Finally, the European Court of Justice cracks down on trusts

The Tax Justice Network has banged the drum about the threats posed by trusts for decades. On 21 May 2026, the European Court of Justice has finally joined us. They have published rulings that directly relate to trusts regarding two major risks: secrecy and asset protection. As we set out below, these represent a significant step against the widespread abuse of trusts, and we urge authorities across the European Union to take action now.

In the first case, the European Court of Justice simply confirmed that access to information on a trust’s beneficial owners based on a ‘legitimate interest’ is good enough. This is by no means radical, and it does not “undo” the disaster of the infamous European Court of Justice ruling of 2022 which invalidated public access to beneficial ownership information by upholding the weaponisation of privacy. Since then, many more EU countries have closed their public registries and others (e.g. British secrecy jurisdictions) have abolished plans to go in that direction.

Recognising access to trusts’ beneficial owners based on a legitimate interest was already contemplated in the EU anti-money laundering directive of 2018 (known as AMLD 5). It was then developed further under EU AML Package of 2024. The unfortunate European Court of Justice ruling of 2022 also admitted this access to beneficial owners of legal persons based on having a legitimate interest. In 2026, the European Court of Justice simply confirms that it also applies to trusts. As reported by the press release:

“laying down public access to beneficial ownership information, provided there is a legitimate interest, is compatible with the rights guaranteed in Articles 7 and 8 of the Charter of Fundamental Rights of the European Union. According to the Court, by that legislation, the EU legislature is pursuing a legitimate and important objective, namely, the prevention of money laundering and terrorist financing through increased transparency, in accordance with the principle of proportionality.”

What is much more relevant, however, is the blow to trusts for asset protection and sanction circumvention. These cases referred to sanctioned individuals trying to escape sanctions by putting assets into discretionary trusts and being removed as protectors or beneficiaries.

The Tax Justice Network has been warning of the risks of asset protection through the “ownerless limbo” created by trusts, whereby settlors and beneficiaries claim not to own or control the assets, but are still able to enjoy them and regain access to them, when the “coast is clear” from tax authorities, sanctions or creditors.

Now, the European Court of Justice agrees with us with some remarkable understanding of how flexible and sneaky trusts can be. As described by the European Court of Justice press release:

This means that assets can be regarded as belonging to or being under the control of the settlor or the beneficiary of a trust, where those persons have power to use, benefit from or dispose of those resources or to have influence over them and over the decisions made by the trustee in relation to them…

In that regard, indications that assets belong to or are controlled by the beneficiary or the settlor may be inferred from factual circumstances³ or from the presence of needlessly complex legal structures.⁴

³ The relevant factual circumstances concern the relationships between the beneficiary or settlor and the other persons involved in the trust, and the allocation of the economic resources in the trust to activities intended primarily, even if indirectly, for the beneficiary or the settlor.

⁴ Such indications include the fact that the beneficiary or settlor holds a majority of the capital of or voting rights in the trustee; the fact that certain entities are set up or change their identity shortly before sanctions come into force; and the relationships between the director of the companies subject to freezing measures and the beneficiary or settlor.

The European Court of Justice ruling quotes remarks from the Italian court (that referred the case to the European Court of Justice) which offers even juicier understanding of the shenanigans created by trusts.

First, if a person really wanted to completely transfer an asset, they would donate it to someone else. If instead they put it into a trust, then they want to keep some control over it. This is especially true, even if the trustee is fully independent (aka not the settlor or its spouse or brother), as the trustee would have the settlor’s interests in mind:

“This contribution [to a trust] would not have the effect of definitively severing the link of ‘ownership’ between the assets contributed to the trust and the settlor, who would objectively be able to exercise substantial influence over them. Such influence would stem from the possibility of recovering formal ownership of those assets in the event of early termination of the trust or refusal by the beneficiaries to accept the transfer of those assets, as well as from the fact that, by establishing the trust and entrusting its management and control to persons in whom the settlor has confidence and whom the settlor has chosen, the settlor would be able to guide in advance its use and final destination…

take into account the relationship between the settlor, on the one hand, and the other persons involved in the trust, such as the trustee or the protector, on the other hand, and determine, in particular, whether the settlor has appointed, in the role of trustee or protector, persons of trust, linked by professional or personal ties to the settlor, who are likely to follow the instructions or suggestions of the settlor regarding the administration of the trust and its assets.”

