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

A family with assets spread across the United Kingdom and Hong Kong is not a simple trust problem. It is a succession problem, a residence problem, and, increasingly, a forced-heirship problem – all of which arrive at the same document on the same day. The trust deed that worked when the family lived in one place and held assets in one jurisdiction may be doing something quite different now. In our cross-border private wealth practice, this is the conversation we have most often: not whether to establish a trust, but whether the one that already exists is still doing the job it was designed to do.

A private trust for a family with assets in the United Kingdom must engage at least two legal systems simultaneously: the trust law governing the structure itself (typically Hong Kong law, an offshore law, or English law) and the succession, tax, and residency rules of the United Kingdom, which attach independently to the asset and, in some cases, to the family member. The Trustee Ordinance (Cap. 29), substantially reformed with effect from 1 December 2013, governs Hong Kong-law trusts; English law governs trusts constituted under it and applies its own rules on situs, domicile, and inheritance tax to UK-situated assets regardless of where the trust was set up. Both systems must be mapped before the structure is relied upon.

This analysis covers what is commercially at stake, how the cross-border interface between Hong Kong and the United Kingdom bites in practice, the comparative read across the two systems, and where the risk sits now for families at the intersection of these two jurisdictions.

What is the commercial question that drives this structure?

The starting point is not legal. It is the family's actual position: who holds what, where they live, where they intend to live, and what they want to happen when they die or when the business changes hands. Those four questions determine whether a private trust is the right answer, which law should govern it, and whether a structure already in place remains fit for purpose.

For families with UK assets – whether residential property, financial portfolios, operating businesses, or a combination – the commercial stakes are significant. The United Kingdom applies inheritance tax on a worldwide basis to individuals domiciled there, and on a situs basis to UK-situated assets held by individuals who are not UK-domiciled. That distinction matters enormously at the trust level. A trust that was established by a non-UK-domiciled settlor to hold UK property sits in a different position from one established by a settlor who has since become UK-domiciled. The trust deed does not move. The tax position does.

For a family with one foot in Hong Kong and one in the United Kingdom, the commercial question is whether the private trust captures the protection it was meant to provide: succession certainty, asset protection from creditor claims, a clean mechanism for transferring value to the next generation, and a manageable tax position across both jurisdictions. Those objectives can align. They can also pull against each other in ways that only a cross-border read makes visible.

Our desk regularly sees structures that were set up in a single-jurisdiction context and have since expanded into the UK. The property was acquired, the child enrolled at a UK university, the family spent more time in London. Each step was commercially rational. Together, they created a cross-border exposure that the original trust was not designed to manage.

How does the governing framework engage across Hong Kong and the United Kingdom?

Two legal regimes apply to any private trust for a family with UK assets, and they do not always agree on the answer to the same question.

The first regime is the law governing the trust itself. Where the trust is constituted under Hong Kong law, the Trustee Ordinance (Cap. 29) applies. The 1 December 2013 reforms were substantial: the rule against perpetuities and excessive accumulations was abolished for Hong Kong trusts, giving the structure an indefinite duration. Settlor reserved powers were given statutory protection, so that a trust is not invalidated because the settlor retained certain rights over investments, distributions, or trustee changes. The 2013 reform also strengthened the protection of Hong Kong-law trusts against foreign forced-heirship claims, giving the trust a statutory firewall that operates independently of the underlying asset's situs.

The second regime is UK law, applied in two distinct ways. English trust law governs trusts constituted under it – and many UK-facing structures, particularly those holding English real property, use English-law documents for the property-holding layer. More significantly, the UK's inheritance tax and domicile rules apply to UK-situated assets on a situs basis, regardless of what the trust deed says. A UK-situated asset held by a trust does not escape UK inheritance tax by reason of the trust being established under Hong Kong law. The question is whether the trust is a relevant property trust under the UK regime and how the applicable charges – entry charge, periodic charge, and exit charge – operate across the trust's duration.

These two regimes interact at several points. The first is the validity of the trust itself: whether it is recognised in the United Kingdom as a valid trust, and whether the settlor's reserved powers are treated as consistent with the trust's existence or as vitiating it. The second is forced heirship: if a family member is a national of a jurisdiction that operates a forced-heirship regime, UK courts and Hong Kong courts may reach different conclusions about whether that claim defeats the trust. The Hong Kong firewall provides a statutory answer for Hong Kong-law trusts; English law has its own conflict-of-laws analysis. The third interaction point is the tax treatment of distributions and of the underlying assets, which requires a read across both systems and, for families with members in multiple jurisdictions, may extend to a third.

