| Abstract
| - Since 1999, foreign trusts and their beneficiaries have to fear double taxation as a result of gift tax and income tax in Germany. The double taxation depends upon whether the trust is considered a Treuhand under German Law or not. In the case that the settlor, resident in Germany, reserves extensive rights of revocation and rights to issue instructions to the trustee, the trust will be considered a Treuhand and will thus be transparent for gift tax and income tax purposes. If the settlor does not reserve any such rights, the endowment of the trust and the trust's distributions to the beneficiaries are threatened with being subject to gift tax and income tax. The reason for these deterrent tax regulations is that foreign trusts (and foreign family foundations) have been considered by German legislators primarily as a means of avoiding tax. It is to be hoped that EU law will develop towards an equal tax treatment of customary German and foreign means of structuring succession in property.
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