Where a private trust for a family with assets in the UAE stands now

A family with significant assets split between the UAE and a common-law offshore structure is sitting on a legal interface that most advisers in either jurisdiction do not fully see. The succession rules that govern an estate in Dubai or Abu Dhabi are not the same rules that govern a trust formed under English-derived law. When those two systems meet – at the point of a settlor's death, a contested distribution, or a creditor claim – the outcome turns on which regime the relevant court treats as controlling. That question has no single, settled answer in either jurisdiction. It is, however, a question that families can do a great deal to manage in advance.

A private trust for a family with assets in the UAE faces a layered cross-border risk: UAE succession law, which includes elements drawn from Shari'a (Islamic jurisprudence governing inheritance shares for Muslim estates), can interact with the trust structure in ways that displace the settlor's intended distribution if the structure is not properly designed and maintained. The Trustee Ordinance (Cap. 29), substantially reformed with effect from 1 December 2013, provides a well-tested platform for Hong Kong-law trusts – but only if the governing law of the trust and the siting of the assets are handled in the right sequence.

This analysis works through the commercial stakes, the governing instruments on each side, the comparative read across the UAE and Hong Kong systems, and our view on where the primary risk sits for families in this position today.

What is actually at stake commercially

The families who carry this exposure are not an unusual group. They are, across our private-wealth practice, one of the most common cross-border profiles we see: a family with roots in the UAE – or with principal residential and operating assets there – that has built a trust or holding structure in a common-law jurisdiction, typically using a BVI or Cayman holding entity above UAE-based real estate, operating companies, or financial assets.

The commercial stakes are high in two distinct ways. First, the assets are often illiquid and high-value. UAE real estate, in particular, can represent the largest single component of a family's balance sheet. A misdirected distribution, a forced claim by a statutory heir, or a freeze pending litigation can produce consequences that no amount of future restructuring can undo. Second, the family members are often spread across jurisdictions – some resident in the UAE, others in Hong Kong, the UK, or elsewhere – which multiplies the number of legal systems capable of asserting an interest.

The question families and their advisers should be asking is not simply "is there a trust?" but rather: does the trust actually work the way the settlor believes it does, given where the assets are situated and who the beneficiaries are? That is a harder question than it appears. And the answer, in our experience, frequently differs from the assumption built into the structure.

How does UAE succession law interact with a common-law trust?

UAE succession law presents a genuinely distinct set of rules for families whose settlors, beneficiaries, or assets are UAE-connected. For Muslim individuals, the UAE applies Shari'a-derived inheritance rules, which prescribe mandatory shares – known as faraid (the Quranic fixed-share inheritance system) – to defined categories of heir. These shares cannot be excluded or overridden by testamentary direction under UAE law, and courts in the UAE have, in certain circumstances, looked through common-law trust structures to apply those rules to the underlying assets.

The position for non-Muslim expatriates in the UAE is materially different. The UAE enacted legislative changes that allow non-Muslim residents to register wills and to have their estates administered under their home-country law, in particular through dedicated wills registries in the UAE. However, the interaction between those wills-registry mechanisms and a trust structure sitting above UAE-sited assets remains an area requiring careful analysis. The question is not simply whether a will is registered, but whether the assets in question have been properly transferred into the trust structure such that they are not subject to UAE succession rules at all – or whether the trust is, in the eyes of a UAE court, a disguised testamentary disposition.

This distinction matters enormously. A trust that is properly constituted, properly administered, and properly documented as a lifetime transfer into an existing structure is in a very different position from a poorly documented arrangement that looks, on its face, like an attempt to avoid faraid. UAE courts have the authority to look at the substance of a transaction, not merely its form.

What the Hong Kong trust reform gives – and what it does not give

The 2013 reform of the Trustee Ordinance (Cap. 29) gave Hong Kong-law trusts a set of protections that are directly relevant to this cross-border pattern. The most significant, for families with UAE exposure, is the anti-forced-heirship provision: the reform strengthened the position that a Hong Kong-law trust is not invalidated by reason of a foreign forced-heirship rule that would otherwise operate against the settlement.

