French Law - No Trust Means No Benefits

A recent case illustrates the sort of unanticipated problem that can arise as a result of owning property abroad.

The case involved an English man who owned a property in Brittany. He was in receipt of social security benefits – in particular, income support. He argued that the value of the property should not be taken into account when assessing his capital (which would have the effect of depriving him of his benefits) because he held it for someone else on an implied trust. An implied trust is a trust (i.e. where a person owns something on behalf of another person) that arises as a result of a person’s actions or intentions, but where no formal deed of trust has been created.

The man claimed that he owned the property in trust for a woman who had paid for it and for its renovation. The arrangement over ownership had its origin in a desire to deal with issues that arose under French inheritance law.

However, the law in France does not recognise the concept of an implied trust, so under French law the man was the legal owner of the property and no-one else had any legal interest in it.

The case turned on the principle that the law ‘closest’ to the arrangement should apply, which in this case was French law. The UK social security officer was therefore entitled to regard the property as owned beneficially by the man for the purposes of assessing his entitlement to benefits.