How to approach a private trust for a family with assets in the CIS

The decision to place family assets into a private trust is rarely straightforward when the family spans the Commonwealth of Independent States (the CIS — the grouping of post-Soviet states including Russia, Kazakhstan, Ukraine, Azerbaijan, Armenia, Georgia, Uzbekistan and others) and holds wealth across multiple jurisdictions. The stakes are specific: forced-heirship rules in several CIS jurisdictions can unwind a structure built on the wrong law. A trust settled in a common-law jurisdiction and advised through a Hong Kong desk — working across the CIS asset map and the offshore holding layer above it — is one of the more tested routes. But the sequence matters.

A private trust for a family with assets in the CIS requires a structured, multi-step approach: first map the full asset and family profile, then select the trust law and governing jurisdiction, then address the forced-heirship and succession exposure in each CIS state where assets sit, and finally complete the settlement and transfer sequence in the right order. Hong Kong's Trustee Ordinance (Cap. 29) — substantially reformed with effect from 1 December 2013 — provides a well-tested trust law with statutory abolition of the rule against perpetuities and express firewall protection against foreign forced-heirship claims, making it a credible choice for this family profile.

This guide takes the reader through the decision sequence in order. Each step identifies the gate that must be cleared before the next step begins.

Step 1: Map the family profile and the asset map before any structure decision

The first move is not to draft a trust deed. It is to produce a complete picture of where the family members are resident, where their assets sit, which jurisdictions have a claim over succession, and whether any CIS jurisdiction has a forced-heirship regime that could reach the assets even after transfer into trust.

This mapping exercise is the gate. No structure decision is defensible without it. In our cross-border private wealth practice, we regularly see families that have moved assets into an offshore trust without completing this analysis — and later discovered that a CIS forced-heirship rule, or a local immovable-property regime, had not been displaced.

The profile must cover at minimum: the domicile and tax residence of the settlor and each beneficiary; the location and legal characterisation of each asset class (real property, shares, cash, business interests); whether any asset is legally immovable under the law of the CIS state where it sits; and the marital and family status of the principal family members. Immovable assets are a specific problem — most conflict-of-laws rules apply the law of the situs (the place where the asset is located) to succession of immovables, meaning a trust settled under Hong Kong or offshore law may not govern the succession of land or buildings held in a CIS state.

The gate at Step 1: you need a complete, jurisdiction-by-jurisdiction asset and family map before proceeding.

Step 2: Identify the forced-heirship and succession exposure in each relevant CIS state

Several CIS jurisdictions operate mandatory inheritance rules — forced heirship (sometimes called obizatelnaya dolya in Russian-law tradition, meaning a reserved share of the estate allocated by statute to certain heirs regardless of the deceased's wishes) — which can apply to assets located in that state and, in some circumstances, to assets held by nationals of that state regardless of where those assets are located. The interaction between these rules and a trust structure is the core legal question for this family type.

Hong Kong law has no forced-heirship regime. The 1 December 2013 reform of the Trustee Ordinance strengthened the statutory firewall protecting Hong Kong-law trusts against foreign forced-heirship claims. But that firewall protects the trust itself — it does not automatically protect immovable assets physically located in a CIS jurisdiction, which will generally remain subject to the succession rules of that state.

The analysis at this step must be conducted jurisdiction by jurisdiction across each CIS state where assets sit. For each state, the question is: does the local succession law apply to these assets regardless of the trust structure, and if so, does it override the trust or merely create a concurrent claim on the settlor's estate?

This step almost always requires input from locally qualified counsel in the relevant CIS states. At Lockhart & Yip, we coordinate that input and integrate it into the overall structuring analysis — but the CIS-law opinion must come from allied counsel admitted in the relevant jurisdiction.

The gate at Step 2: you need a jurisdiction-specific forced-heirship and succession analysis for every CIS state in the asset map before selecting the trust law or the trustee jurisdiction.

Step 3: Select the trust law and the trustee jurisdiction

The choice of governing law for the trust and the jurisdiction of the trustee are separate decisions, though they interact. They must be made with the Step 2 analysis in hand.

