Where choosing a trust jurisdiction for an Asia-based family stands now

The question arrives at a particular moment in a family's life. Assets sit across jurisdictions. The next generation is scattered – one child studying in the United Kingdom, another managing operations in the Mainland, a third holding permanent residence in a third country. The patriarch or matriarch has built the wealth in one legal system and is now being advised by counsel trained in another. Choosing the governing law for a trust is not a technical footnote. It is the single decision that determines whether the structure holds when it is tested.

For an Asia-based family, selecting a trust jurisdiction in 2027 means mapping forced-heirship exposure, residence and tax-residency consequences, the enforceability of the structure across the family's actual jurisdictions, and the governing-law firewall protection that each candidate centre offers. Hong Kong, the British Virgin Islands and the Cayman Islands are the most commonly assessed against one another; each occupies a different position on those four axes. The Trustee Ordinance (Cap. 29), as substantially reformed with effect from 1 December 2013, places Hong Kong on materially different ground from where it stood a decade ago.

This analysis works through the commercial stakes first, then the governing instruments, then the comparative read across the principal centres, and closes with where our desk sees the risk sitting in the current environment.

What is actually at stake commercially – and why the decision is harder than it looks

A trust governing law is the background constitution of the structure. It determines how the trust is interpreted in a dispute, which courts can hear an application to vary or set aside, and – crucially – whether a foreign court's forced-heirship ruling can displace the settlor's intentions.

For a Greater China family, the commercial stakes are unusually concentrated. A single holding entity (an offshore company placed between the settlor's operating assets and the trust) typically shelters assets spanning Mainland real property, listed Hong Kong securities, cash held offshore and, increasingly, digital assets or fund interests booked in Singapore. The trust itself may be settled by one family member, administered by a professional trustee in a third jurisdiction, and contested – if it ever is contested – by beneficiaries who are resident in a fourth.

The decision is harder than it looks because the right answer is not uniform. What matters is the specific intersection of the family's asset map, their residence pattern, and the jurisdictions where a challenge is most likely to be mounted. A family with significant Mainland China connections faces a different risk profile from a family whose principal exposure is to a civil-law European country. Both face a different calculation again from a family whose wealth is predominantly financial rather than real-property based.

In our private-wealth practice, we see this decision made too quickly in both directions: structured too conservatively by settlors who assume their home-country succession rules are irrelevant once a trust is created, and structured too loosely by settlors who assume that any offshore trust is automatically immune from challenge. Neither assumption survives close scrutiny.

The governing instruments – and where the cross-border interface actually bites

Three legal instruments define the field for Asia-based families: the governing trust law of the chosen jurisdiction, the private international law rules of the jurisdictions where a challenge might be mounted, and the real-property rules of the jurisdictions where land is held.

In Hong Kong, the Trustee Ordinance (Cap. 29) as reformed in 2013 abolished the rule against perpetuities and excessive accumulations for trusts governed by Hong Kong law. That single change extended the structural horizon from the old common-law perpetuity period to an indefinite term – practically relevant for families intending multigenerational planning. The 2013 reform also provided statutory protection for settlor-reserved powers: a trust governed by Hong Kong law is not invalidated merely because the settlor reserved powers over investment, additions, revocation, or amendment. Before the reform, the position was less clear and created drafting risk.

Critically, the 2013 reform strengthened Hong Kong's anti-forced-heirship firewall. The Ordinance now provides expressly that a Hong Kong trust is not void or voidable by reason of the application of a foreign jurisdiction's mandatory succession rules – provided that the trust is validly created under Hong Kong law. This is the central protection an Asia-based family is buying when they choose Hong Kong as governing law. It is not absolute: the firewall does not extend to real property situated in a jurisdiction that insists on applying its own succession rules to immovables. Land in the Mainland follows Mainland succession law regardless of a Hong Kong trust instrument.

