How to approach a private trust company

For a family with assets spread across Hong Kong, the Mainland, and one or more offshore centres, the question of succession is never purely domestic. It is a cross-border legal problem dressed in the language of estate planning. A private trust company (a purpose-built corporate trustee owned and governed by, or for, a single family) is increasingly the answer that family principals and their in-house counsel reach for – and with good reason. It concentrates governance, preserves confidentiality, and keeps decision-making inside the family across generations.

A private trust company, established typically in Hong Kong, the Cayman Islands, or the British Virgin Islands and acting as trustee of one or more family trusts, allows a multi-generational family to control the governance of its wealth structures without subjecting those structures to the operational risk, commercial interests, or institutional changes that accompany a professional corporate trustee. The Trustee Ordinance (Cap. 29), substantially reformed with effect from 1 December 2013, provides the statutory basis on which Hong Kong-law trusts can be used within, or alongside, such a structure.

This guide walks through the decision sequence: why a private trust company, which jurisdiction, the structural steps in order, the gates at each stage, and the common errors that practitioners on our desk see most often.

What decision does the family actually face?

The starting point is not which jurisdiction to use. It is whether a private trust company solves the problem the family actually has.

Most families who come to this question have already accumulated complexity. They hold operating companies through a BVI or Cayman intermediate layer. They have family members resident in several countries. Some branches may be subject to forced-heirship regimes in their country of domicile. The family may have already experienced the friction of a professional institutional trustee – one whose officers rotate, whose risk appetite changes, and whose decisions are driven by institutional rather than family priorities.

The alternative – a private trust company – shifts trusteeship to a vehicle the family controls. But that shift creates its own obligations. Governance must be documented. Decisions must be made and recorded. Directors of the private trust company bear fiduciary duties to the beneficiaries of the underlying trust. The family is, in effect, electing to become a regulated trustee of itself. That is the trade-off the decision-maker must understand before the structure is drawn.

In our cross-border practice, we see two distinct profiles arrive at this question. The first is the founder who wants to retain meaningful influence during their lifetime while beginning the transition to the next generation. The second is the second or third generation, already holding the assets, seeking to formalise governance and pre-empt future disputes. The sequence of steps looks similar for both; the governance design differs considerably.

Which jurisdiction sits at the centre – and why does Hong Kong matter?

Hong Kong is not always the seat of the private trust company itself, but it is frequently the operational and governance hub for the family's wealth structure. Its legal system offers a common-law foundation, court access in English, and a statutory trust regime that – since the 1 December 2013 reforms – abolished the rule against perpetuities for Hong Kong-law trusts, protected settlors who reserve certain powers, and strengthened the position of Hong Kong-law trusts against foreign forced-heirship claims.

That last point matters considerably for families with members domiciled in civil-law jurisdictions where forced heirship (the legal obligation to leave a fixed share of an estate to certain relatives, regardless of a will) applies. Hong Kong law has no forced-heirship regime. The 2013 reform added explicit firewall provisions, meaning a Hong Kong-law trust cannot be set aside or varied solely on the basis that it defeats a foreign forced-heirship claim. For a family spanning several jurisdictions, that protection is a material structural advantage.

The private trust company itself is most often incorporated in the Cayman Islands or the BVI, both common-law holding centres widely used above Hong Kong operating companies. Some families incorporate the private trust company in Hong Kong directly, particularly where the family's primary assets and advisers are based here and where local substance is already present. Each option has governance, economic-substance, and regulatory implications that must be assessed on the family's specific map.

Singapore is the other frequently considered alternative. For families with a cross-border interface between Hong Kong and Singapore – a pattern we see with increasing regularity – the question of where the private trust company sits, and which law governs the trust, is a substantive one. The two systems are closely comparable in the common-law foundation; they differ in regulatory touch-points, cost base, and the family's actual centre of gravity.

For a structured assessment of your family's jurisdiction options across Hong Kong and the relevant offshore centres, write to us at info@lockhartyip.com.

What are the structural options before choosing a private trust company?

A private trust company is not the only vehicle that can sit between a family and its trust assets, and the route should begin with a clear-eyed review of the alternatives.