Hong Kong trust law is a credible governing law for this family profile for several reasons. The Trustee Ordinance, as reformed, abolishes the rule against perpetuities for Hong Kong trusts — meaning the trust can run for the full duration of the family's need without an arbitrary termination point. It expressly permits the settlor to reserve certain powers without invalidating the trust. And the statutory firewall provision protects the trust against foreign forced-heirship claims to the extent Hong Kong law governs.

Offshore jurisdictions — the British Virgin Islands and the Cayman Islands — are also commonly used as the seat of the trustee for CIS-origin families, typically with a holding entity layer below the trustee and above the operating or asset-holding entities in the CIS. Each of these jurisdictions has its own trust statute; they are common-law systems and broadly comparable in structure, though the detail differs. The choice between Hong Kong, the BVI and the Cayman Islands as trustee seat depends on: where the holding layer sits, where the family intends to be resident, and whether the family anticipates litigation risk that would make a Hong Kong court (with its common-law tradition and well-tested trust jurisprudence) the preferred forum.

For families with a Hong Kong residence or business connection — or those relocating a family office to the city, a route we address in our guide on transferring a family office from a European hub to Hong Kong — Hong Kong as the governing law and the seat of the trustee or protector offers a coherent structure that keeps the trust within a well-regulated common-law environment.

The gate at Step 3: the trust law and trustee jurisdiction must be chosen on the basis of the full family and asset map, not as a default.

What do foreign advisers most commonly get wrong at this stage?

The single most common error — and we see it in matters that come to us after an earlier structure has produced an adverse result — is selecting the trust jurisdiction and governing law before completing the Step 2 analysis. A structure built for the holding layer without a position on the forced-heirship exposure in the underlying CIS jurisdictions is a structure with an unexamined gap.

The second error is treating the trust as a single-document exercise. A private trust for a CIS family typically involves at minimum a trust deed, a letter of wishes, a protector arrangement (where the family wants a check on trustee discretion), a holding-company layer in an offshore jurisdiction, and — in many cases — a succession plan for immovable assets in the CIS states that sits alongside the trust rather than inside it.

The third error is overlooking the residence and tax-residence position of the settlor. Several CIS jurisdictions have rules that look back to the settlor's residence or domicile to determine whether a transfer into trust is effective for succession purposes, or whether it constitutes a taxable event. Some jurisdictions in the region are also developing controlled foreign corporation (CFC) rules — rules that attribute income of foreign entities to a resident shareholder — which can affect the tax position of a settlor who retains any interest in a trust holding offshore entities.

The sequence above describes the standard position. Your matter turns on the documents, the jurisdictions actually engaged, and the order of steps — which is where the route is won or lost. For a structured assessment of your family's cross-border succession and trust position, write to us at info@lockhartyip.com.

Step 4: Structure the holding layer and prepare the settlement documents

Once the trust law and trustee jurisdiction are confirmed, the structure of the holding layer below the trust is designed. For a CIS-origin family, this typically means one or more intermediate holding companies — commonly in the BVI or the Cayman Islands — sitting between the trustee and the operating or asset-holding entities in the CIS states. The holding layer performs several functions: it provides a clean legal ownership point for the trustee, it separates the trust from the CIS-law obligations of the underlying entities, and it facilitates the transfer of assets into the trust by consolidating ownership at a holding level rather than transferring individual CIS assets directly.

The economic-substance regimes that apply in the BVI and the Cayman Islands are relevant here. A holding company in either jurisdiction that holds equity interests — without conducting active business — must satisfy the substance requirements applicable to a pure equity-holding company. These requirements are generally less demanding than those for operating or IP-holding entities, but they must be met.

The settlement documents — the trust deed and any accompanying instruments — must be prepared to reflect the governing law selected at Step 3 and the full asset and beneficiary profile established at Step 1. Where a protector is appointed, the deed must define the protector's powers clearly, particularly in relation to trustee removal, beneficiary additions and distributions. For CIS families, the protector role is often held by a trusted adviser or a family member in a jurisdiction outside the CIS, to keep the governance of the trust clear of any CIS-law complications.

The transfer of assets into the trust — the settlement — then proceeds in a sequence determined by the asset type and jurisdiction. Movable assets (cash, securities, shares of offshore holding companies) can generally be transferred by assignment or share transfer. Immovable assets in CIS states must be addressed separately, typically through a will or succession plan under the applicable CIS law rather than a transfer into trust, precisely because of the situs rule described at Step 2.

