Estate Planning and Trust Taxation Europe 2026

French inheritance tax (droits de succession) structure: Spouse/PACS partner: 100% tax-free (full exemption since 2007); Child abattement: €100,000 per child per 15-year period; above exemption, progressive rates 5-45% on children. Siblings: €15,932 abattement; above: 35-45% progressive. Non-relatives: €1,594 abattement only; above: 55% or 60% flat rate. The dramatic divergence: a spouse inheriting €5,000,000 from a French estate pays zero tax; an unmarried partner (without PACS) inheriting the same estate pays approximately €3,000,000 in inheritance tax (60% on €4,998,406 above the minimal exemption). For wealthy unmarried couples or couples with complex family situations, French inheritance tax planning is essential: formalise PACS status (simple civil partnership); use assurance-vie (life insurance — proceeds pass outside the estate with separate beneficiary nomination; up to €152,500 tax-free per beneficiary if premiums paid before age 70); structured donations every 15 years to use child abattement renewals.

UK IHT pension proposal: Autumn Budget 2024 — Chancellor Rachel Reeves announced that from April 2027, unused pension funds and death benefits will be included within the estate for IHT purposes. Current position: defined contribution pension funds pass outside the estate; beneficiaries inherit pension pots completely IHT-free (no IHT on the pension fund itself; income tax may apply on withdrawals above 75). The change: from April 2027, pension funds included in estate for IHT purposes; combined with main estate; IHT at 40% on amount above nil-rate bands. Impact: a typical wealthy retiree holding £500,000 in a DC pension plus £600,000 property: currently — property attracts IHT on amount above nil-rate bands; pension passes free. Post-2027: both pension and property combined = £1,100,000 estate; IHT approximately £280,000 on amount above £325,000 nil-rate + £175,000 residence NRB. Pension planning reversal: the entire financial planning industry's 'leave pension last' strategy (spend other assets first; pass DC pension to children tax-free) would need complete restructuring. Estimated additional revenue: approximately £1.5bn/year by 2029-30. Many wealthy retirees accelerating pension withdrawals and gifting before April 2027.

Liechtenstein foundation (Stiftung) characteristics: a private Stiftung is a legal entity that holds assets for specified beneficiaries; not a trust (which most EU civil law systems reject) but a recognised civil law entity. Governance: Stiftungsrat (board); Stiftungszweck (purpose defined in deed); beneficiaries need not be named in public documents. Tax in Liechtenstein: 12.5% corporate income tax on income generated within the foundation; no Liechtenstein wealth tax; no Liechtenstein inheritance tax on assets transferred into foundation. CRS/AEOI: Liechtenstein is fully compliant with OECD Common Reporting Standard — all foundation accounts and beneficial owner information is automatically exchanged with EU member states. This means Liechtenstein foundations are not tax evasion vehicles — they are transparent to the beneficial owner's home country. Legitimate purposes: estate administration; asset protection from creditors (with limitations); privacy from public disclosure (beneficiaries not in public register); structured giving across generations; centralised family asset management. European recognition: Netherlands, Germany, Austria, and most EU civil law countries recognise Liechtenstein Stiftungen as foreign foundations — they are not 'looked through' to the grantor automatically but treated as separate entities, allowing deferred recognition for tax purposes.