Update: succession planning across Hong Kong UK

For families with assets, residence and beneficiaries distributed across Hong Kong and the United Kingdom, succession planning sits at the intersection of two distinct common-law systems – and the points of friction between them are sharpening. Successive adjustments to UK inheritance and residence rules, combined with Hong Kong's own trust reforms, mean that a structure designed two or three years ago may no longer achieve what it was intended to do.

Succession planning across the Hong Kong – United Kingdom corridor is governed by two separate legal regimes: in Hong Kong, principally the Trustee Ordinance (Cap. 29) as substantially reformed with effect from 1 December 2013; in the United Kingdom, a distinct body of succession, domicile and inheritance-tax law that treats a non-UK domiciliary differently from a settled UK resident. The critical interface is the domicile and residence classification of the principal – and that classification determines which regime taxes the estate, which governs distribution, and whether forced-heirship rules from a third jurisdiction can disrupt either.

This briefing sets out what has changed across the corridor, who it affects, and what to do now.

What has changed – and why the corridor demands attention now

The United Kingdom has adjusted the inheritance-tax treatment of non-domiciliaries and long-term residents in a manner that affects principals who split time between London and Hong Kong. Where a principal was previously treated as non-UK domiciled for inheritance-tax purposes – and could therefore shelter non-UK assets from UK inheritance tax – the residence-based test introduced in recent UK fiscal legislation tightens that position for individuals who have been UK-resident for a sustained period.

The precise effective dates and thresholds under UK domestic law should be verified with UK-qualified advisers before any structural decision is taken. What we can say from our cross-border practice is that the combination of a reformed Hong Kong trust regime and a shifting UK residence-based tax perimeter creates a genuine mismatch for families who have not revisited their structures recently.

On the Hong Kong side, the position is more settled. The Trustee Ordinance reform of 2013 abolished the rule against perpetuities for Hong Kong trusts, protected the settlor's power to reserve certain rights without invalidating the trust, and – critically – strengthened Hong Kong law's firewall against foreign forced-heirship claims. Hong Kong has no forced-heirship regime of its own. That makes a Hong Kong-law trust a structurally cleaner vehicle than many onshore alternatives for principals with beneficiaries in jurisdictions that do impose forced-heirship rules.

The structural question the corridor raises is this: if a principal is UK-resident and holds assets through a Hong Kong trust, does the UK's residence-based inheritance-tax test capture those assets? The answer turns on the specific facts – settlor status, trustee location, the trust's governing law, and the nature of the underlying assets. It is not answered by the trust deed alone.

Who is affected across the Hong Kong – United Kingdom corridor

The principals most exposed are those in three overlapping categories. First, Hong Kong-based families with UK residential property or UK-based beneficiaries who have never formalised the succession position under UK law. Second, UK-resident principals of Asian or international origin who hold the bulk of their wealth in Hong Kong or through offshore structures above Hong Kong operating companies. Third, families where one generation resides in Hong Kong and the next is resident, educated or working in the United Kingdom – a generational split that creates a cross-border succession event almost by default.

In our cross-border private wealth practice, we regularly see structures where the holding layer sits in the BVI or the Cayman Islands above a Hong Kong-connected asset base, the trust is governed by one law, and the principal's domicile or deemed-domicile position under UK law has not been assessed since the structure was established. The mismatch is not visible until a taxable event occurs – at which point it is too late to restructure without significant cost or loss.

For a family managing assets in this corridor, the question is not whether a problem exists. The question is when it becomes concrete. See also our analysis on succession planning across Hong Kong and Cyprus for a comparison of how similar corridor issues arise in a different cross-border context, and our analysis of asset protection for principals with Mainland China exposure for related structural considerations.

What to do now

Three immediate steps matter for principals in this corridor.

First, establish the current domicile and deemed-domicile position under UK law. This is a factual and legal assessment that must be done by qualified UK counsel. It determines whether UK inheritance tax applies to worldwide assets, to UK assets only, or not at all.

Second, review the governing law and trustee location of any existing trust. A trust established under Hong Kong law with Hong Kong trustees is not automatically outside the UK inheritance-tax perimeter if the settlor is treated as UK-domiciled. The structural analysis follows the domicile analysis.

Third, confirm that the Hong Kong trust documentation takes full advantage of the reforms under the Trustee Ordinance – in particular the firewall provisions protecting against forced-heirship claims from third jurisdictions, and the reserved-powers provisions allowing the settlor appropriate involvement without invalidating the structure.

The sequence matters. Attempting to restructure after a change in residence status, or after a taxable event has been triggered, is a materially harder and costlier exercise than planning before either occurs.

To discuss how the Hong Kong – United Kingdom succession interface applies to your family's position, contact our private wealth team at info@lockhartyip.com.

Frequently asked questions

Which jurisdiction's law applies to succession planning across Hong Kong and the United Kingdom?

There is no single answer. In Hong Kong, succession to movable property is governed by the law of the deceased's domicile at death; immovable property follows the lex situs (the law of the place where the asset is situated). In the United Kingdom, inheritance tax applies on a domicile and, increasingly, a residence basis. A principal with assets in both jurisdictions may simultaneously engage both regimes, and the two do not automatically align. Specialist cross-border advice is required to map the exposure before it crystallises.

What does the route look like for succession planning across Hong Kong and the United Kingdom?

The route typically starts with a domicile and residence assessment under both Hong Kong and UK law. It then moves to an asset map – identifying which assets sit where and under which governing law. Where a trust is the primary vehicle, the trust's governing law, trustee location, and the settlor's reserved powers are reviewed against the requirements of the Trustee Ordinance and the UK inheritance-tax perimeter. The final step is documentation and, where appropriate, restructuring of the holding layer to align the legal position with the family's intentions.

What are the main risks in succession planning across Hong Kong and the United Kingdom?

The principal risks are: first, assuming that a non-UK domicile status is permanent when UK residence rules can change that classification over time; second, operating a trust structure that was valid when established but has not been reviewed since the 2013 Trustee Ordinance reforms or subsequent UK fiscal changes; and third, failing to address forced-heirship exposure from a third jurisdiction before assets pass. Each of these risks compounds the others, and none is visible without a deliberate cross-border review. Parties should verify the current UK position before acting, as UK rules in this area continue to develop.

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

Update: succession planning across Hong Kong and the United Kingdom

What has changed – and why the corridor demands attention now

Who is affected across the Hong Kong – United Kingdom corridor

What to do now

Frequently asked questions

Speak with Lockhart & Yip

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