Update: a private trust for a family with assets in the UAE

Families with assets spread across the UAE and Asia face a structural question that neither a UAE adviser nor a Hong Kong adviser can answer alone: how does a private trust formed under one legal system interact with succession rules, forced-heirship exposure, and asset-recognition in the other? The question is not academic. It surfaces at the point of death, divorce, or a change of residence – and the answer depends on which instruments are in place before that moment arrives.

A private trust settled under the Hong Kong Trustee Ordinance (Cap. 29) can hold and manage assets across the UAE and Asia, but its effectiveness against forced-heirship claims from a UAE-connected estate depends on the governing law chosen, the location of assets, and whether the trust structure is recognised by the relevant courts in the seat of those assets. Hong Kong trust law, as substantially reformed with effect from 1 December 2013, expressly protects trust assets from foreign forced-heirship claims – a feature that matters directly for families with beneficiaries or assets in jurisdictions that apply mandatory succession rules.

This briefing identifies what families in this corridor need to act on now, and why the sequence of steps matters.

What the structural trigger is

The UAE has developed its own succession and trust landscape considerably in recent years. The Dubai International Financial Centre and Abu Dhabi Global Market each operate independent common-law courts, with their own trust and foundations regimes. A family with operating assets or real property in the mainland UAE and holding or investment assets in the DIFC or ADGM faces a multi-regime succession position.

That position interacts with Hong Kong in two ways. First, many families in this corridor hold their private investment portfolios through Hong Kong-seated vehicles or trusts. Second, where a settlor or beneficiary is resident in Hong Kong or holds Hong Kong assets, the Hong Kong Trustee Ordinance is available as a governing law – and its anti-forced-heirship firewall, introduced in the 2013 reform, provides a statutory basis to resist succession claims derived from a foreign legal system.

The trigger is structural complexity. A family that has not mapped the interaction between its UAE asset register, its Hong Kong holding and trust structure, and the succession laws that will apply to each asset class on death is carrying unquantified exposure. The trigger to act is not a single deadline. It is the combination of asset growth, a change of residence, a change in family structure, or an impending transaction that brings the succession position into focus.

In our cross-border private wealth practice, we regularly see families in this corridor discover the gap only at the moment a succession event is imminent – when the options are fewer and the cost of correction is higher. The time to structure is before that point.

Who this affects and what the immediate action is

This briefing is relevant to any family that holds assets in the UAE – whether in the mainland UAE, the DIFC or the ADGM – and also has succession, trust, or holding structures connected to Hong Kong. It is equally relevant to families currently resident in the UAE who are considering a move to Hong Kong or to a third jurisdiction, and to families with beneficiaries distributed across multiple systems.

The immediate action is a structured map of the succession position across each asset class and each jurisdiction. That map should address: which law governs the trust and its validity; which law governs the forced-heirship position of each beneficiary; which assets sit outside the trust and are therefore subject to the default succession rules of their situs; and whether the trust's governing-law clause and firewall provisions are correctly drafted to engage Hong Kong's statutory protection.

For families whose assets include real property in the mainland UAE, the position under UAE federal succession rules must be assessed by UAE-qualified counsel. Hong Kong counsel advises on the Hong Kong law dimension – the trust instrument, its governing law, its firewall provisions, and the interaction with Hong Kong-seated assets and holding vehicles. Both strands are needed. A structure that is sound under Hong Kong trust law but has not addressed the UAE asset layer remains incomplete.

To discuss how this applies to your family's cross-border position, contact us at info@lockhartyip.com.

Further reading on related succession and estate structuring questions is available in our analysis of will and estate planning for families with assets in the CIS and in our piece on estate plans covering assets in Singapore. For a broader view of our private wealth practice, see our Private Wealth service page.

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