Question

Mr. Abott settled an offshore trust in Guernsey with his wife as beneficiary. Later he set up another offshore trust in Cayman with himself as beneficiary. Both trusts contained provisions ‘that during the lifetime of the settlor he would have the right, at any time, to discharge an existing or acting Trustee and to appoint another Trustee in any jurisdiction and he may in his sole discretion determine’. Additionally, any distributions of principal are to be made upon any written statement of facts by the beneficiaries. The terms of both trusts provided that in the event of death of the beneficiary the surviving spouse becomes the beneficiary. Mrs. Abbott died in 2014, Mr. Abbott became the sole beneficiary for both trusts. The Abbots were French citizens and were assessed for back taxes upon the implementation of Common Reporting Standards. It was revealed that they owed back taxes for the years 1985-1988 and 2003-2010. Disturbed by this finding, the Abbots decided to apply for an installment plan whereby they would pay $8,000 monthly until the amount was paid in full. The Abbotts paid monthly instalments for six months and then stopped paying the tax agency. The matter was referred to the Courts where judgment was entered against the Abbots, in 2016 for the full amount owed to the French authorities. The French authorities wish to repatriate all the funds held in the offshore trusts to pay the outstanding liability to the government. Mr. Abbott is standing his ground that the government has no right to the funds which he has placed in the trust company.

Discuss on what grounds the French authority may pursue this matter and how successful they will be in obtaining the funds from the offshore trusts.

Answer 1