I have spent much of my working life at the seam between two legal traditions, and I know of few instruments that sit on that seam as uneasily as the trust. To a common law adviser it is the most ordinary thing in the world. It separates legal title from beneficial enjoyment, it outlives the person who creates it, and it can be drafted to almost any honest purpose a family has. Carry the same instrument across the border into Spain and something is lost in the crossing. Spanish civil law has nowhere to put the idea that two people can own the same asset in different ways at the same time.
What follows is not a gentler version of the treatment the trust receives at home. It is a different treatment altogether, and the authorities that administer it, the Agencia Estatal de Administración Tributaria and the Dirección General de Tributos, apply it with very little of the predictability the structure was meant to provide.
The shorthand one hears is that Spain disregards the trust. That is true enough, but it flatters the doctrine. What I have come to think, after enough of these files, is that Spain does something less principled. It recognises or ignores the trust depending on which produces the larger tax bill, and it does so on the strength of administrative rulings rather than any settled body of statute or case law. I want to explain why that happens, and why it bites hardest at the moment a family is least able to do anything about it.
What a trust is, and why the difference matters
It helps to be precise about what the trust is in the systems that produce it, because the Spanish difficulty is not that the instrument is exotic. It is that the trust rests on a division of ownership for which Spanish law has no vocabulary.
In English law the trust is an equitable obligation. The trustee holds the legal title, but is bound to hold or apply the property for the benefit of others. The trustee owns the asset at law. The beneficiary owns it in equity. That second ownership is real and proprietary, not a mere promise, and it can be enforced against the trustee and against anyone who takes the property knowing of it.
The requirements are old and settled, the three certainties of Knight v Knight, intention, subject matter and objects, and the principle of Saunders v Vautier, by which the beneficiaries, if they are all adult and between them entitled to everything, can bring the trust to an end and take the property. The point I would draw out is that once the trust is made, it is the beneficiaries, and not the person who set it up, who are the owners in equity.
The statute sits on top of this rather than replacing it. The Trustee Act 2000 gives trustees a duty of care and a power to invest, and the United Kingdom went so far as to give domestic effect to the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition through the Recognition of Trusts Act 1987.
I keep coming back to that last fact, because it is the cleanest measure of the gulf. Britain legislated to recognise trusts, including foreign ones. Nor was the Convention a common law imposition. It was written for civil lawyers, defining the trust by its characteristics rather than its origin, as a relationship in which assets are placed under a trustee’s control for a beneficiary and kept apart from the trustee’s own estate, so that an analogous civil law institution might qualify as well.
Civil law states took it up. Italy, the Netherlands, Luxembourg and Switzerland ratified it and gave the trust a place in their law. France signed it and, though it has never ratified, has still absorbed the trust into its administrative and judicial practice and even enacted a tax definition of its own, so the Convention’s vocabulary does real work there at several levels.
The United States signed it as well and likewise never ratified, though for the opposite reason, its own trust law being so well developed that the Convention added little, a point I will come back to. Germany never joined either, yet its courts give foreign trusts effect through their private international law.
Among its neighbours Spain stands nearly alone, having ratified nothing, legislated nothing and recognised nothing. It could not take in even that accommodating form of words, which tells me the obstacle is structural, lodged in Spain’s own posture rather than in any defect of drafting.
America is not one place
I should add a word about the United States, because clients and even advisers often speak of American trust law as though it were a single thing. It is not. Trust law there is state law, and the two states I meet most often in this work have kept their own statutes rather than the model Uniform Trust Code.
California runs its trusts through Division 9 of the Probate Code, its own Trust Law, and declined to adopt the uniform code, keeping a hybrid of statute over the old law of equity. In daily life the revocable living trust is the ordinary vehicle there, used to keep an estate out of probate, with the person who creates it often acting as trustee and beneficiary while alive.
New York runs its trusts through Article 7 of the Estates, Powers and Trusts Law, has also not adopted the uniform code, and is the stricter of the two. A beneficiary’s interest is presumptively protected from his own creditors, and a trust a person sets up for his own benefit is void against that person’s creditors, so New York will not let you shelter your assets from yourself.
Sitting over both states is a federal rule with no equivalent in the law of trusts as such. Under the grantor trust rules of the Internal Revenue Code, a person who keeps enough control over a trust is treated as the owner of its assets for income tax, and the trust is looked through. I will return to that, because it turns out to rhyme with the Spanish position more closely than one might expect.
What Spain sees
Spain, having neither ratified the Hague Convention nor legislated for trusts, has no civil law box to put one in. The trust is not a person, not a taxpayer, and not a layer of ownership that the law will respect. So when the administration has to make sense of a trust, it looks straight through it to the people behind it, the settlor and the beneficiaries, and treats whatever happens as though it had happened directly between them.