What does the cross-border interface actually look like in practice?

The structural interface between Hong Kong and the United Kingdom is one of the more technically demanding in our cross-border practice. The two jurisdictions share a common-law heritage and broadly recognise each other's trust structures, but the tax, domicile, and residence rules diverge in ways that create real structural risk.

Consider a mid-sized family group that came to us in 2025. The settlor had established a Hong Kong-law discretionary trust in the mid-2010s, holding investment assets through a BVI holding company. The family subsequently acquired a residential property in London, held through a UK company for stamp duty land tax reasons at the time. The settlor's children had studied in the United Kingdom and one had remained, establishing UK tax residence and, over time, UK domicile. By the time the family engaged us, three legal systems were engaged by a single trust structure: Hong Kong, the British Virgin Islands, and the United Kingdom. The trust deed addressed none of their interactions explicitly.

The sequencing of risk in that kind of matter is not immediately obvious. The forced-heirship angle arrived first – a family dispute in a third jurisdiction raised a claim against the trust assets. The Hong Kong firewall was engaged. The UK company holding the property was outside the firewall's direct reach, because it was constituted under English law. Resolving the position required a careful mapping of which assets sat inside and outside the firewall, and a structural adjustment to bring the UK property-holding layer within a more defensible position.

The tax interaction arrived second. The UK-domiciled child's position as a discretionary beneficiary of a trust holding UK assets engaged the UK's inheritance tax periodic charge. A distribution from the trust to that beneficiary required advice from locally licensed UK-qualified practitioners working alongside our desk. The cross-border read – mapping the Hong Kong-law trust's position against the UK tax charge – was the work our desk provided.

This kind of multi-layered sequencing is where a purely domestic read, whether Hong Kong-only or UK-only, fails the family. The decisions are not independent of each other. The trust amendment that solves the forced-heirship exposure may alter the UK tax analysis. The distribution that is tax-efficient in the United Kingdom may be inconsistent with the trust's stated purposes under Hong Kong law. Managing those interactions is the core of the cross-border private wealth exercise.

To understand the Hong Kong-law trust position in more detail, see our guide to single family offices structured through Hong Kong. For the source-of-wealth dimension that often accompanies UK-asset structures, our matter note on source-of-wealth and source-of-funds files for family offices sets out the practical approach.

The sequence above describes the standard position in outline. Your matter turns on the documents, the jurisdictions actually engaged, and the order of steps – which is where the route is won or lost. For a structured assessment of your private trust's position across Hong Kong and the United Kingdom, write to us at info@lockhartyip.com.

How does the comparative read between Hong Kong and UK trust law affect the structure?

Hong Kong and English trust law are closer to each other than to most civil-law systems, and that shared common-law foundation matters. But the differences are operative at the level that matters most to families with UK assets.

On perpetuities, Hong Kong has moved further than England. The abolition of the rule against perpetuities for Hong Kong trusts (from the 1 December 2013 reforms) gives Hong Kong-law structures a significant long-term planning advantage over structures governed by English law, where modified perpetuity rules still apply. A dynasty trust governed by Hong Kong law can, in principle, hold assets across multiple generations without the structural interruption that perpetuity periods impose.

On forced heirship, Hong Kong has no forced-heirship regime of its own. The statutory firewall introduced by the 2013 reform provides that a Hong Kong-law trust is not invalidated by reason of foreign forced-heirship or matrimonial property rules. English law does not have an equivalent statutory provision. This difference is significant for families with members who are nationals of jurisdictions – including some Mainland Chinese, Middle Eastern, or European civil-law jurisdictions – that reserve a share of an estate for certain heirs regardless of the deceased's wishes.

On settlor reserved powers, both jurisdictions allow a settlor to retain certain controls over a trust without invalidating it. The Hong Kong reform was explicit about which powers may be reserved; the English position remains more dependent on the particular facts and on whether the arrangement is a sham. For families where the settlor wishes to retain meaningful oversight, the Hong Kong-law structure offers more predictability on this point.

The comparison that matters most for UK-asset families, however, is on the tax side. And here the analysis is one-directional: the UK's inheritance tax applies to UK-situated assets regardless of the governing law of the trust. A Hong Kong-law trust holding UK residential property is subject to UK inheritance tax on that property. A Hong Kong-law trust holding shares in a UK company that in turn holds UK property was historically subject to UK inheritance tax on those shares; the position on enveloped UK property has been subject to significant legislative development in the United Kingdom, and families relying on company structures to hold UK residential property should verify the current position with UK-qualified counsel.