The cross-border interface bites hardest at two points. First, characterisation: some civil-law jurisdictions treat the transfer of assets into a trust as a disguised gift or as an advance on inheritance, which triggers their own forced-share claims. A Hong Kong trust settled by a Mainland-domiciled settlor faces that characterisation risk in any Mainland court proceeding, because the Mainland does not recognise the trust-law concept of beneficial ownership in the same way a common-law court does. Second, situs of assets: the trust law of the governing jurisdiction protects intangibles and movables far more reliably than it protects real property. Families with significant real-property holdings in civil-law or Mainland jurisdictions need a separate structuring layer – typically an intermediate holding company – to interpose the company share (a movable, sited where the company is incorporated) between the trust and the underlying land.

For a deeper read on succession planning with cross-border Mainland assets, see our briefing on will and estate planning covering assets in Mainland China.

The sequence above describes the standard position. Your matter turns on the documents, the jurisdictions actually engaged, and the specific asset classes in scope – which is where the route is defined or lost.

To discuss how the governing-law and firewall position applies to your family's cross-border structure, contact info@lockhartyip.com.

Hong Kong as governing law – what the 2013 reform actually changed

Before the 2013 reform, Hong Kong trust law was functional but not a first-choice governing law for large multigenerational structures. The perpetuity period imposed a structural ceiling. The lack of statutory clarity on settlor-reserved powers created drafting uncertainty. And the firewall against forced heirship, while present at common law, was less explicitly codified than in competing offshore centres.

The reform addressed all three. The abolition of the rule against perpetuities for trusts governed by Hong Kong law aligned Hong Kong with the BVI, Cayman, Jersey, and the other leading trust centres that had made the same move earlier. The statutory settlor-reserved-powers provision removed a drafting tension that had led some advisers to recommend offshore law by default. And the strengthened anti-forced-heirship provision gave Hong Kong an explicit statutory firewall comparable to – and in some respects better tested than – those in the offshore centres, because Hong Kong courts are common-law courts with a substantial body of trust jurisprudence and a functioning appellate structure up to the Court of Final Appeal.

There is a practical administration argument as well. A Hong Kong trust with a Hong Kong-based trustee or protector can be managed in the same timezone as the family's operating businesses, with English as an official language of the courts. For a family whose principal advisers, bankers and operating entities are concentrated in the region, that proximity reduces operational friction in a way that a Jersey or Guernsey structure – excellent in their own right, but twelve time zones away – does not.

What Hong Kong does not offer is the same depth of offshore precedent as the BVI or Cayman Islands, where specialist trust courts have developed substantial case law on protector powers, letter of wishes (a non-binding expression of settlor intent, typically kept confidential) and trust variation applications. For a family that anticipates contested administration or complex variations, the more developed specialist trust-court infrastructure of those offshore centres may carry weight.

How do the BVI and Cayman Islands compare – and when does the offshore option still win?

The BVI and the Cayman Islands both operate mature trust law regimes built on English common-law foundations and substantially updated by their own statutory reforms. Both have abolished the rule against perpetuities. Both provide robust anti-forced-heirship firewalls. Both have specialist trust courts with accumulated case law.

The BVI's VISTA trust regime – the Virgin Islands Special Trusts Act regime (a statutory framework permitting the settlor to designate a BVI company as a "VISTA company," under which the trustee is restricted from interfering in the management of the underlying company) – is a specific product for families who want to pass an operating business through a trust without giving the trustee discretion to sell or manage the underlying company. For Asia-based families with a closely held operating group, this is a genuinely differentiated feature. Hong Kong and Cayman do not have a direct statutory equivalent.

The Cayman Islands' STAR trust regime – the Special Trusts (Alternative Regime) (a Cayman statutory mechanism permitting trusts for non-charitable purposes, without requiring a human beneficiary) – allows a family to establish a trust for a purpose rather than for identified beneficiaries, which has structural advantages in certain family-holding and succession contexts. Again, this is a feature without a direct Hong Kong equivalent.