Assets put into a trust are not regarded as having left the settlor’s estate just because they were put there, and a movement of benefit inside the trust is read as a transfer between real people. None of this is written in a statute about trusts. It is built by analogy, and that is exactly why it wobbles.
The ruling that shows the machine working
A binding ruling of June 2025, V0986-25, shows the doctrine at work on a family I recognise. A father resident in Panama settles several trusts and is, at the same time, their settlor, their trustee and their only beneficiary while he lives. His daughter is tax resident in the Community of Madrid and within the special inbound regime of article 93 of the Ley 35/2006 del IRPF, the regime most people know as the Beckham Law. The trust assets sit wholly outside Spain.
While the father is alive, the administration treats him as still owning everything, because he has kept complete control and benefit. The daughter owns nothing yet, and so she does not have to bring the trust assets into her annual wealth tax or her Impuesto Temporal de Solidaridad de las Grandes Fortunas. That is a real relief, if only a temporary one. And here is the irony I promised.
A father who is settlor, trustee and sole beneficiary is the textbook grantor trust, if he is an US resident, as the United States would look straight through it too and tax him on the income. On the living settlor, the two systems I work between actually agree.
Selective transparency
The agreement does not last, and the way it breaks is what troubles me. Look at inspection practice as a whole and a pattern shows itself that I would not call disregard so much as selective transparency.
When seeing through the trust raises the tax, the administration sees through it, and hands the assets to the Spanish resident for wealth tax. When the taxpayer would gain something from being seen through, a kinder treatment of the income the trust pays out, for instance, the administration remembers that in Spain the trust does not exist and reaches for the harsher rule instead.
The same structure is recognised or ignored according to the direction of the bill. That asymmetry, and not the blunt idea of disregard, is the real difficulty, and it is a good deal harder to defend.
The death, and the trap
The exposure hardens when the settlor dies. A common law adviser sees a shift of benefit inside a trust that simply carries on. Spain sees a direct transmission mortis causa from father to daughter, taxable as an inheritance. Because she lives in Spain she is taxed by obligación personal, on what she receives worldwide, so the assets are caught wherever in the world they sit.
The Beckham regime does not save her, and this is the misunderstanding I correct most often.Article 93 is an income tax rule, and for wealth tax it does treat the impatriate as a non-resident, taxed only on Spanish assets.
For inheritance it does no such thing. The person who relies on it remains, for inheritance, a full Spanish resident exposed to worldwide tax. The agreements Spain holds with the United Kingdom and the United States are income tax treaties, and they say nothing about death or inheritance, a point I come to shortly.
I would be candid that this inheritance reading is administrative doctrine and not settled law, and there is an argument that the death of a man who was at once settlor, trustee and sole beneficiary does not map neatly onto a Spanish succession at all.
It is also worth keeping succession law and succession tax apart in one’s mind. Regulation (EU) 650/2012 lets a foreign national choose the law of his nationality to govern how his estate passes, but it does nothing to the inheritance tax, which follows where the beneficiary lives whatever law governs the will.
The treaty vacuum
This is the part the ordinary commentary skips, and it is the part that does the damage. The treaties that exist barely engage with trusts, and they do not reach the tax that actually hurts.
The convention between Spain and the United Kingdom signed on 14 March 2013 and in force from 12 June 2014, is a treaty on income and on capital only (Article 2). It does engage the trust, but only at one remove.
A trust is included within the definition of a “person” (Article 3(1)(d)), yet the treaty never treats it as a taxpayer entitled to relief in its own right. Article 4(4) instead looks straight through the trust, giving the benefit of the convention to the beneficiaries where their state taxes the income in their hands, and to the trust only where that state taxes the trust itself.
The Protocol then defines a “trust”, for these purposes, as one resident in the United Kingdom under its own law (Protocol, paragraph II), and confirms that a Spanish resident who is the beneficiary of a United Kingdom trust is taxed in Spain on the gross income he receives or is entitled to receive, with a credit for the United Kingdom income tax effectively borne (Protocol, paragraph V, read with Articles 20 and 22).
So the treaty confirms the look-through to the resident beneficiary, but only for income, and only with a credit. It has nothing to say about the death of a settlor.
The decisive thing is that neither treaty covers death or inheritance at all. The 2013 convention with the United Kingdom is confined to income and capital. The convention with the United States, amended by a protocol in force from November 2019, is confined to income, with no estate or gift treaty behind it. Spain has inheritance treaties with only three countries, France, Greece and Sweden.
