Update: choosing a trust jurisdiction for an Asia-based family

For Asia-based families structuring wealth across multiple legal systems, the choice of trust jurisdiction is rarely a one-time decision. Residence shifts, succession law changes in the asset-holding countries, and evolving forced-heirship regimes each create fresh pressure to revisit an existing structure – or to choose correctly from the outset.

The governing instrument for trusts established under Hong Kong law is the Trustee Ordinance (Cap. 29), substantially reformed with effect from 1 December 2013. That reform abolished the rule against perpetuities for Hong Kong trusts and strengthened the protection of Hong Kong-law trusts against foreign forced-heirship claims. For families whose assets, residence or succession exposure spans the Mainland, offshore centres, and European or Middle Eastern jurisdictions, those two features remain among the most practically significant in the region.

This briefing covers what continues to drive jurisdiction selection, who the current trigger affects, and what the immediate action is.

What the recurring trigger is

Two developments keep jurisdiction selection live as a question rather than a settled one.

First, forced heirship (mandatory inheritance shares reserved under civil law for specific relatives) is an expanding variable. Civil-law jurisdictions from which many Asia-based families originate – including several Mainland Chinese, Central Asian, Middle Eastern, and European legal systems – impose forced-heirship regimes on assets connected to those systems. Whether that connection is made via the domicile of the settlor, the situs of assets, or the habitual residence of beneficiaries depends on the private international law rules of each state. The interaction is not automatic, and it rarely resolves itself the same way twice.

Second, the common law trust jurisdictions most commonly used by Asia-based families – Hong Kong, the British Virgin Islands, and the Cayman Islands – have each developed their own statutory firewall (legislative provisions blocking the recognition of foreign forced-heirship claims against a trust properly constituted under that jurisdiction's law). Hong Kong's firewall was strengthened by the 2013 reform. Offshore centres have their own parallel measures. The strength, reach, and judicial track record of those provisions differ. Choosing a jurisdiction on the assumption that all firewalls are equivalent is a structural error we see regularly in our cross-border practice.

The window that closes is not always a statutory deadline. It closes when the family's residence position crystallises – typically when a principal member takes up long-term residence in a new country – or when assets in a new jurisdiction are acquired before the trust structure has been extended to cover them.

Who this affects

The current trigger is most acute for three groups.

Families relocating a principal to Hong Kong – either under the talent-admission schemes or through a family-office arrangement – face a change in the family's residence map. Hong Kong has no forced-heirship regime. However, the family's assets and other members may remain connected to jurisdictions that do. The trust must hold across that map, not just at the point of relocation.

Families with Mainland Chinese assets or beneficial owners face a separate question. The Mainland does not recognise trusts as a legal structure in the same way as common-law systems do. Where Mainland assets sit inside or below a trust holding, the enforcement and succession treatment depends on how the structure is documented and where the interface with Mainland property and succession law arises. Our desk sees this configuration regularly, and the sequencing of steps matters significantly.

Families already holding offshore (BVI or Cayman) structures who have not revisited the jurisdiction choice since the 2013 Hong Kong reforms should take a fresh look. The question is whether the firewall in the current trust jurisdiction has the depth needed for the family's current residence and asset map – or whether re-siting or supplemental structuring is warranted. Substance and economic-presence requirements in offshore centres have also evolved and now interact with how a trust is administered and where its effective management sits.

The sequence above describes the standard position. 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 preliminary read on your trust structure and the jurisdictions engaged, email info@lockhartyip.com.

The immediate action

The first step is a jurisdiction map: a structured review of where the settlor and principal beneficiaries are resident, where assets are situated, and which forced-heirship or succession-law regimes have a plausible claim over the trust or its assets. That map then drives the choice of trust law, the selection of trustees, and the documentation of the trust's governing law and administration.

For families already holding a structure, the review should also cover whether the current trust deed expressly elects Hong Kong law (or the chosen offshore law), whether the governing-law clause is sufficiently clear to support a firewall argument, and whether the trustee's administration is consistent with the jurisdiction whose law governs.

Succession planning and trust jurisdiction selection intersect closely with the family's tax-residence position. See our analysis at Succession planning across Hong Kong and Mainland China for a detailed treatment of the cross-border succession interface. For matters involving offshore holding structures and family assets, the approach described in our Cyprus family assets matter illustrates how the jurisdiction question plays out in practice. Our private wealth practice covers the full range of structuring, succession, and cross-border enforcement questions for Asia-based families.

If an earlier structure was put in place without a full forced-heirship and jurisdiction analysis, a review now is a lower-cost step than contesting a claim after the principal's death.

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