Update: a private trust for a family with assets in the BVI
A private trust for a family with assets in the BVI. What changed and the action it now calls for. The Hong Kong angle in focus. Write to info@lockhartyip.com.
For families holding assets through British Virgin Islands (BVI) structures, the intersection of Hong Kong succession planning, BVI corporate governance and cross-border enforcement has shifted. Families who have not reviewed their private trust arrangements since establishing their BVI holding entities face a compounding risk: the trust instrument governing succession may no longer align with the underlying holding structure, the family's current residence pattern, or the forced-heirship rules of the jurisdictions where beneficiaries now live.
A private trust established under Hong Kong's Trustee Ordinance (Cap. 29) – substantially reformed with effect from 1 December 2013 – can hold BVI-incorporated entities while benefiting from Hong Kong law's express abolition of the rule against perpetuities and its statutory protection against foreign forced-heirship claims. Whether that protection holds depends on the trust's governing law, the settlor's current residence, and the jurisdictions in which beneficiaries are domiciled.
This briefing sets out what families with BVI-held assets should be reviewing now, who the development affects, and the immediate steps worth taking.
What has changed – and why it matters now
Two pressures have converged. First, economic-substance requirements in the BVI have tightened over successive review cycles, affecting holding entities that sit within family trust structures but are treated as passive. Where a BVI entity holds operating assets or receives passive income streams, the substance analysis has become a live compliance question rather than a filing formality. Second, the residence and domicile map of wealthy families has shifted materially since 2020: principals who were previously resident in one jurisdiction have relocated to Hong Kong, the UAE, Singapore or European cities, each carrying a different forced-heirship or succession-law consequence for the trust's beneficiary provisions.
These two pressures interact. A trust drafted when all principal family members were in a single jurisdiction may now expose assets to the succession law of a jurisdiction the settlor had not anticipated. Hong Kong law's firewall provisions – strengthened by the 2013 reform of the Trustee Ordinance – are designed to resist foreign forced-heirship claims against a Hong Kong-law trust. But the firewall only operates if the trust is properly constituted and governed under Hong Kong law, and if the BVI holding entities beneath it are maintained in a manner consistent with that characterisation.
Families who established BVI structures in the 2010s and have not conducted a comprehensive review since then are operating on instruments that predate the 2013 reforms, the BVI substance regime, and the post-2020 family residence dispersal. That is the core trigger.
Who is affected across the Hong Kong – BVI corridor
The alert is most immediately relevant to three groups. First, families where the settlor or a primary beneficiary has changed residence since the trust was established – particularly those who have relocated to Hong Kong under the capital-investment or talent-admission schemes, or who have moved to a civil-law jurisdiction with mandatory réserve héréditaire (forced-heirship share for children or surviving spouses). Second, families where the BVI entities within the trust structure hold Hong Kong operating companies, real property in the Mainland, or financial accounts that have become subject to automatic exchange of information. Third, estates where succession has opened – or is expected to open within the next planning cycle – and the trust has not been confirmed as the effective holding vehicle by a legal review under current law.
The cross-border enforcement dimension also deserves attention. Since the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) came into force on 29 January 2024, Mainland civil judgments – including those touching asset-recovery and family claims – can be registered and enforced in Hong Kong through the Court of First Instance. A family trust holding BVI entities above Mainland assets is no longer insulated from Mainland judgment enforcement in the way that an earlier structural analysis might have assumed. This is a material change that our desk sees affecting families with cross-border wealth profiles across Greater China.
See our analysis of asset protection for principals with Mainland China exposure and our case study on transferring a family office from a European hub to Hong Kong for related context. Our private wealth practice sets out the full range of services available to international families.
The immediate action
Three steps apply now. First, confirm the governing law of the trust instrument and verify that it engages Hong Kong law's firewall and forced-heirship protections as currently drafted. If the trust was established under BVI law, the protection calculus differs and requires a separate analysis. Second, map the current residence and domicile of the settlor and each named beneficiary against the succession laws of those jurisdictions. The forced-heirship exposure of a beneficiary resident in France, Spain or a Mainland Chinese city is not neutralised by a BVI holding structure alone. Third, review the BVI entities for economic-substance compliance and confirm that they are characterised and maintained consistently with the trust's governing-law elections.
None of these steps is routine in isolation. Combined, they constitute a structural health-check that should be completed before the next succession event – or before any further asset is added to the structure. We regularly advise international families on precisely this review, working with locally licensed counsel in Hong Kong and in the BVI as the work requires.
To discuss the position of your trust and BVI holding structure across the relevant jurisdictions, write to us at info@lockhartyip.com.
Frequently asked questions
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This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.