Wealth Planning for Expats in Italy: Trusts, Life Insurance & Smart Structures

Relocating to Italy opens the door to a rich and rewarding lifestyle — but for high-net-worth individuals and families, the decision also brings important questions about how best to structure, protect, and transfer wealth.

Whether you're arriving under the €200,000 flat tax regime, the 7% pensioner scheme, or any other residency track, Italy offers a stable legal framework and a surprisingly flexible approach to international wealth planning — provided you understand the tools available, and how to use them in compliance with Italian law.

In this post, we explore the main strategies used by expats to manage their wealth in Italy, with a focus on trusts, life insurance wrappers, holding structures, and succession planning.

The Italian Challenge: High Perception, Low Familiarity

Italy is not traditionally known as a hub for wealth structuring — at least not in the way that Switzerland, Luxembourg, or London are. But this perception is changing.

In reality, Italy has:

• A robust private legal system

• Access to international instruments (e.g., foreign trusts)

• A civil code that protects heirs, but allows for strategic planning

• No wealth tax, and relatively light inheritance tax in most cases

• Tax regimes (like the flat tax) that exclude foreign assets from many local obligations

For expats with assets, heirs, or beneficiaries in multiple jurisdictions, Italy can be a perfectly viable base for long-term wealth planning — as long as you bring the right structures with you.

Using Foreign Trusts While Living in Italy

Trusts are not native to Italian law, but are fully recognized thanks to Italy’s ratification of the Hague Convention on the Recognition of Trusts.

What this means in practice:

• Foreign trusts (e.g. Jersey, Liechtenstein, Singapore) are respected under Italian law

• If structured properly, they do not create tax transparency — i.e., the assets are not automatically attributed to the settlor

• Trusts can be used for succession planning, asset protection, and family governance

• There is no inheritance tax on distributions to beneficiaries if the trust is discretionary and structured in advance

It is crucial, however, to ensure that:

• The trust is properly declared on your Italian tax return (if applicable)

• The trust is administered by a recognized and experienced trustee

• The structure aligns with Italian anti-avoidance rules and civil law concepts (e.g., respecting legitimate heirs)

At Knotted, we work with trust lawyers and fiduciaries across Europe and beyond to ensure each structure is resilient, compliant, and effective over time.

Life Insurance Wrappers: A Powerful and Underused Tool

Unit-linked life insurance policies (polizze vita) have become a go-to strategy for many HNWIs relocating to Italy.

Why? Because under Italian law, these contracts offer:

• Full exemption from income tax during the life of the policy

• Deferral of tax on capital gains until redemption or partial withdrawal

• Exclusion from inheritance tax when structured as a life contract

• Protection from creditors in many cases

• Privacy, as the underlying assets are not reported individually

They also allow you to hold international portfolios (including hedge funds, private equity, crypto wrappers, etc.) inside a compliant vehicle, often with full investment flexibility via a “dedicated internal fund” (Fondo Interno Dedicato).

In combination with the €100k flat tax, this means that a significant portion of your wealth can remain outside the Italian tax net — while still being held through regulated, recognized, and legitimate instruments.

Italian Holding Companies: Strategic, But with Caveats

For clients who intend to invest actively in Italy or Europe, creating an Italian or foreign holding company can be a useful tool.

Benefits include:

• Consolidating family assets or businesses under a central vehicle

• Access to participation exemption rules (no tax on 95% of capital gains on qualifying shareholdings)

• Flexibility in succession or governance

• Easier implementation of family charters, shareholders’ agreements, and voting rights

However, Italian holding companies:

• Are subject to ordinary corporate tax (IRES)

• Must comply with local accounting and disclosure rules

• Require careful coordination if the UBO is under the flat tax regime

In some cases, using a foreign holding company or a life policy-holding structure may offer more tax efficiency and administrative simplicity.

Succession Planning: Civil Law Meets Modern Needs

Italy’s civil code imposes forced heirship rules: a portion of your estate must go to specific family members (spouse, children, etc.).But many expats are surprised to discover that:

• These rules apply only to Italian-situs assets (e.g. real estate in Italy)

• If you elect your home country’s law as governing your succession, via an Italian will, you may bypass forced heirship altogether

• With proper structuring, you can achieve a high degree of freedom while staying within legal boundaries

We assist clients in coordinating their wills, trusts, and corporate structures to avoid litigation, protect harmony among heirs, and maintain control across generations.

Crypto, Art, and New Assets: What About Non-Traditional Wealth?

For expats holding digital assets, collectibles, or art, Italy is relatively open — but these assets need to be addressed clearly in your planning.

Key points:

• Crypto held abroad may fall under the flat tax or the 7% regime

• Proper custody and reporting are essential (especially if you exit the regime later)

• Art and collectibles should be included in estate planning and may benefit from life insurance structures or trusts

Knotted collaborates with specialized providers and legal advisors to map these assets and help you build strategies that are both compliant and future-proof.

Knotted: Cross-Border Wealth Planning With Purpose

Relocating to Italy as an HNWI should not mean compromising on wealth protection or strategic freedom.Our mission is to help you bring your structures, priorities, and vision into your Italian life — with legal precision, tax efficiency, and family peace of mind.

Whether you're managing a family office, preserving generational wealth, or simply building your legacy, our cross-border team helps you plan with clarity, not complexity.

📩 Want to explore how to structure your wealth as an Italian resident?Write us at info@knotted.ch or 📲 message us on WhatsApp at +41 76 771 30 22 — we’re here to help you think long-term.