The reform also confirmed that a trust is not invalidated by the settlor reserving certain powers – a point of practical importance because families often want the settlor to retain influence over investment decisions or distributions without destroying the trust. Additionally, the abolition of the rule against perpetuities for Hong Kong trusts gives families genuine multigenerational planning flexibility: there is no fixed period beyond which the trust must vest.

But the Trustee Ordinance's protections operate in the context of Hong Kong law. They tell you what a Hong Kong court will do when it applies Hong Kong law to the trust. They do not tell you what a UAE court will do when a beneficiary – or a statutory heir under Shari'a – brings a claim against UAE-situated assets. The firewall provided by the 2013 reform is powerful within its own legal system. It is not self-executing across the border.

The practical consequence is that a Hong Kong-law trust holding UAE assets has two distinct risk profiles operating simultaneously. Inside the trust – governance, distributions, trustee powers, reserved powers, protector arrangements – Hong Kong law applies and is well-tested. Outside the trust, at the level of the UAE asset itself – the title registration, the company licence, the real estate registration – UAE law has a voice that the trust instrument cannot silence by itself.

The cross-border interface: where the two systems actually meet

There are three points at which the UAE and Hong Kong legal systems make contact in a structure of this kind. Each has a distinct risk profile.

The first is asset transfer and perfection. For the trust to function as intended, the UAE assets must actually be within the trust structure – not merely described in it. For UAE real estate, that means examining how title is held, whether the relevant UAE emirate permits foreign-entity or trust-entity ownership, and whether any transfer has been properly registered. A trust that describes assets without actually holding them is exposed. When a settlor dies, the question of what the trust actually owns – as distinct from what the trust document says it owns – is the first thing an adverse claimant will examine.

The second is the moment of succession. At a settlor's death, the trust should continue to hold the assets without any succession event occurring at the trust level. But if the structure is imperfectly constructed – if the settlor retained legal title, if a corporate entity was held in the settlor's personal name, or if there was an oral understanding inconsistent with the documentation – a UAE court may treat the assets as part of the deceased's estate rather than as trust property. The claim would then be heard under UAE succession law.

The third is enforcement. Even where the trust is well-constructed and the assets are properly within it, an adverse claimant in the UAE can bring proceedings before a UAE court. Whether a Hong Kong court judgment or a trust-related ruling can be recognised and enforced in the UAE – or vice versa – depends on bilateral treaty arrangements and the domestic enforcement law of each jurisdiction at the relevant time. Neither system has a comprehensive mutual-recognition arrangement with the other in the way that Hong Kong now has with the Mainland under the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645), which took effect on 29 January 2024. The UAE and Hong Kong enforcement relationship requires case-by-case analysis.

Where does the forced-heirship risk actually sit?

This is the question at the centre of our assessment. Forced heirship under UAE law is not a single, uniform rule. It operates differently depending on the religion of the deceased, the type of asset, the emirate in which the asset is situated, and – increasingly – whether there are legislative pathways (such as the non-Muslim wills registries) that have been properly used.

For a Muslim settlor, the faraid rules represent a genuine legal risk to a structure that has not been carefully designed to separate trust assets from the settlor's personal estate. The clearest risk scenario is one in which a settlor contributes assets to a trust but retains, in substance, the characteristics of an owner – through excessive reserved powers, through undocumented side arrangements, or through a failure to administer the trust as a genuinely independent entity. In that scenario, a UAE court is likely to look through the trust and apply the mandatory inheritance shares to the underlying assets.

For a non-Muslim settlor, the risk profile is different but not absent. The UAE has broadened the options for non-Muslim succession planning, and a properly registered will in the relevant UAE registry, combined with a well-structured trust, can give a non-Muslim family a high degree of predictability. But "properly registered" and "well-structured" are both doing significant work in that sentence. The details of execution matter considerably.

