Criminal seizure in a tax fraud case involving a trust and a life insurance policy: distinction between beneficial owner and free disposal of assets
Criminal seizure in a tax fraud case involving a trust and a life insurance policy: distinction between beneficial owner and free disposal of assets
An investigation into tax fraud has brought to light an international asset-holding structure at the heart of the judges’ reasoning.
The French Court of Cassation recently ruled on the seizure of €94,460,440, representing the proceeds from the sale of a real estate complex valued at €1,032,000,000 (24 September 2025, appeal no. 25-80.120).
As part of a preliminary investigation for tax fraud and aggravated money laundering, the individual under investigation was suspected of having indirectly held, in his capacity as the beneficial owner of real estate interests placed within various companies, a property portfolio he allegedly failed to declare to the French tax authorities for wealth tax purposes.
Investigators uncovered a multilayered international ownership structure: a Luxembourg company owned a Danish holding company, which in turn controlled a number of subsidiaries established in Denmark and France. Among these was a French company owning high-value properties located in Paris and along the French Riviera.
In 2005, the person under investigation transferred his shares in the Luxembourg company to a family trust. The following year, this trust transferred the shares through a dation in payment incorporated into a Luxembourg life insurance contract. Under the terms of that policy, the trust acted both as policyholder and beneficiary, while the insured person was the individual himself.
The legal framework of seizure: ownership or free disposal
In French criminal law, a seizure can only be ordered under specific legal conditions.
Articles 131-21, paragraph 6, of the French Criminal Code and 706-153 of the French Code of Criminal Procedure provide that an asset may be seized if it either belongs to the person under investigation or is under that person’s free disposal, unless a third-party owner acting in good faith establishes a legitimate right.
The notion of free disposal requires the existence of an actual power to exercise control over the asset: the ability to decide on its use, sale, or transfer, even without holding formal ownership.
Moreover, decisions of the chambre de l’instruction (the criminal investigation division of the court of appeal), like all final judgments, are null and void if they fail to provide sufficient reasoning to allow the Court of Cassation to review their legality (Article 593 of the Code of Criminal Procedure).
The Court of Appeal’s analysis: beneficial ownership as the basis for the seizure
To uphold and justify the seizure, the Paris Court of Appeal relied on several documents obtained during the investigation, including correspondence written in Italian describing the person under investigation as the “ultimate beneficial owner” of the real estate interests held through the interposed companies.
The judges also noted that the Luxembourg life insurance policy designated the trust as both policyholder and beneficiary, while the insured person was the individual himself. The insurance contracts further revealed that, in the event of a full or partial redemption, the proceeds would not be paid back to the trust but directly to the insured person.
For the Court of Appeal, the individual—being the beneficial owner of the trust, which itself was the beneficiary of the life insurance policy of which he was the sole insured—had to be regarded as the ultimate economic owner of the entities held through the Luxembourg company. Accordingly, the judges considered that he exercised free disposal over the seized funds, thus justifying the confirmation of the criminal seizure order.
In this reasoning, the Court of Appeal based its decision on an essentially descriptive analysis of the legal links between the various structures forming part of the same overall asset-holding strategy: companies, the trust, and the life insurance policy. Starting from the individual’s designation as the beneficial owner, combined with his status as beneficiary of the life insurance policy, the judges concluded that he exercised free disposal over the assets—one of the statutory conditions legitimising the criminal seizure.
The position of the Court of Cassation: a requirement of concrete demonstration
The Court of Cassation overturned this reasoning. It recalled that the free disposal of an asset cannot be inferred from mere economic appearance or declaratory status; it must be demonstrated through concrete evidence establishing the existence of a genuine power of control or direction over the asset.
When an asset is owned by a company, free disposal presupposes that the person concerned exercises a power of management over that company, whether de jure or de facto. And when that company is itself held within a trust of which the person under investigation is a beneficiary, the judge must go further: it is incumbent upon him to analyse the trust’s actual functioning, to assess its practical effects, and to examine how powers are genuinely distributed within it.
Only through such an analysis can the judge determine whether, as a beneficiary, the individual truly exercises a power of decision over the interposed company, and consequently over the assets it owns.
The Court referred to the definition provided under Article 1649 AB of the French General Tax Code, according to which (translated):
“The beneficial owners of trusts shall mean all natural persons having the status of trustee, settlor, beneficiary and, where applicable, protector, as well as any other natural person exercising effective control over the trust or performing equivalent or similar functions.”
This definition, designed for tax transparency purposes, aims to identify the natural persons standing behind legal structures. However, it does not necessarily imply an effective power of disposal. It may include mere potential beneficiaries, settlors who have been divested of their rights, or protectors without any real authority over the trust’s management.
This is precisely the distinction drawn by the Court of Cassation. The status of beneficial owner falls within a declaratory and tax-based logic, whereas free disposal belongs to a factual and criminal law logic. The former identifies the persons connected to the structure; the latter assesses the concrete power exercised over the assets.
Free disposal is a more demanding and substantive concept: it goes beyond the mere recognition of an economic interest and requires a genuine capacity for decision-making. In other words, a beneficial owner may be only a theoretical rights holder, whereas the person enjoying free disposal acts as the true economic owner.
Conclusion: “Do not look at the trust, look into the trust”
For the Court of Cassation, establishing that an individual exercises free disposal over an asset requires demonstrating that the trust serves merely as an apparent legal owner — an intermediary structure concealing the reality of ownership.
Such a demonstration necessarily involves a concrete examination of how the trust operates in practice: understanding how decisions are made, who gives the instructions, who holds the power to redeem or distribute assets, and who actually receives the income.
It is only through this functional analysis — rather than through a mere affirmation of beneficiary status — that a judge may validly conclude that a person exercises effective control over an asset and thereby justify a criminal seizure.
Thus, the Court of Cassation calls on investigating judges to look beyond the legal surface of wealth-holding structures and to scrutinise their actual mechanisms of operation.
Sandro ASSOGNA