The main options are: an institutional professional trustee; a managed trust company (a private trust company that relies on an external licensed manager for its trust and corporate services); a protector structure (an individual or body with reserved powers over the trustee, overlaid on an institutional trustee); and a fully family-directed private trust company. Each sits at a different point on the control-versus-compliance spectrum.

What distinguishes the private trust company model is governance concentration. The family's representatives sit on the board of the corporate trustee. They make – or directly influence – the decisions about distributions, investment mandates, and the addition or removal of beneficiaries. The trust deed and any separate letter of wishes (a non-binding but influential statement of the settlor's preferences, addressed to the trustee) guide, but do not override, those decisions.

Where a family has significant operating-company assets alongside passive investment portfolios, a private trust company also allows the family's own directors to exercise the trustee's rights as a shareholder in those operating companies. That is a capability an institutional trustee rarely offers without friction.

The trade-off is transparency and accountability within the family. The private trust company model works when governance is genuine. Where the family has unresolved succession conflicts, where different branches have materially different risk appetites, or where the founding generation has not yet made considered decisions about the scope of the next generation's role, the private trust company governance structure can become the forum for those conflicts rather than a solution to them. Those conversations should happen before the structure is built – not inside the board of the trustee after the assets have been settled.

How does the structure come together? The sequence in order

The sequence for establishing a private trust company structure is not a single filing. It is a series of gates, each of which conditions the next. Moving out of order is one of the most common errors our desk sees.

Step 1 – Family map and asset inventory. Before any legal documents are prepared, the adviser needs a complete picture: the family members and their residence and domicile positions; the asset classes and the jurisdictions in which those assets are located or incorporated; any existing trust, will, or holding structure that must be unwound or preserved; and any forced-heirship or matrimonial exposure affecting any family branch. This step is analytical, not documentary. Its output is a clear statement of the problem the structure must solve.

Step 2 – Jurisdiction selection and trust law choice. Based on the family map, the adviser identifies the governing law of the trust (typically Hong Kong or the relevant offshore jurisdiction), the seat of the private trust company, and the jurisdiction of the underlying operating or holding entities. These choices interact. A Hong Kong-law trust administered by a Cayman private trust company holding BVI subsidiaries is a common configuration; it requires deliberate analysis of which courts have jurisdiction and under which law in the event of a dispute.

Step 3 – Governance design. The constitutional documents of the private trust company – its articles of incorporation and any shareholders' agreement among the family – must reflect the governance decisions made in Step 1. Who sits on the board? How are decisions made? What is the mechanism for appointing, removing, and replacing directors across generations? What is the quorum? These questions are more important than the boilerplate, and they are the ones most often deferred to an offshore service provider rather than answered by the family itself. That deferral is a governance failure.

Step 4 – Trust deed drafting. The trust deed governs the relationship between the settlor, the trustee (the private trust company), and the beneficiaries. It must address: the class of beneficiaries and how it can be extended; the trustee's investment and distribution powers; any powers reserved to the settlor; any protector role and the protector's powers; and the mechanism for changing the governing law or the trustee. The interaction between the trust deed and the private trust company's own constitutional documents must be mapped explicitly. Where Hong Kong law governs the trust, the reforms under the Trustee Ordinance (Cap. 29) provide the statutory floor; the deed can expand or restrict those defaults.

Step 5 – Asset settlement and transfer. The assets are transferred to the trust. For operating companies and real property, this typically involves a share transfer or re-registration. For Hong Kong stock, ad valorem stamp duty of 0.1% per party (0.2% in total on the higher of consideration or value) applies. Shares of a non-Hong Kong company holding no Hong Kong-situated assets are generally outside Hong Kong stamp duty, but this must be verified on the specific facts. The transfer sequence should be planned to avoid unintended tax events in the relevant jurisdictions.

Step 6 – Regulatory and substance review. Where the private trust company is incorporated in a jurisdiction with an economic-substance regime – as both the BVI and Cayman Islands now operate – the company must satisfy the relevant substance requirements. Where it provides trust services as a business (rather than operating purely for the single family), additional licensing requirements may apply. This gate is often underestimated by families working with offshore service providers who focus on incorporation speed rather than ongoing compliance.