Hong Kong's own position is clear: Hong Kong law has no forced-heirship regime. The trust, if governed by Hong Kong law and protected by the firewall provisions of the Trustee Ordinance, is insulated from foreign forced-heirship claims in Hong Kong. The remaining exposure is entirely a function of what UAE courts will do in respect of UAE-situated assets.

What foreign counsel – and families – commonly get wrong

The most common error in structures of this kind is the assumption that "putting assets into a trust" solves the succession problem. It solves part of the problem. It does not solve the part of the problem that lives inside the UAE legal system in relation to UAE-situated assets.

A second common error is treating the trust as a set-and-forget structure. Trusts require active administration: trustee resolutions, distribution records, investment decisions documented in writing, and periodic reviews that confirm the structure still reflects the family's circumstances. A trust that was well-structured in 2015 but has not been formally reviewed since may have drifted – new assets acquired, new family members born, changes in the settlor's residence or domicile – in ways that create gaps the original structure did not anticipate.

A third error, specific to the UAE context, is failing to account for the emirate-level variation in how succession and real estate rules operate. The position in Dubai, which has dedicated free zones and a well-developed non-Muslim wills registry, is not identical to the position in other emirates. Advice that treats "the UAE" as a single legal system for succession purposes is advice that may miss the operative rule.

In our cross-border practice, we regularly advise families who have discovered one or more of these gaps only after a triggering event – a death, a dispute between beneficiaries, or a creditor claim. The options available at that stage are narrower than the options available before the event. That asymmetry is worth weighing carefully.

The sequence above describes the standard risk pattern. Your matter turns on the specific assets, the identities and residences of the settlor and beneficiaries, the documentation in place, and the current state of the structure – which is where the route is won or lost.

To discuss how these issues apply to your family's position across Hong Kong and the UAE, contact us at info@lockhartyip.com.

How a Hong Kong-law trust should be positioned to manage this risk

A well-positioned Hong Kong-law trust for a family with UAE assets will typically reflect several design principles that are distinct from the design of a trust serving a purely common-law family.

The first is clean asset transfer. Each UAE-situated asset should be examined individually. Where the asset is held through a corporate entity – a BVI or Cayman company, for example – the shares in that entity should be the trust asset, not the underlying UAE property directly. That interposition of a corporate layer creates a legal separation between the trust (holding shares) and the UAE asset (held by the company). Whether that separation is respected by a UAE court depends on the facts, but a properly maintained and adequately capitalised corporate structure is in a materially stronger position than a direct trust ownership claim over UAE property.

The second is trustee independence. The more the trustee acts as a genuine fiduciary – making documented decisions, exercising discretion independently, maintaining its own records and accounts – the more robust the structure is against a look-through challenge. A professional trustee operating from a recognised jurisdiction, with a track record of documented decisions, presents a more coherent defence than a nominee trustee that has never held a meeting.

The third is the interplay with UAE wills. For non-Muslim families in particular, a registered UAE will can play a complementary role alongside the trust – addressing any assets that are not, or cannot be, held within the trust structure, and providing a clear legal pathway for any succession event under UAE law. The two instruments should be designed to work together, not to contradict each other.

The fourth is governing-law clarity. The trust deed should expressly select Hong Kong law as the governing law, and that selection should be matched by the substance of the administration: a trustee in Hong Kong, meetings held in Hong Kong, decisions documented in Hong Kong. A trust that says it is governed by Hong Kong law but is administered from, or controlled from, a jurisdiction with materially different succession rules is exposed to the argument that the governing-law choice is ineffective.

Our assessment: where the risk sits now

The risk environment for this structure type has not become easier in recent years. The UAE has strengthened and clarified certain succession rules – which is broadly positive for families who have properly engaged with those rules – but the process of clarification also makes it harder to argue that an improperly structured trust should be excused on the basis of legal uncertainty. The rules are more visible. The expectation that families will follow them is correspondingly stronger.

