A practical guide to a private trust for a family with assets in the UAE

A family with property, operating businesses or investment portfolios sitting across the UAE and Greater China faces a structural question that neither local counsel in Dubai nor a Hong Kong corporate adviser can answer alone. The asset map spans two legal systems with fundamentally different approaches to succession, ownership and the treatment of foreign law. A private trust, properly structured, can hold that map together. The question is sequence: which decisions must be made first, and where the gaps in the structure create risk.

A private trust for a family with assets in the UAE requires a disciplined sequencing of five distinct steps: mapping the asset and residence picture, selecting the governing law and trust jurisdiction, establishing the holding chain above UAE-situated assets, addressing the interaction between UAE personal law and the trust instrument, and activating the succession and protectorate (oversight) arrangements. The governing instrument in Hong Kong is the Trustee Ordinance (Cap. 29), substantially reformed with effect from 1 December 2013, which provides a strong statutory platform for trusts with cross-border assets.

This guide moves through that sequence in order. At each gate, it identifies the decision point and the common error that stalls or defeats the structure.

What decision is the family actually making?

A private trust is not a single product. It is a set of legal relationships – settlor, trustee, beneficiaries, protector – held together by a governing law, a trust instrument, and the holding chain above the underlying assets. The family's decision is not simply "do we want a trust". It is four connected decisions made in sequence.

First: which law governs the trust, and where does the trustee sit? Second: how does the holding chain above UAE assets interact with UAE property and succession law? Third: which members of the family are beneficiaries, in what capacity, and what happens if a beneficiary is a UAE national or resident? Fourth: what oversight mechanism – a protector (an independent third party with defined supervisory powers over the trustee) or an advisory committee – gives the family practical influence without compromising the trust's legal validity?

These decisions are not separable. A family that picks a trustee jurisdiction before mapping the asset and residence picture frequently discovers that the governing law it chose creates an exposed flank in the UAE. The sequence exists for a reason.

In our cross-border practice, the families who engage us earliest are those who have already received advice in one jurisdiction and discovered that it is incomplete. The UAE–Hong Kong corridor is a structurally complex interface. Advice that starts from only one end of the corridor tends to leave gaps.

Step 1: map the asset and residence picture before anything else

The first gate in any private-trust structure is a complete asset and residence map, prepared before any jurisdiction or instrument is chosen. This sounds obvious. In practice, it is the step most often abbreviated.

The map must capture four things. First, the nature and location of each asset: real property situated in the UAE, shares in UAE-incorporated entities (including those licensed in a free zone – a designated economic zone within the UAE operating under its own regulatory regime, such as the Dubai International Financial Centre or Abu Dhabi Global Market), shares in offshore holding companies, and any liquid portfolio held through a UAE brokerage or family office. Second, the domicile and residence of the settlor: is the settlor a UAE national, a UAE resident with foreign nationality, or a non-resident with UAE assets? Third, the nationality and residence of intended beneficiaries. Fourth, any existing succession documents – wills registered under UAE civil or personal law, wasiyya (a testamentary disposition valid under certain interpretations of Islamic succession law), or foreign estate plans.

The residence and nationality picture is critical because UAE succession law is not uniform. For non-Muslim expatriates, UAE federal law since 2023 allows a foreign national to elect for the law of their home country to govern succession to assets in certain categories. For UAE nationals and, in certain circumstances, Muslim expatriates, Sharia-based succession rules apply with the force of law. A private trust structured without understanding which of these regimes applies to the settlor and each beneficiary is a structure built on an incomplete foundation.

Step 2: choose the governing law and trustee jurisdiction

With the asset and residence map in hand, the governing-law decision can be made on the facts rather than by default. The two principal options for a UAE-facing private trust are a Hong Kong law trust and a trust governed by the law of a common-law offshore centre – the BVI or the Cayman Islands being the most widely used above Greater China and the Gulf corridor.

Hong Kong offers a well-tested statutory platform. The Trustee Ordinance (Cap. 29), as reformed in 2013, abolished the rule against perpetuities and excessive accumulations for Hong Kong trusts, protecting the trust from forced termination on a fixed timetable. It provides statutory protection for a settlor who reserves certain powers – including powers of revocation, appointment and investment direction – without invalidating the trust. And it contains a strengthened firewall provision: a Hong Kong-law trust is not invalidated by reason only that a foreign law – including a Sharia succession regime – would otherwise apply to the settlor's or a beneficiary's assets. This firewall matters acutely for UAE-facing structures.

The offshore centres offer comparable provisions and, in some configurations, a longer track record with Gulf-region settlors. The practical choice turns on three variables: where the trustee's administration infrastructure actually sits, whether the family requires a corporate trustee regulated under a common-law supervisory regime, and the ease of enforcement in the relevant court system if the trust is contested.