Where does the offshore option still win outright? Three scenarios emerge consistently in our practice. First, where the family anticipates a dispute that is most likely to be litigated in a jurisdiction that does not recognise Hong Kong court judgments as readily as it recognises BVI or Cayman orders. Second, where the operating asset is a BVI or Cayman company – by far the most common holding structure for Greater China groups – and the administrative efficiency of keeping governing law and vehicle law in the same jurisdiction argues for consistency. Third, where the family has non-Asia beneficiaries in jurisdictions that have specific trust-recognition treaties with BVI or Cayman, and where those treaties affect the enforceability of the trust instrument locally.

The competitive position has shifted, however. Five years ago, the offshore option was effectively the default for large Asia-based structures. Today, Hong Kong's reformed Trustee Ordinance, combined with the cost efficiencies of regional administration, makes Hong Kong governing law a genuine first-choice candidate for a specific category of family: Greater China-centred, common-law-comfortable, and looking for a structure that can be administered and litigated within the region.

The forced-heirship interface – the question that decides the jurisdiction more often than any other

Forced heirship is the mandatory allocation of a portion of a deceased's estate to defined family members under the law of their domicile or, in some systems, the law of the jurisdiction where the assets are located. It is the central risk in Asia-based trust planning because the families most likely to use trusts are also the most likely to have beneficiaries or assets in civil-law jurisdictions – including Mainland China, continental Europe, and parts of the Middle East – that maintain forced-heirship regimes.

Hong Kong has no forced-heirship regime of its own. A trust validly created under Hong Kong law is not subject to a mandatory family share under Hong Kong succession law. The Trustee Ordinance's anti-forced-heirship firewall provides that the trust is not void or voidable by reason of a foreign forced-heirship rule. The firewall works as follows: if a beneficiary brings an action in a Hong Kong court claiming a forced share under the law of their home jurisdiction, the court will apply Hong Kong law to the trust and decline to give effect to the foreign mandatory rule as against the trust assets – provided the trust is a valid Hong Kong trust.

The limitation is real-property situs. A Mainland China real-property holding passes under Mainland succession law regardless of the trust. The practical response is to hold Mainland real property through an operating company, hold the company shares in a BVI or Cayman holdco, and settle those holdco shares into the trust. The shares are movables sited at the place of incorporation; the trust law firewall then applies to the shares rather than to the underlying land. This intermediate-holdco structure is standard practice in our cross-border private-wealth work – but it must be established and maintained correctly to achieve the intended result.

A different risk arises where the settlor is domiciled in a civil-law jurisdiction at the time of settlement. Some civil-law courts treat the settlement of assets into a trust as equivalent to a transfer in anticipation of death, which triggers their domestic forced-share rules at the time of settlement rather than at death. This is not a hypothetical: our desk has seen this argument raised by beneficiaries in European-origin proceedings, seeking to characterise a Hong Kong trust as a donation subject to a forced-share claw-back. The counter-arguments are well-developed in common-law courts, but they require careful drafting, a defensible residence position for the settlor, and coordination between Hong Kong counsel and counsel admitted in the relevant civil-law jurisdiction.

For families that have already relocated or are considering relocating their centre of administration to Hong Kong, see our briefing on transferring a family office from a European hub to Hong Kong.

What do residence and tax-residency positions add to the jurisdiction decision?

The trust governing law is not chosen in isolation from the residence and tax-residency position of the settlor, the trustees, and the beneficiaries. These are interlocking variables. A change in one can expose the trust structure to a tax consequence or a reporting obligation in a jurisdiction that the adviser did not anticipate when the trust was drafted.

Hong Kong operates on a territorial basis. Its profits tax applies only to profits arising in or derived from Hong Kong. There is no capital gains tax and no withholding tax on dividends or interest in the general position. For a trust holding investment assets, this makes Hong Kong an administratively light jurisdiction when compared with a trustee jurisdiction that imposes a trust-level income or capital tax. The foreign-sourced income exemption (FSIE) regime – the Hong Kong regime that applies economic-substance conditions to certain categories of passive offshore income – applies to the entities within a structure rather than to the trust instrument itself, but families holding through intermediate Hong Kong entities need to assess its application to passive income flowing through those entities.

