Monaco: Types of Company
This page was last updated on 18 February 2021.
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 Monégasque residents. Consequently some British and American nationals residing in Monaco appealed to the government to be allowed to use the vehicle of a trust to grant them the same flexibility to dispose of their assets on death as existed under the laws of common law jurisdictions.
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 Monégasque trust law or introduce the concept of a trust into Monaco. Unless Monégasque law makes express provision for a legal issue to be governed by its internal law (e.g. appointment of trustees), Monégasque courts will apply the principles of the foreign proper law governing the trust as specified in the trust deed. Monégasque law also allows for a trust to be administered from but not registered in Monaco.
As well as Law 214 trusts, Monégasque law allows for trusts registered in a foreign jurisdiction to be administered from Monaco; such trusts are not dealt with here.
A 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 beneficiaries (see Offshore Legal and Tax Regimes)
- Foreign 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.
Monaco is not a good jurisdiction in which to form a trust since the key characteristics of a Law 214 Trust do not compare favorably with other offshore jurisdictions:
- Settlors must be residents of Monaco; thus a Monaco trust has little relevance to offshore financial planning;
- The trust deed must be registered with the result that information relating to the beneficiaries, settlors and property settled under the trust are easily verifiable matters.
In most offshore common law jurisdictions the converse applies. For further information on the legal structure of Monagesque trusts see Law of Offshore.
See Offshore Legal and Tax Regimes for details of the taxation regime for Monaco trusts.