The sequence between INTERNAL_LINK_2 analysis on BVI succession and INTERNAL_LINK_3 briefing on Cayman Islands succession confirms the consistent position: governing-law selection is a legal decision, not an administrative one, and it must be made after the asset map is complete.

For deeper context on the private-wealth practice and how the trust fits a broader cross-border structure, see our Private Wealth practice. For analysis of the succession and holding-structure interface in the BVI context, see Succession planning across Hong Kong and the BVI. For the Cayman counterpart, see Succession planning across Hong Kong and the Cayman Islands.

The sequence above describes the standard position across the relevant jurisdictions. Your matter turns on the specific asset categories, the nationalities and residences of the family members actually involved, and the governing documents already in place – which is where the structure is secured or exposed.

For a structured assessment of the governing-law and trustee-jurisdiction decision for your family's position, write to us at info@lockhartyip.com.

Step 3: build the holding chain above UAE-situated assets

UAE law places restrictions on direct foreign ownership of certain categories of onshore real property and operating entities. A private trust does not, of itself, resolve those restrictions. What it does is provide the ownership layer above the vehicle through which the UAE asset is held.

For real property in the UAE held by an expatriate, the direct owner is typically the individual or a UAE-registered company. The trust holds shares in the offshore holding company, which holds the UAE vehicle, which holds the property. The trust instrument must be drafted to capture this chain accurately. A trust that purports to hold UAE real property directly, without a legally valid intermediate vehicle, creates both a registration problem and a succession problem: it may be unenforceable against UAE-situated assets.

For assets held within a UAE free-zone entity – whether a DIFC (Dubai International Financial Centre) company or an ADGM (Abu Dhabi Global Market) entity – the position is more flexible. Both the DIFC and ADGM operate under common-law frameworks with their own courts and have trust regimes that can interact with a Hong Kong or offshore-governing-law trust. A DIFC-domiciled trust, for instance, may provide a more proximate holding point for UAE-situated financial assets than an entirely offshore structure. Whether the additional layer adds utility or complexity depends on the family's long-term concentration in the region.

Consider a mid-sized family with real property in Dubai, an operating business in ADGM and a portfolio held through a Hong Kong family office. In this configuration, we have seen the most effective structures use a Hong Kong-law discretionary trust as the apex, a BVI holding company as the intermediate vehicle for the ADGM operating business, and a UAE-registered property-holding company beneath that for the Dubai real estate. The three-layer chain reflects the legal constraints at each level, not a preference for complexity.

Does UAE forced-succession law affect the trust? The critical gate

The interaction between UAE personal succession law and a common-law private trust is the most frequently misunderstood point in this structure. It is the gate at which the most expensive errors are made.

For a UAE national, or a Muslim settlor regardless of nationality, Sharia-based succession rules govern the distribution of assets that fall within their estate. The question for the trust is whether assets transferred into the trust remain within the settlor's estate for those purposes – which would expose the trust to a forced-heirship claim on the settlor's death – or whether the transfer into the trust constitutes a genuine disposal.

The answer depends on three factors. First, the effectiveness of the transfer under both the governing law of the trust and the lex situs (the law of the jurisdiction where the asset is situated) of the assets transferred. A transfer that is valid under Hong Kong trust law but not registered or recognised at the UAE level does not achieve the disposal. Second, whether the settlor has retained powers or benefits that cause the transfer to be treated as revocable or illusory under the applicable law. Hong Kong trust law protects reserved powers, but other legal systems – including UAE personal law – may characterise a trust with extensive settlor powers differently. Third, whether the trust instrument itself makes any representation about the succession treatment of the assets.

The Hong Kong Trustee Ordinance firewall – protecting a Hong Kong-law trust against foreign forced-heirship rules – operates at the level of the trust's governing law. It does not override the lex situs rules that apply to UAE-situated assets. A properly constructed holding chain, with the trust sitting above an intermediate vehicle that holds the UAE asset, is therefore essential: it places the interest transferred into the trust at the level of the share in the intermediate vehicle (which is typically not UAE-situated), not at the level of the underlying UAE asset.

What foreign counsel frequently get wrong at this step is treating the Hong Kong firewall as comprehensive protection against all forced-heirship exposure in the UAE. It is not. The firewall protects the trust instrument and its governing law. The lex situs rules of the UAE still apply to UAE-situated assets. The holding chain – not the firewall alone – is the mechanism that resolves this gap.