Second, the Italian court proposes the same rule that we proposed back in 2017. Whenever taxes, unpaid debts or sanctions are concerned, assets put in a trust should be considered belonging to the settlor (because they are otherwise in an ownerless limbo), until they are effectively distributed to third-party beneficiaries:

“a trust, at least until the assets contributed to it are definitively allocated to third parties, would constitute an easily usable mechanism for circumventing the measures for freezing funds and economic resources provided for by Union law”

Third, because trusts are usually not registered, let alone published, trust documents can be amended or backdated, so it makes little sense to give too much value to the current text of a trust deed. More importantly, this same flexibility can be abused to undermine the law:

“in determining whether the settlor “controls” the assets contributed to the trust, it would be irrelevant that, under the trust deed, during the period of validity of the trust, for ordinary or extraordinary reasons, the persons responsible for administering the trust, in particular the trustee or the protector, may change, since the persons who may eventually be called upon to replace them will act under the rules established by the settlor in the trust deed…

This dissociation, as well as other characteristics of the trust, namely the private nature of this mechanism, the ease and flexibility of its creation and modification, which can lead to the opacity and structural complexity of such a mechanism, allows its use not only for legitimate purposes, but also to conceal the link that the settlor maintains with the funds and economic resources contributed to the trust…

Indeed, since the trust deed and its amendments are not subject to the obligation of publicity, identifying the true nature of the legal relationship covered by this mechanism on the basis of this deed can prove difficult, since the versions in force of this deed and its amendments may not be made available and are, in any case, liable to be modified.”

Fourth, courts and authorities should look beyond the nominee or trustee appearing as the registered owner, but instead check who is really in control:

“the notion of ‘ownership’ must be interpreted as covering not only situations in which such power over the funds and economic resources concerned can be legally attested, but also situations in which a person or entity actually possesses this power, despite the fact that, legally, the holder of said power is another person or entity.”

Fifth, just as courts in India considered the circumstances of using trusts and secrecy jurisdictions like the Cayman Islands, courts should always consider the governing law of the trust, in this case of Bermuda:

“the trust at issue in the main proceedings is constituted and governed by the law of Bermuda… take into account the prerogatives conferred by that law on the settlor, such as the power to revoke all or part of the trust, the power to give binding instructions to the trustee concerning the purchase, holding, sale or other commercial or investment transactions relating to trust property, or concerning any investment or reinvestment of such property, as well as for the purposes of exercising any power or right arising from such property, the ability to appoint, add, remove or replace any trustee or protector of the trust, the ability to add, remove or exclude a beneficiary or a class of beneficiaries, and the ability to decide to be a joint beneficiary of the trust.

These prerogatives could indicate that the settlor has influence over the funds and economic resources contributed to the trust or over the choices made by the trustee with regard to these funds and economic resources, whether these prerogatives are explicitly provided for or not in the trust deed or its amendments.”

In conclusion, the European Court of Justice is finally agreeing with what we have been saying for years. Rather than just being “private family matters”, trusts can have a crucial role and be abused to engage in money laundering, sanction circumvention and many other illicit financial flows. While trust transparency is still limited to those with a ‘legitimate interest’, at least the flexibility, ownerless limbo and asset protection features of trusts are at last being challenged to ensure that individuals cannot simply escape the law by hiding and confusing their control over assets through the use of trusts.

We welcome the European Court of Justice rulings, and urge tax authorities and law enforcement to ensure this approach is now rapidly turned into practical action to combat the many abuses.