Monaco: Law of Offshore
The concept of a trust in Monaco can be best understood in terms of its historical development. As a civil law jurisdiction the Principality enforced its internal laws governing strict heirship rules on any dispositions made by Monegasque residents. Consequently some British and United States nationals residing in Monaco appealed to the Government to be allowed to use the vehicle of a trust so as to be able to have the same flexibility to dispose of their assets on death as existed under the laws of common law jurisdictions of which they were nationals.
Law 214 was passed with a view to allowing foreigners resident in Monaco to set up trusts governed by their own national law. The law was not passed to create a body of Monegasque trust law or introduce the concept of a trust into Monaco. Where a dispute arises the Monaco courts may exercise jurisdiction: but unless Monegasque law makes express provision for a legal issue to be governed by its internal law (e.g. appointment of trustees) the courts of Monaco will apply the principles of the foreign proper law governing the trust.
As well as Law 214 Trusts, Monaco law allows for trusts registered in a foreign jurisdiction to be administered from Monaco; such trusts are not dealt with here.
The Law 214 Trust has the following characteristics:
- The settlor of such a trust must be a resident of Monaco;
- The trust deed must be registered with the result that information relating to the beneficiaries, settlors and property settled under the trust is publicly available;
- Registration fees are payable according to the number of beneficaries (see Offshore Legal and Tax Regimes);
- Fforeign judgments (including judgments relating to forced heirship and foreign inheritance laws) are recognized and there are no specific asset protection laws in place which protect a trust from challenge by creditors other than the protection offered by general insolvency law;
- All trust powers must be either stated in the deed or implied by the foreign proper law governing the trust since there is no statutory schedule of trust powers in Monaco;
- Trust documents must be in French;
- Monaco internal law makes provision for a trust not to have a perpetuity period so long as it is not a charitable trust;
- Monaco law requires that each trust has at least one trustee chosen from a Government list of approved trustees;
- It has been argued that only nationals of common law jurisdictions can set up Law 214 trusts and not the nationals of civil law jurisdictions such as Italy whose internal law does not recognize the concept of a trust; at present this remains an academic matter since the issue has never been litigated;
- There is some doubt as to whether a Law 214 trust can make a disposition of immovable property in Monaco subject to the principles of the foreign proper law governing the trust as opposed to Monaco internal law;
- Implied trusts cannot arise: an approved lawyer must certify the validity of a trust formed under a foreign law;