Step 4: succession and protectorate arrangements

A private trust without an active succession plan for the trust itself is incomplete. The trust instrument must address what happens when the settlor dies or loses capacity, who holds the power to appoint and remove trustees, and who acts as protector.

The protector is a structural feature of most modern discretionary trusts for internationally mobile families. The protector – typically an individual or a committee, separate from the trustee – holds defined oversight powers: commonly the power to approve or veto trustee decisions on distributions, investments or changes of governing law. The protector's role must be defined in the trust instrument with precision. A protector with powers so broad that the trustee cannot act without approval in every circumstance risks converting the trust into a sham in certain jurisdictions. A protector with no meaningful power provides only the form of oversight, not the substance.

For UAE-facing structures, the practical question is often whether a family member who is a UAE national can serve as protector without inadvertently pulling the trust back within the UAE's domestic succession rules. The answer depends on the scope of the protector's powers and the governing law of the trust. This is a drafting question with a structurally significant answer, and it must be resolved before the instrument is executed.

The succession plan should also address the position of beneficiaries who are minors, beneficiaries who may become UAE nationals or residents after the trust is settled, and the mechanism by which new beneficiaries – including future generations – are added. A discretionary trust for a growing family is a living instrument. The letter-of-wishes (a non-binding memorandum from the settlor to the trustee setting out how the settlor hopes the trust will be administered) is not a substitute for clear instrument drafting, but it is an important complement: it gives the trustee context that the instrument itself may not carry.

If an earlier structure, instrument or succession document has already been put in place and the family's circumstances have since changed – new assets acquired in the UAE, a change in residence, or a second generation now approaching adulthood – a review of the existing arrangements may identify both the risk points and the routes still open.

For a preliminary read on your succession and trust structure across the UAE and Hong Kong, email info@lockhartyip.com.

The common mistake: starting with the trustee rather than the map

The single most common error in private trust structuring for UAE-facing families is selecting a trustee and a trustee jurisdiction before the asset and residence map is complete. This reverses the sequence.

A trustee jurisdiction selected in advance of the map tends to drive the structure: the holding chain is assembled to match the trustee's preferred documentation, the governing law defaults to the trustee's home jurisdiction, and the UAE succession interaction is addressed – if at all – only after the instrument is substantially drafted. At that point, the cost of correction is high and the room for structural improvement is limited.

The correct sequence is: map first, governing-law decision second, holding-chain design third, instrument drafting fourth, trustee engagement (for execution and ongoing administration) as the final operational step. The trustee is the administrator of a structure that has been designed. They are not the designer.

A second common mistake is treating a UAE will or wasiyya as a substitute for a trust structure for non-UAE assets. A UAE-registered will governs assets within UAE jurisdiction effectively. It does not govern the offshore holding company or the Hong Kong-managed portfolio. A family that relies on a UAE will for its entire succession plan may find, on the death of the settlor, that the non-UAE assets pass outside the will entirely – either by default rules in the relevant offshore jurisdiction or through the operation of local succession law in another country where a beneficiary is resident.

A decision checklist for the family and its advisers

Before engaging a trustee or drafting an instrument, the family and its cross-border counsel should be able to answer each of the following questions. Where the answer is incomplete or uncertain, that gap is a structural risk.

Asset map: Is every asset – onshore UAE, free-zone, offshore holding company, portfolio – identified and categorised? Is the legal owner of each asset confirmed? Is there any jointly owned asset whose co-ownership regime might interact with the trust transfer?

Residence and nationality: Is the settlor's domicile and tax residence confirmed? Does any beneficiary hold UAE nationality or residency? Is any beneficiary subject to a forced-heirship regime in their country of residence?

Governing law: Has the governing-law choice been made by reference to the asset map and the family's succession objectives, not by default? Does the chosen law provide adequate firewall protection against foreign forced-heirship claims?

Holding chain: Is there a legally valid intermediate vehicle between the trust and each UAE-situated asset? Has the transfer of interests into the trust been structured to achieve a genuine disposal at the relevant level?

Succession and protectorate: Is the protector mechanism clearly defined in the instrument? Is the letter of wishes current and consistent with the instrument? Has the position of minor and future beneficiaries been addressed?

Interaction with UAE succession law: Has local UAE counsel confirmed the treatment of trust assets under the applicable succession regime for each family member? Has this advice been integrated into the instrument drafting?

A checklist that produces confident answers to all six categories is the foundation for an effective structure. A checklist that produces uncertainty at two or more points is a signal that the preliminary work is not yet complete.

Related practices

Related practices

• Private Wealth – succession, asset protection and cross-border trust structures for internationally mobile families
• Holding Structures – offshore and Hong Kong holding-chain design above operating and investment assets

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