On the Hong Kong side, the trust environment remains sound. The 2013 reform protections are well-established, the Trustee Ordinance is a mature statute, and the common-law court system provides a reliable platform for trust disputes that fall within Hong Kong jurisdiction. For a well-structured Hong Kong-law trust holding interests in a BVI or Cayman corporate layer above UAE assets, the intra-trust position is predictable.

The concentration of risk is at the interface: the UAE-situated assets, the perfection of the transfer into the structure, and the question of what a UAE court will do if a claim is brought. That interface has not been made more predictable by recent developments. It remains a jurisdiction-specific analysis, not a general rule.

Consider the following pattern, which our desk sees regularly. A family based across the UAE and Hong Kong holds the majority of its real estate and operating interests through a trust established a decade ago. The trust documentation has not been reviewed since establishment. One or more significant UAE properties were acquired after the trust was formed, and the acquisition documentation does not clearly place those properties within the trust structure. The settlor has, over time, exercised influence over distributions in ways that are only partially documented. At a settlor's death or incapacity, those gaps become the first points of attack for any adverse claimant. The structural response – a thorough review of asset transfer, trustee decision records, and UAE succession planning – is exactly the work that reduces that exposure.

A second pattern: an expatriate family resident in Dubai, non-Muslim, has a trust governed by BVI law holding shares in an offshore company that in turn holds Dubai real estate. A UAE will has been registered, but it was prepared without reference to the trust and addresses the Dubai real estate directly, as though the trust does not exist. The trust and the will are in direct conflict. Resolving that conflict now – by aligning the two instruments and ensuring the UAE will addresses only what falls outside the trust – is straightforward. Resolving it after a death, when both instruments are in force and competing, is considerably more complex.

If an earlier filing, structuring decision, or succession arrangement has created ambiguity or an adverse result, a second read can identify what routes remain open.

To discuss the current state of your trust structure and its interaction with UAE succession law, write to us at info@lockhartyip.com.

Decision matrix: matching the situation to the structural response

The right structural response depends on where the family currently sits. A few common patterns illustrate how the analysis maps onto action.

Where the settlor is alive, the structure is in place, and no succession event is imminent, the appropriate step is a comprehensive structure review: confirm that all intended assets are properly within the structure, verify trustee independence and documentation quality, review the interaction with any existing UAE wills, and assess whether the governing-law selection is substantively supported by the administration of the trust. This review is the lowest-cost, highest-value intervention. It can be conducted without triggering any formal legal proceedings.

Where a succession event has occurred or is anticipated, the analysis shifts. The immediate priority is to identify which assets are, as a matter of fact and documentation, within the trust structure, and which are not. Assets within a well-constructed structure are in a strong position. Assets outside the structure – or in a structure with significant documentation gaps – require a more urgent response, which may involve UAE legal proceedings, registration steps, or urgent trustee action. The cross-border coordination between Hong Kong-side trust advisers and UAE-admitted counsel on this work is, in our experience, where outcomes are determined.

Where the family is at the design stage – before any trust is formed – the planning options are the widest. The choice of governing law, the jurisdiction of the trustee, the treatment of UAE-situated assets, and the interface with UAE succession planning for family members resident in the UAE can all be built into the design from the outset. That design work, done properly, produces a structure that is far more defensible than a structure assembled in response to a specific event.

For families reviewing existing arrangements, the additional dimension of will and estate planning that covers offshore-held assets is directly relevant: the trust and the will are not alternatives but complementary instruments, and the relationship between them should be reviewed as a single package. For families where the succession question intersects with matrimonial or relationship arrangements, the cross-border issues addressed in prenuptial and matrimonial property planning may also bear on the analysis.

Our full Private Wealth practice covers the complete range of succession, trust, and asset-protection work for families with cross-border exposure across Greater China, the UAE, and the principal offshore centres.

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