The Pillar Two minimum top-up tax became effective for fiscal years beginning on or after 1 January 2025 for in-scope multinational enterprise groups with consolidated revenue at or above EUR 750 million. Families operating at that scale – a smaller category than the Pillar Two discourse might suggest, but a real one in our practice – need to map how the trust structure interacts with the group's Pillar Two position, particularly if the trustee or a holding entity is resident in a low-tax jurisdiction.

The more immediate concern for most Asia-based families is the residence of the beneficial owner and the trust's characterisation under the tax law of the beneficiary's jurisdiction. A Hong Kong trust with a US-citizen beneficiary is a foreign grantor trust for US tax purposes, with reporting obligations that have nothing to do with Hong Kong law. A UK-resident beneficiary receiving income distributions from a trust faces a different set of rules again. The trust jurisdiction decision does not eliminate those obligations; it determines the structural starting point from which they are managed.

If an earlier structure or filing produced a stalled or adverse result, a second review can identify the point of misalignment and the routes that remain open.

To discuss the tax-residency and FSIE interaction for your family's structure, write to us at info@lockhartyip.com.

Where our desk sees the risk sitting now – a current read

The risk environment in 2027 has three features that distinguish it from the environment in which many existing Asia-based trusts were drafted.

First, the Mainland China succession risk is sharper. Mainland beneficiaries and settlors are more likely than they were a decade ago to have had the nature of a trust explained to them by Mainland legal advisers, which means they are also more likely to understand – and to pursue – the arguments available to them in Mainland courts. The Mainland does not have a trust-recognition framework equivalent to the Hague Convention on the Law Applicable to Trusts, which means that a Mainland court faced with a trust-related dispute will apply its own legal categories. The intermediate-holdco structure mitigates but does not eliminate this risk.

Second, the residence and tax-reporting environment has tightened materially. The combination of the common reporting standard, Pillar Two, and the FSIE regime means that information about the trust structure – its assets, its income, its beneficiaries – is more likely to be visible to more tax authorities than at any earlier point. Structures that were designed before the common reporting standard took effect may carry legacy documentary deficiencies that create exposure in a review. This is a prompt for families to audit their trust documentation, not for the first time, but with the current reporting environment as the reference frame.

Third, the window for jurisdictional re-evaluation is open. The Hong Kong inward re-domiciliation regime – which commenced in 2025 and allows an eligible non-Hong Kong company to re-domicile to Hong Kong while preserving its legal identity – is relevant to families whose intermediate holding vehicles are incorporated outside Hong Kong and whose advisers are now reconsidering the holding structure. Parties should verify the current commencement date and eligibility criteria before acting.

The decision-tree in practice runs like this. Where is the greatest concentration of forced-heirship risk, and is it in a jurisdiction where real property situs will override the trust governing law? Is the settlor's domicile likely to shift during the trust's life, and how does each candidate governing law respond to that? Is the administrative team – trustees, protectors, advisers – genuinely able to administer the structure in the chosen jurisdiction, or is the governing-law choice a paper exercise that creates a mismatch between nominal centre of administration and actual control? And is the enforcement route, in the event of a dispute, a realistic common-law pathway or a theoretical one?

For a family with the centre of gravity in Greater China, operating businesses held through BVI or Cayman vehicles, and an adviser team concentrated in Hong Kong, the answer in many cases is a Hong Kong governed trust with offshore intermediate holdcos and a carefully maintained substance position in Hong Kong. That is not the right answer for every family. But it is the answer that our desk reaches more often than the default offshore election would have produced five years ago.

For a broader view of the private-wealth structuring options available through Hong Kong, see our practice page on private wealth.

What foreign counsel and family advisers most often get wrong

Three errors recur in the cross-border trust work that reaches our desk from other jurisdictions.

