According to the French tax authorities, inheritance tax which was allegedly due upon the death of Daniel Wildenstein in 2001 had been evaded through the use of offshore trusts.

According to the prosecutor, Daniel’s sons, Guy Wildenstein and his brother, had hidden assets under the ownership of trusts which should have been subject to inheritance tax upon Daniel’s death.

The Court noted, quite rightly, that liability for inheritance tax became due upon the death of the Settlor of a trust only after a law of 29 July 2011 came into effect (creating a specific wealth tax and French Inheritance and gift tax regime to apply to trusts).  This law, like any other law, is not retroactive.  As a consequence, the death of Daniel Wildenstein in 2001 could not give rise to inheritance tax.  Therefore, no tax evasion occurred in the first instance.

Another argument of the prosecutor was that the trusts in question were “fictitious” and consequently, any assets held in trust should have been treated, in any event, as part of Daniel Wildenstein’s estate even before the law of 2011 came into effect.  As ruled by the Criminal Court, neither the tax authorities nor the instructing judges brought the proof that their allegations were correct.

As a consequence, Mr Wildenstein and the other parties were acquitted.

This is obviously a very important decision which is particularly welcome now that the French tax authorities are increasingly trying to apply the 2011 law provisions retroactively and are accusing all trusts of being fictitious structures.