What this means structurally is that no trust law reform in Hong Kong, however advantageous in its own terms, can insulate UK-situated assets from UK tax. The two systems operate on parallel tracks. The Hong Kong-law trust provides the structural wrapper; the UK tax rules apply their own charge to the underlying assets. The private wealth adviser's role is to ensure that the two tracks do not produce unexpected and avoidable collisions.

Where does the succession risk sit in a cross-border trust for a family with UK assets?

Succession is the point at which cross-border private trust structures are most often stress-tested, and the most common failure mode is a mismatch between the trust deed and the legal system that applies to the underlying asset on death.

For UK real property, succession is governed by English law as the lex situs (the law of the place where the asset is situated). A trust that is constituted under Hong Kong law and purports to dispose of UK land must, in its ownership and disposition structure, comply with English property law's formal requirements. The trust itself may be valid. The underlying property transfer may require additional steps. Getting this sequence right – particularly where a trustee predeceases the settlor, or where a successor trustee needs to be appointed – requires a read of both systems simultaneously.

For financial assets, the position is more flexible. Shares in a BVI or Cayman holding company are not UK-situated assets for most purposes, even if the company's underlying portfolio includes some UK-listed securities. Structuring the trust's investment exposure through an offshore holding company can therefore separate the succession question from the UK-situs analysis, at least for portfolio assets. This structural point is well-established in practice, but it requires careful documentation and ongoing maintenance to remain effective.

The forced-heirship interaction sits alongside the succession analysis. A family member who is a national of a forced-heirship jurisdiction – say, a European civil-law country or a Mainland Chinese jurisdiction – may have rights that they or their estate could seek to enforce against assets held by the trust. The Hong Kong-law trust's statutory firewall is the first line of defence. But the firewall operates at the level of Hong Kong law. If the assets are situated in the United Kingdom, and if a UK court is asked to give effect to the foreign forced-heirship claim, the analysis under English conflict-of-laws rules may reach a different conclusion from the Hong Kong analysis. Families in this position should not assume that a firewall provision in the trust deed resolves the UK-sited exposure without a separate UK-law opinion.

The residence dimension compounds this. A family member who has become UK-domiciled – either by intention or by operation of the UK's deemed-domicile rules after a period of UK residence – changes the succession analysis for all assets they hold directly, and also changes the tax analysis for assets they receive from the trust. The deemed-domicile rules under UK law can engage at a point that surprises non-UK families; this is a specific risk for families whose children have built careers or families in the United Kingdom.

What are the risk points that cross-border structures most often miss?

In our experience, the gaps in cross-border trust structures for UK-asset families cluster around four recurring points.

The first is the trustee's jurisdiction. A trust constituted under Hong Kong law with a corporate trustee incorporated in Hong Kong raises a question about where the trust is resident for UK tax purposes. UK trust residence rules look at where the majority of trustees are resident. A Hong Kong-resident trustee holding UK assets may, in certain configurations, produce a UK-resident trust for tax purposes. This is not always the intended result. The structure of the trustee entity and the location of its central management and control matter.

The second is the beneficiary's residence. A UK-resident and UK-domiciled beneficiary receiving a distribution from a trust with UK-situated assets is in a different position from a beneficiary who is neither UK-resident nor UK-domiciled. If the family's next generation has UK roots, the distribution analysis changes. This is not a reason to avoid the trust; it is a reason to design the distribution provisions with the beneficiaries' actual residence profile in mind, and to revisit that profile regularly.

The third is the company layer. Many families hold UK property through a UK company or through a chain of entities. The company layer can serve legitimate purposes, but it also creates its own set of exposures: the UK has specific rules applying to UK residential property held through non-natural persons, and the inheritance tax position of enveloped property has been subject to legislative change. Families holding UK residential property through a company should verify the current position before assuming the structure remains optimal.

The fourth – and the one that most often goes unaddressed until it is too late – is documentation. The trust deed records the structure at the moment of its creation. Side letters, memoranda of wishes, and letters of intent are the tools by which a settlor communicates to the trustees how they want the trust to be managed. In our cross-border practice, we regularly see structures where these documents are absent, out of date, or inconsistent with each other. In a cross-border context, an inconsistent memorandum of wishes can create a forced-heirship exposure, a tax uncertainty, or a succession dispute that the trust was designed to prevent.