Step 7 – Governance operationalisation. The structure is only as strong as the governance practice. Board minutes must be prepared. Distribution decisions must be documented. The letter of wishes must be reviewed and updated as family circumstances change. The protector, if any, must exercise their powers in a genuine and documented manner. In our cross-border practice, the structures that face challenge – whether from excluded beneficiaries, revenue authorities, or foreign courts – are almost invariably those where the governance was treated as administrative rather than substantive.

If an earlier filing, structure or enforcement attempt produced an adverse or stalled result, a second read can identify the strategic error and the routes still open. Write to us at info@lockhartyip.com.

What does the cross-border element change?

The cross-border dimension of a private trust company structure is not a complication to be managed after the fact. It is the central design constraint from Step 1.

Consider a family whose founder is domiciled in a civil-law jurisdiction, whose operating assets are held through a Hong Kong intermediate company, whose investment portfolio sits in a Cayman trust, and whose second generation includes members resident in the United Kingdom, the UAE, and Hong Kong. Each of those residence positions creates a different tax and succession exposure. The private trust company, as trustee of the Cayman trust, makes distribution decisions that land differently depending on where the beneficiary sits.

The forced-heirship question is the most acute. A child of the founder who is a national and resident of a civil-law jurisdiction with mandatory heirship rights may have a claim on the estate that a Hong Kong-law trust with firewall provisions can resist – but only if the trust is properly constituted, the settlor was not domiciled in that jurisdiction at the time of settlement, and the trust was not structured to defeat an existing obligation. The firewall is not a guarantee. It is a well-tested mechanism that requires correct implementation.

Mainland China adds a further dimension. The PRC does not recognise trusts in the same way that common-law systems do. Assets in the Mainland – real property, equity in A-share companies (companies listed on the Shanghai or Shenzhen stock exchanges, whose shares are denominated in Renminbi and subject to specific trading restrictions), or bank deposits – cannot simply be settled into a Hong Kong-law trust by transferring title. The structure above the Mainland assets may be a trust; the Mainland assets themselves require separate analysis of how distributions and succession are handled under PRC law.

For families with a Mainland asset base, the interaction between the trust structure and the Mainland's succession and gift rules is a critical gate in Step 2 of the sequence. It affects both the asset settlement step and the long-term distribution strategy.

The enforcement angle deserves separate attention. If a dispute arises between beneficiaries, or between a beneficiary and the private trust company acting as trustee, the forum in which that dispute is resolved determines what law applies and what assets are reachable. For a Hong Kong-law trust, the Court of First Instance has jurisdiction over trust disputes. Since 29 January 2024, the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) has provided a mechanism for registering effective Mainland court judgments in Hong Kong and vice versa – though trust-specific and succession-related matters fall within the instrument's exclusion list, and parties should verify the current scope before relying on it. Arbitration of trust disputes, where the trust deed or a separate arbitration agreement provides for it, is increasingly used as an alternative forum in cross-border family structures.

You may also find the following briefings on our site useful as context for offshore structuring questions: Private trust and family assets: Cayman Islands briefing (II) and Private trust and family assets: Cayman Islands briefing (I).

What do advisers commonly get wrong – and how does good sequencing avoid it?

Three errors appear with notable consistency in the cross-border private trust company matters that reach our desk.

The first is jurisdiction selection before governance design. An offshore service provider, focused on the incorporation product, selects the seat of the private trust company before the family has decided who sits on the board, how votes are cast, and what happens when a director dies or becomes incapacitated. The constitutional documents are then drafted around the incorporation, not the family's governance decisions. The result is a private trust company whose articles do not reflect how the family actually operates – and a board that deadlocks when the first real decision must be made.

The second is treating the trust deed as standard-form. Every professional trust service provider has a precedent trust deed. That precedent was not drafted for a family whose assets span five jurisdictions and whose beneficiaries have conflicting domicile positions. The distribution powers, the protector provisions, and the mechanism for changing the governing law must be negotiated, not imported. A deed that restricts distribution to income in a year when the family's principal asset is a growth-stage operating company is not a minor inconvenience; it is a structural defect.

The third is the forced-heirship assumption: specifically, the assumption that because Hong Kong law governs the trust and the 2013 Trustee Ordinance reforms include firewall provisions, the structure is automatically insulated from foreign forced-heirship claims. The firewall is a strong protection. It is not a complete shield. The settlement must be genuine. The settlor's domicile at the time of settlement matters. Any pre-existing obligation in favour of a forced heir – one that existed before the settlement – may not be defeated. Counsel on our desk regularly advise families at this exact point: the firewall works when the structure is built correctly, not after the claim has been made.