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

Step 5: Address residence, tax and ongoing substance requirements

The trust is settled. The holding layer is in place. The succession exposure in the CIS states has been addressed. What runs after that?

The ongoing requirements fall into three categories. First, the trustee must administer the trust in accordance with the governing law and the deed — maintaining records, making distributions in accordance with the letter of wishes, and keeping the trust accounts. For a Hong Kong-governed trust, this is administered under the Trustee Ordinance.

Second, the holding entities must meet their substance requirements in whichever offshore jurisdiction they are incorporated. This means, in practice, that board meetings are held in the right jurisdiction, that directors with appropriate qualifications are engaged, and that the economic-substance returns are filed correctly.

Third, the settlor and the beneficiaries must manage their own tax-residence and reporting obligations. Hong Kong taxes on a territorial basis — profits tax applies only to Hong Kong-sourced profits, and there is no capital gains tax, no withholding tax on dividends or interest in the general position, and no inheritance or estate tax. But the CIS states where family members are resident will have their own rules, and the interaction between those rules and the trust structure must be reviewed each time a family member changes residence or a distribution is made.

For families relocating to Hong Kong — a route increasingly taken by CIS-origin principals — the tax and residence position in Hong Kong is straightforward in its broad outlines but requires careful structuring at the point of arrival, particularly where the settlor has retained any interest in the trust or in the underlying entities. Our practice on private wealth in Hong Kong covers this in detail.

Finally, where a family member holds assets or an estate in the United Kingdom, the succession and estate-planning position must be coordinated with the trust structure. The interaction between UK inheritance tax, domicile rules and an offshore trust settled by a CIS-origin principal is a distinct analysis, addressed in our briefing on wills and estate plans covering assets in the United Kingdom.

Decision checklist: before you proceed

The following questions represent the minimum threshold a family and its advisers should be able to answer before a private trust structure is implemented. If any question cannot be answered clearly, that gap must be closed before the structure is finalised.

• Is the full asset map — by jurisdiction, asset class and legal characterisation — complete?
• Has a forced-heirship and succession analysis been obtained from locally qualified counsel in each CIS state where assets sit?
• Are any assets legally immovable under the law of the CIS state where they sit, and if so, how will their succession be handled outside the trust?
• Has the governing law of the trust been selected with the forced-heirship analysis in hand?
• Is the trustee jurisdiction chosen on the basis of the family's residence, the holding layer, and the anticipated forum for any future litigation?
• Have the economic-substance requirements of the offshore holding jurisdiction been reviewed and a compliance plan put in place?
• Has the settlorʼs CFC exposure in any CIS residence jurisdiction been assessed?
• Has the tax-residence position of the settlor and each beneficiary been confirmed in each jurisdiction where they are or may become resident?
• If any family member holds or may inherit assets in the UK, has the UK succession and inheritance tax position been coordinated with the trust structure?
• Is there a letter of wishes that reflects the family's current intentions, and a protector arrangement if appropriate?

A cross-border scenario: the CIS principal relocating through Hong Kong

A principal from a major CIS jurisdiction — holding a combination of real property in the home state, shares in an offshore holding company and liquid assets held across European accounts — engaged our desk in late 2025. The family had two adult children, one resident in a CIS state and one planning to relocate to Hong Kong. An earlier trust structure, settled in an offshore jurisdiction without a forced-heirship analysis for the CIS assets, had left the real property outside the trust's effective reach under local succession law.

We coordinated a full asset and family map, instructed allied counsel in the relevant CIS state for the succession analysis, and redesigned the structure with a Hong Kong-governed trust holding the offshore entities and a complementary will under CIS law addressing the immovable assets. The settlement was completed in stages, timed to the principal's relocation. The Hong Kong resident beneficiary's position was confirmed under the territorial tax system. The matter closed within one planning cycle, with the family's succession position materially more secure than at the outset.

Related practices

• Private Wealth – succession, asset protection and family office structuring across Greater China and offshore centres
• Holding Structures – offshore and Hong Kong holding architecture for cross-border family and corporate groups
• Tax Positions – FSIE, territorial tax and Pillar Two analysis for principals relocating to or through Hong Kong

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