The first is treating the trust governing law as the only law that matters. It is the most important single choice, but the structure's durability depends on four legal systems working in alignment: the trust governing law, the corporate law of the intermediate holdcos, the succession law of the settlor's jurisdiction at death, and the property law of the jurisdictions where real assets are held. A trust that is impeccable under Hong Kong law but holds Mainland real property directly – without an intermediate company interposing a movable share – will fail to deliver the intended protection on the most likely fact pattern.

The second error is failing to maintain substance. A trust that is expressed to be administered in Hong Kong but whose trustee meetings are held in a different jurisdiction, whose decisions are made by advisers in yet another, and whose protector is resident in a fourth, does not have a defensible centre of administration in Hong Kong. The governing law is one element; the centre of trust administration – for tax-residency and recognition purposes – is determined on substance. This matters directly under the FSIE regime for any Hong Kong-resident intermediate entity, and it matters for the tax-residency position of the trust in any jurisdiction that taxes trusts on their residence.

The third error, which is subtler, is drafting the letter of wishes too specifically. A letter of wishes that reads like a binding mandate creates the evidentiary basis for a beneficiary to argue that the trustee had no real discretion – and that the trust was therefore not a genuine discretionary trust but a disguised direct holding. That argument, if accepted in a jurisdiction that does not recognise discretionary trusts, converts the trust assets into the settlor's estate for succession purposes. The letter of wishes is a legitimate and useful document; it must be drafted as an expression of preference, not as an instruction.

Decision matrix: which jurisdiction, in which scenario

The matrix below is a prose summary of how the jurisdiction decision resolves across the principal scenarios our desk encounters. It is not a substitute for advice on a specific structure, but it maps the logic.

Scenario A: A Greater China family, settlor resident in Hong Kong, assets primarily in financial instruments and operating company shares held through BVI holdcos, beneficiaries across Hong Kong, Singapore and the United Kingdom, no civil-law forced-heirship exposure. The instrument points clearly to Hong Kong governing law. The reformed Trustee Ordinance provides the firewall; the perpetuity abolition provides the horizon; the trustee can be managed from Hong Kong in the family's timezone. The BVI holdco structure is retained as the intermediate vehicle; the trust governs the shares.

Scenario B: A family with a closely held manufacturing group, holding through a BVI operating company, with key real-property assets in the Mainland and a second generation partly resident in a civil-law European jurisdiction. Here the real-property situs risk is acute, the civil-law forced-heirship risk is present for European-resident beneficiaries, and the BVI VISTA regime – which restricts trustee interference with the underlying company management – addresses the operational-continuity concern. A BVI VISTA trust over the BVI holdco shares, with Hong Kong professional advisers coordinating the cross-border elements, is a plausible answer. The Mainland real property sits in an intermediate Mainland operating entity, shares of which flow up into the BVI holdco.

Scenario C: A family that has already relocated its principal family-office function to Hong Kong, with the settlor now Hong Kong resident, assets predominantly in listed securities and private funds, and no material real-property holdings in civil-law jurisdictions. Hong Kong governing law is the natural choice. The administration cost is lower than an offshore structure. The substance position is genuine because the family office functions here. And the enforcement route, in the event of a dispute, runs through the Court of First Instance and the Court of Final Appeal, which are experienced, well-resourced common-law courts.

Scenario D: A family where an earlier structure was established under the law of a jurisdiction that has since become less stable, less accessible, or less aligned with the family's current adviser team. Here the question is re-domiciliation or governing-law migration – technically a different exercise from the initial jurisdiction choice, but one that the current Hong Kong inward re-domiciliation regime and the reformed Trustee Ordinance together make more practically accessible than at any earlier point. Parties should verify the current eligibility criteria before proceeding.

Related practices

• Holding Structures – structuring intermediate vehicles across Hong Kong and the principal offshore centres
• Tax Positions – FSIE, territorial basis, Pillar Two and trust-residency interaction

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Related

• Private Wealth
• Will Estate Plan Covering Assets Mainland China Mainland
• Transferring Family Office From European Hub Hong Kong

This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.