If an earlier structure, filing, or distribution produced an adverse or stalled result – or if the family's circumstances have changed since the trust was established – a second cross-border read can identify what remains open and what requires attention. Write to us at info@lockhartyip.com to discuss the position.

Where does the risk sit now, and what does our desk see heading into the current period?

The risk for families with private trusts and UK assets has not decreased. On the contrary, three developments have made the cross-border position more active in the current period.

First, the UK's inheritance tax regime has extended its reach in ways that are particularly relevant to non-UK-domiciled families. The deemed-domicile rules, the application of inheritance tax to UK-situated assets on a situs basis, and the treatment of trusts established by formerly non-domiciled individuals have all been the subject of legislative attention. Families who established their trust structure under the rules that applied five or ten years ago should not assume the analysis remains unchanged. Verification with UK-qualified advisers – working alongside our desk for the cross-border mapping – is advisable where the UK asset base or the family's UK residence profile has changed.

Second, the forced-heirship landscape is more active than it was. The volume of cross-border inheritance disputes has increased as families have become more internationally mobile, and courts in multiple jurisdictions – including the courts of England and Wales – have grappled with the question of how to treat foreign forced-heirship claims in the context of trust structures. The Hong Kong firewall is a well-tested protection, but it operates in a world of moving judicial analysis. Families relying on it should understand what it does and does not cover.

Third, transparency regimes have changed the information environment. The United Kingdom operates registers of beneficial ownership for UK companies and Scottish limited partnerships. Hong Kong has maintained its own Significant Controllers Register (an internal register of ultimate beneficial ownership, required for Hong Kong-incorporated companies since 1 March 2018) and has continued to develop its beneficial-ownership framework. These registers do not invalidate a trust structure, but they affect how the structure is documented, what is disclosed, and what is visible to third parties. In a cross-border trust involving a UK company or a Hong Kong company, both disclosure regimes apply.

Our desk's read is that the structural risk for UK-asset families is concentrated at two points: the tax and deemed-domicile position of beneficiaries who have become UK-connected, and the documentation quality of the trust and its ancillary instruments. Both are manageable with the right cross-border analysis. Neither is resoluble by a purely domestic adviser working on one side of the interface only.

For a full analysis of how the structure applies to your specific position, our Private Wealth practice page sets out the scope of the work we do across Hong Kong, the offshore centres, and the United Kingdom.

How should a family with UK assets and a Hong Kong trust approach the review now?

The practical answer is a structured cross-border review conducted in three layers.

The first layer is structural: mapping the trust deed, the trustee entity, the asset-holding vehicles, and the beneficiary classes against the legal systems that actually apply. This means identifying which assets are UK-situated for situs purposes, which beneficiaries are UK-connected, and whether the trustee's jurisdiction is producing an unintended trust-residence result. The governing instruments – the Trustee Ordinance (Cap. 29) for Hong Kong-law trusts; the relevant English statutes for trusts governed by English law – provide the starting framework. The cross-border mapping produces the operative analysis.

The second layer is documentary: reviewing the memorandum of wishes, the letter of intent, and any side letters for consistency with the trust deed, with the family's current intentions, and with the cross-border legal position. Where these documents are absent or outdated, preparing them is a straightforward step that significantly reduces the risk of a disputed distribution or a forced-heirship challenge.

The third layer is succession-specific: tracing, for each UK-situated asset, the succession chain from trustee to successor trustee, and from trust to beneficiary, and confirming that the mechanism is valid under each applicable legal system. For UK real property, this means confirming that the formal requirements of English property law are satisfied. For financial assets held through offshore vehicles, this means confirming that the holding chain is intact and that no company in the chain has lapsed, struck off, or otherwise lost standing.

This review is not a one-time exercise. Families move. Children acquire domicile. UK tax rules change. A trust review conducted on the family's initial structure and not revisited as circumstances develop is, in our experience, the single most common source of the structural gaps we are asked to address. Our desk recommends a cross-border review whenever a family member acquires UK residence or domicile, whenever UK assets are acquired or disposed of, and whenever the UK legislative environment relevant to the structure changes materially.

Related practices

• Private Wealth – succession, asset protection, trust structuring and family office counsel across jurisdictions
• Holding Structures – review and design of offshore and Hong Kong holding entities for cross-border asset groups

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Related

• Private Wealth
• Source Wealth Source Funds Files Family Office Matter
• Single Family Office Structured Through Hong Kong Guide

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