A myth worth addressing directly: the common belief that a private trust company is primarily a tax structure. It is not. For families whose members are resident in jurisdictions with personal income tax, the trust structure – including the private trust company as trustee – does not eliminate the tax obligations of those members on distributions received. The tax efficiency of the structure, if any, depends on the specific residency and domicile positions of the settlor and beneficiaries, the source and characterisation of the income, and the relevant treaties. Under Hong Kong's foreign-sourced income exemption (FSIE) regime (in force from 1 January 2023, as amended), passive income of a Hong Kong entity with Mainland or offshore source is subject to economic-substance conditions. The tax layer must be modelled independently of the trust design.

Decision checklist before engagement

Before instructing counsel on a private trust company structure, the family's decision-maker or in-house adviser should be able to answer the following questions. Where the answer is unclear, that is precisely the issue for the first advisory engagement.

What assets are to be held through the structure, and in which jurisdictions are those assets located or incorporated?
What is the domicile and residence position of the founder/settlor, and has it been formally reviewed?
Are any family members resident or domiciled in a forced-heirship jurisdiction? Have their rights been assessed?
Who will sit on the board of the private trust company? Is there a succession mechanism for the board itself?
Does the family have a mechanism for resolving internal disagreements that would otherwise deadlock the board?
What is the intended distribution policy, and does the proposed trust deed give the trustee the powers to implement it?
Is the family prepared to document board decisions, prepare minutes, and maintain the governance practice on an ongoing basis?
Has the economic-substance position of the private trust company been assessed in the proposed jurisdiction of incorporation?
Has a tax adviser modelled the distribution and succession implications in each jurisdiction where a beneficiary is resident?
Is there an existing trust, holding structure, or will that must be unwound or coordinated with the new structure?

This checklist is not exhaustive. It is the minimum gate before the structure is designed. A family that can answer each of these questions is ready to instruct. A family that cannot is ready to have the first advisory conversation.

Our Private Wealth practice advises on succession structures, trust and holding arrangements, and cross-border estate planning for principals and their in-house teams across Greater China and the principal offshore centres.

Related practices

Holding Structures – cross-border holding vehicle design, BVI and Cayman structuring above Hong Kong operating companies
Tax Positions – FSIE regime, profits tax, treaty analysis, and cross-border tax modelling for trust and holding arrangements

Frequently asked questions

What documents are needed for a private trust company for a multi-generational family?

The core documentary set comprises the constitutional documents of the private trust company (articles of incorporation and, where relevant, a shareholders' agreement), the trust deed governing each underlying trust, any letter of wishes addressed to the trustee, and the governance materials – including board mandates, investment policy statements, and distribution protocols. Where assets are to be settled in, transfer documentation for each asset class and jurisdiction is required, including stamp duty and re-registration filings where applicable. A full asset and family inventory should precede drafting.

How does the cross-border element affect a private trust company for a multi-generational family?

The cross-border dimension affects jurisdiction selection, governing law, the enforceability of forced-heirship firewalls, the tax position of distributions in each beneficiary's country of residence, and the forum for dispute resolution. Where assets include Mainland China interests, PRC succession and gift rules must be separately analysed. Where beneficiaries are resident in multiple countries, each residence position creates a distinct distribution and reporting obligation. Hong Kong's common-law system and the 2013 Trustee Ordinance reforms provide a strong base, but the structure must be mapped against each jurisdiction the family touches.

What does the route look like for a private trust company for a multi-generational family?

The route runs in seven steps: family map and asset inventory; jurisdiction and governing-law selection; governance design for the private trust company board; trust deed drafting; asset settlement and transfer; regulatory and economic-substance review; and ongoing governance operationalisation. Each step is a gate. Jurisdiction selection before governance design, or trust-deed drafting before the asset inventory is complete, are the two most common sequencing errors. The structure is only effective when each gate is cleared in order and documented properly.

Speak with Lockhart & Yip

For a scoped view of your matter, contact info@lockhartyip.com. Discuss your matter →

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

How to approach a private trust company for a multi-generational family