FIDUCIE AND FAMILY: A FEW EXAMPLES

Five practical examples of the family fiducie

Case No. 1 : the annuity fiducie

Mr and Mrs DUPOND are anxious about the day when, having died, they will no longer be able to pay a monthly annuity to their daughter Sandrine and their son Paul who, suffering from an acute form of illness, have no professional activity and are unable to manage financial capital on their own. They do not wish their other brothers and sisters, who nevertheless have a good relationship with them, to have money dealings with them.

Today, Paul is under curatorship, while Sandrine could also find herself in the same situation within a few years. In order to perpetuate the payment of the annuity beyond their death or incapacity, Mr and Mrs DUPOND have made a gift subject to the condition precedent of their incapacity or death and have set up a fiducie (the French-law fiducie) intended to ring-fence the capital allocated to carrying out the gift and to enable the annuity to be paid by the fiduciary avocat.

In some matters, it is life-insurance death benefits that are intended to be paid in the form of an annuity to the vulnerable child among the siblings. Wealth engineering based on a particular drafting of the beneficiary clause and on a fiducie agreement drawn up in advance and appended to the beneficiary clause allows the death benefits to be managed exclusively by the Fiduciaire: it is the Fiduciaire that invests the capital and that pays the annuity and/or applies the capital received to expenses of the vulnerable adult. The risk that the obligation to transfer the death benefits into the fiducie will not be performed is set aside thanks to the instruction given to the insurance company to pay the capital to the notaire responsible for administering the estate of the subscribing parent.

Since the description of the mission entrusted to the Fiduciaire is free, subject only to compliance with the prohibition of the fiducie-libéralité, it is possible to provide for all manner of situations in which the Fiduciaire may release sums for certain expenses to be incurred by the vulnerable adult.

Case No. 2 : the aggregating fiducie

Mrs DURAND wishes to pass her capital on to her two grandchildren, one of whom is a minor and the other a young adult. Her banker has told her that the investments will be less remunerative if the sums are invested separately, in two distinct capitalisation wrappers. The choice is therefore made, in the interest of the donees, to impose as a charge on each gift an obligation to transfer the sums given into a single Fiduciary Patrimony, of which the donees are the two Settlors, so that the best investment may be put in place.

In the gift made to the minor grandchildren, provision must then be made for the appointment of a third-party administrator of the sums given (French Civil Code, art. 384), in order to circumvent the prohibition on the legal administrator transferring the minor’s assets into a fiducie (French Civil Code, art. 387-2, 4°).

Case No. 3 : the inclusive fiducie

In the context of a donation-partage of the securities of a family company, Mr and Mrs PICHEGRU are concerned about allotting securities to their daughter Julie, who suffers from psychological disorders that make her presence at general meetings and in any transactions for the transfer of securities problematic. In order not to penalise Julie by allotting her a mere balancing payment and depriving her of the benefit of the expected increase in value of the securities given, the choice is made to give her securities but to attach to that gift an obligation to transfer them into a Fiduciary Patrimony of which Julie is the Settlor.

Thanks to such engineering, it is the Fiduciaire that holds the status of member of the company attached to the securities given: it is therefore the Fiduciaire that is convened to general meetings and that has standing to take part in any transfer transactions relating to the securities. The Fiduciary Patrimony is the exclusive recipient of the dividends attached to the securities given. The fiducie agreement states the frequency and the terms on which the Fiduciaire must pay the dividends over to Julie or apply them directly to certain expenses for which she is responsible (housing, health, etc.).

Case No. 4 : the provident fiducie

Mr and Mrs JARDIN are concerned about how little empathy their children might show were they to find themselves in a position of vulnerability. They decide to ring-fence the capital they intend for the possible funding of their dependency (employing home helps, home adaptation works, in particular). Accordingly, they enter into a deferred and conditional fiducie agreement providing for the transfer of the capitalisation contract in which that capital is invested, subject to the condition precedent of the earliest of the following events: activation of the mandat de protection future of whichever of them survives or retains his or her mental faculties the longest, or a simple certificate of the loss by that person of his or her mental faculties bearing the joint signatures of the family doctor and of their niece, Nathalie, a doctor of medicine in whom they have full confidence.

Indeed, the event set up as a condition precedent in a provident fiducie is freely described, unlike the statutorily defined conditions for the activation of a mandat de protection future. The Fiduciaire’s mission consists in ensuring, for as long as possible, that the spouses who have lost their mental faculties remain in their home, by meeting the costs that such continued home living will require (hiring staff, home adaptation works) and then, in the event of placement in a medical facility, in meeting the accommodation invoices while guaranteeing conditions of dignity for the Beneficiary.

The provident fiducie is therefore a safety net put in place and intended to be triggered on the day the risk to be covered materialises. The Fiduciaire’s mission only fully begins on the day the event set up as a condition precedent occurs. In the meantime, the Fiduciaire stands ready.