7%, according to the number of beneficiaries:

• Only one: 1.3%
• Two: 1.5%
• More than two: 1.7%.

In the case of an in vivos Trust, the registration duty is levied on the trust's constitution. On the other hand, a will Trust is levied after the grantor's death and, by extension, before the trusteeship begins. A reduced tax is applicable on transferable securities such as shares and bonds. Namely:

• Only one: 0.05%
• Two: 0.25%
• More than two: 0.45% 

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View of Marina with docked boats in Monaco City

The constitution of a Will Trust can be of excellent advantage because the testator can benefit from all the freedom to pass on his fortune. Moreover, they can avoid that the people entitled to a fraction of the estate by the Forced Heirship rules ask for their inheritance reserve, as the law textually provides for the non-application of public order. Therefore, distant relatives or foreigners will be exempted. The Trust is an ideal instrument for when some beneficiaries do not have the capacity, real or assumed, to manage their assets, and the grantor considers that it is better to leave the administration of the fortune in the hands of qualified professionals. That way, the grantor can avoid the interference of other family members while the beneficiary is still underage or incapable. The regulation also offers the possibility of submitting the capital to certain conditions, such as the age at which the beneficiary can use it or how much is given to every person.

When establishing a trust, attention to detail is crucial. The trust deed should clearly outline the purpose, beneficiaries, and terms of the trust. It's important to consider factors such as the selection of trustees, succession planning, and the inclusion of provisions for spouses and dependents. By carefully addressing these details, you can ensure the trust aligns with your intentions and provides comfort and security for your loved ones.

Establishing a trust in this jurisdiction further enhances the credibility and reputation of your wealth management structure

In contrast, the creation process is more cumbersome than a simple will because of the form imposed by the law. The presence of a trustee could slow down the process of paying the inheritance, so it is recommended to appoint them with the utmost care. There exists the possibility of hiring more trustees who will keep the main one accountable. It is equally an excellent idea to appoint a protector. As with other Trusts, trustees deal with much responsibility. If they do not fulfill their obligations, they are liable to fines up to €90,000. The trustee must keep all accounting and supporting documents for five years minimum. All information must be accurate and updated. Trustees registered or domiciled in the Principality must store the information related to the identity of all individuals involved in the Trust, such as constituents, trustees, protectors or beneficiaries, and share it with the Ministry of State.

All the information of the Register of Trusts is accessible to the following organisms only in the case of the fighting against money laundering or the financing of terrorism:

• The President of the Order of Advocates and Advocates.
• The authorized agents of the Department of Tax Services.
• The judicial authorities.
• Judicial police officers from the Department of Public Security acting on written requisition and delegation of powers from the Public Prosecutor or on delegation of an investigating judge.
  
  

BENEFITS OF SETTING UP A TRUST IN MONACO

Monaco recognizes the concept of trust ownership, which allows assets to be held in the name of the trust rather than the individual settlor. This ensures a higher level of privacy and protection, as the trust is considered a separate legal entity. Additionally, trusts in Monaco offer flexibility in terms of distribution and management of assets, making them a valuable tool for lifetime planning and wealth management.

Establishing a trust in this jurisdiction further enhances the credibility and reputation of your wealth management structure. This can be particularly advantageous for individuals seeking to protect their assets and ensure the long-term financial well-being of their family.

Setting up a trust in Monaco offers a range of benefits, including lifetime planning, asset protection, and favorable tax rates. By seeking professional advice, understanding the formalities, and paying attention to details, you can establish a trust that meets your specific needs and provides comfort and security for yourself and your loved ones. Monaco's trust laws and reputation as a credible financial institution make it an excellent choice for individuals looking to establish a trust for their wealth management and succession planning purposes.

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Monte Carlo Casino, Monaco

Conclusion

Before setting up a Trust, it is crucial to determine if this measure is the most appropriate for you. Although there are a few taxes, they are minimal compared to other Western countries.

The great thing about Monaco is that it offers high-quality educational, banking and healthcare services, which makes it an excellent place for families in every aspect, including finances.