Update: a private trust for a family with assets in the United Kingdom

For families with assets on both sides of the Hong Kong – United Kingdom corridor, the question of where to hold, how to settle and what happens on succession has grown materially more complex. The interaction of United Kingdom trust and succession law with a Hong Kong-law trust structure is not automatic. It requires deliberate engineering – and the window for efficient planning often narrows without warning.

A private trust governed by Hong Kong law can hold United Kingdom-situated assets, but the cross-border interface engages UK succession rules, potential forced-heirship claims from a third jurisdiction, and the asset-protection provisions of the Trustee Ordinance (Cap. 29, as substantially reformed with effect from 1 December 2013) – all simultaneously. Getting the sequence right is the central structural question.

This briefing identifies the trigger, the affected corridor and the immediate steps for principals, family-office advisers and in-house counsel managing this interface.

What the trigger is – and why it recurs

In our private wealth practice, we see a consistent pattern: a family with UK-situated real property, investment assets or business interests engages a Hong Kong-law trust without first mapping how the UK succession position interacts with the trust instrument. The result is structural exposure that surfaces only on a liquidity event, a change of residence or a death in the family.

Two developments keep this pattern current. First, the UK has moved to reform the tax treatment of non-UK-domiciled individuals and their settled property. The scope and timing of those changes require families with UK assets to revisit whether the trust structure remains fit for purpose. Second, cross-border families increasingly hold UK assets through holding entities incorporated in the British Virgin Islands or the Cayman Islands – common-law offshore centres whose economic-substance regimes now affect how the trust is read at the holding layer. Neither change is a single deadline. Together, they represent a structural trigger that recurs each time the family's residence map, asset mix or succession intentions change.

Hong Kong law offers the governing trust framework. The 2013 reform abolished the rule against perpetuities for Hong Kong trusts, strengthened firewall protection against foreign forced-heirship claims, and confirmed that a settlor may reserve certain powers without invalidating the trust. Those protections do not, however, extend automatically to UK-situated assets. The UK has its own situs rules and its own succession regime.

Who is affected across the corridor

The immediate audience is families whose asset map spans both jurisdictions: a Hong Kong-resident settlor with UK property, UK-listed securities or a UK operating business held through a trust or a trust-and-company structure. Equally affected are families who are themselves UK-resident but whose trust governance, trustee appointment or family-office function sits in Hong Kong.

A mid-market illustration: an Asian family settled a Hong Kong-law discretionary trust in 2019, using a BVI holding company to hold two UK residential properties. The trust instrument reserved certain investment powers to the settlor. On a subsequent change of UK residence by one beneficiary, the family discovered that the UK's situs rules treated the underlying properties as UK assets for succession purposes – a position the trust structure had not anticipated. The corrective step required re-sequencing the holding layer and amending the letter of wishes, a process that took one advisory cycle to complete.

For in-house and family-office advisers: the structural risk is not in the trust instrument alone. It sits in the interface between the instrument, the holding layer, the settlor's domicile and the beneficiaries' residence. Any change to one element can move the risk position of the others. We advise on this interface regularly across the Hong Kong – UK corridor.

The immediate action

Three steps are warranted now.

First, map the family's current position: settlor's domicile and residence; beneficiaries' jurisdictions; the situs of each material asset; and the governing law of the trust and any interposed holding entity. This is the baseline for any structural review.

Second, review the trust instrument against the current UK succession and situs position. The firewall provisions of the Trustee Ordinance protect a Hong Kong-law trust against foreign forced-heirship claims, but they operate within limits. Where UK assets are held directly by the trust, the UK situs rules engage UK succession law independently of Hong Kong's firewall. The instrument, the holding structure and the asset map must be read together.

Third, consider the reserved-powers position. Statutory protection in Hong Kong confirms that certain reserved powers do not invalidate the trust. That protection does not travel to the UK automatically. A settlor who has reserved investment or distribution powers over UK-situated assets may inadvertently affect the UK tax and succession analysis. Specialist cross-border input – coordinated between Hong Kong international counsel and locally licensed UK advisers – is the correct sequencing.

For a structured assessment of your trust and UK-asset position across the Hong Kong – United Kingdom corridor, write to us at info@lockhartyip.com.

Further analysis on the private trust instrument and the reserved-powers position is available in our Reserved Powers Trust matter note. For the comparable Singapore corridor, see our private trust for families with Singapore assets briefing. Our full private wealth practice page is at lockhartyip.com/practices/private-wealth/.

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