There is no Anglo-Spanish and no United States and Spanish inheritance treaty at all. The worldwide inheritance exposure I described is relieved, if it is relieved, only by the unilateral credit in the Spanish inheritance tax law, which is narrower than a treaty and often leaves a Spanish charge standing.
The result has a grim symmetry. The disregard doctrine works hardest on the death, which is the one event no treaty exists to discipline. The treaty network guards the gentle exposure, the recurring income, and leaves the family alone at the worst moment, the inheritance.
A doctrine without foundations
It is worth pausing on how we arrived here, because the difficulty is old.
The trust has a long lineage, with antecedents in the Roman fiducia and in Germanic law, reaching its mature form in the medieval English use, where land was conveyed to feoffees to hold for another. The civil law took a different road.
Spain has fiduciary cousins of its own, the substitución fideicomisaria of the Código Civil and the fideicomiso de residuo built upon it (articles 781 and following), but these were never the trust. They do not sever a patrimony from its owner, and they do not split legal from beneficial ownership the way equity does.
When the Hague Convention of 1 July 1985 offered a route to recognise foreign trusts without adopting them, Spain declined to become a party, and even that bridge was left unbuilt.
When the courts have met the trust, they have refused it. The landmark is the Sentencia del Tribunal Supremo 338/2008 of 30 April 2008, which described the trust accurately, an inter vivos or mortis causa relationship in which one person holds the legal title under an equitable duty to keep or use the property for another, and then declined to give effect to a mortis causa trust made in Arizona so far as it reached assets in Spain, on the ground that the figure is unknown to Spanish law and does not sit with our rules of succession.
The Dirección General de los Registros y del Notariado has taken the same line when such arrangements have reached the registry. But all of this is civil non-recognition in the law of succession, not a worked-out account of how a trust is to be taxed.
The tax treatment, by contrast, has been left to the administration. The Dirección General de Tributos built it through its binding rulings, and the Tribunal Económico-Administrativo Central has lately reinforced them, in resolutions of 22 January and 30 May 2025, the second raised to the status of doctrine, holding that because the trust does not exist in Spain it is taken as not constituted, the assets passing directly from the settlor to the beneficiary. Yet the Tribunal Económico-Administrativo Central is an organ of the administration, not a court.
There is still no tax doctrine of the Tribunal Supremo, nor of the Audiencia Nacional, on the trust. The whole edifice rests on the administration’s own answers, piecemeal and, on independent assessment, simplistic, to the point that they do not consistently distinguish a revocable trust from an irrevocable one, or a discretionary trust from a fixed one, distinctions that are the first thing one learns in any system that takes the instrument seriously.
The lack of statutory or doctrinal positions cannot give legal certainty, and seguridad jurídica is a constitutional value in Spain under article 9.3 of the Constitución, not a nicety. The comparison with our neighbours is not flattering. Italy, a civil law country with no native trust of its own, ratified the Hague Convention and let a real body of case law on the trust interno grow up around it. Britain legislated.
Spain did neither, and filled the gap with improvised practice. The selective transparency I described is the natural child of that emptiness. Where there is no anchoring doctrine, the administration is free to pick, case by case, the reading that collects the most, and the taxpayer has little settled law to push back with.
The one mercy
There is genuine relief on the inheritance side, and it is worth knowing. Where the deceased was a non-resident, Spanish law lets the taxpayer apply the rules of the autonomous community where the most valuable Spanish assets lie, and where there are no Spanish assets, the rules of the community where the beneficiary lives. For this family that community is Madrid, with its bonus of up to 99 per cent for children. The state still collects the tax, but the daughter may claim Madrid’s relief. The same facts in a less generous region would read very differently. The lesson I take from it is that where the beneficiaries sleep matters as much as where the assets are kept.
What I tell clients
Three things, in the end, for any family with a member thinking of living in Spain.
Do not treat the Beckham regime as estate planning. It shelters nothing from worldwide Spanish inheritance tax, and no treaty stands behind it.
Look at the control and the revocability of the trust before the move, not after. Where the settlor has kept control and benefit, the timing of the tax follows him, and the room to plan shrinks once the family member has landed.
And map where the beneficiaries actually live, because under the present doctrine that single fact can move the bill from ruinous to bearable, and it is the thing most often forgotten in structures drawn up in London, Jersey or Miami.
A trust that works perfectly abroad will be translated, the moment it arrives in Spain, into civil law ideas it was never built for, by an administration working without the discipline of statute or settled case law and without a treaty to soften the worst of it. The honest course is not to trust the structure to survive the move. It is to restructure before the move, or to walk in with one’s eyes open.
This article reflects a personal view and does not constitute legal advice.