How to approach succession planning across Hong Kong and the CIS

A principal with business assets in Russia, Kazakhstan or another CIS state, a Hong Kong operating presence, and family members resident across three or four jurisdictions is not facing a simple estate-planning exercise. The question is which legal system will govern each asset class at the moment of death or incapacity – and whether the structures established today will survive the legal pull of each jurisdiction the family touches. That pull is strong, and it operates on timelines the family rarely sees until a crisis arrives.

Succession planning across Hong Kong and the CIS requires mapping the family's asset and residence profile across at least two legal systems before any structural instrument is selected. Hong Kong law, as reformed by the Trustee Ordinance (Cap. 29) with effect from 1 December 2013, offers a common-law trust environment with no forced-heirship regime and statutory firewall protection against foreign forced-heirship claims – a combination that many CIS families cannot access in their home jurisdictions. The sequence, however, must follow the assets and the residences, not the other way around.

This guide sets out the practical steps in order, the gate at each step, and the mistakes that derail the process before a structure is even in place.

What decision does the principal actually face?

The first question is not "which structure?" It is "which law will govern, and over what?"

CIS jurisdictions – Russia, Kazakhstan, Ukraine, Uzbekistan and their neighbours – operate civil-law systems with forced heirship (the mandatory entitlement of a deceased's close relatives to a fixed share of the estate, regardless of testamentary wishes). Those rules apply to assets situated in the relevant territory and, in many cases, to the estate of a national or resident regardless of where assets sit. Hong Kong law has no equivalent regime. That asymmetry is the defining feature of any cross-border succession engagement involving CIS families.

The principal typically faces three options. First, rely on existing testamentary documents prepared in the home jurisdiction – documents that may be valid domestically but unenforceable over Hong Kong or offshore assets without a recognition step in each relevant court. Second, establish a Hong Kong or offshore holding structure – commonly a trust governed by Hong Kong law or a trust established in a recognised offshore jurisdiction – to move assets outside the forced-heirship perimeter before succession opens. Third, do nothing now and allow each jurisdiction's default rules to operate at the critical moment.

Option three is rarely a considered choice. It is usually the outcome of postponement. The window for effective structural planning narrows once a principal's tax residence, health or family circumstances shift.

Step 1: Map the family's asset and residence profile

Before selecting any instrument, the adviser must establish where each asset is legally situated, where each family member is resident, and what citizenship the principal holds. These three data sets determine which legal systems have a claim on the estate.

For a CIS family with a Hong Kong operating company, the map typically shows: operating entities incorporated in Hong Kong under the Companies Ordinance (Cap. 622); holding entities in the BVI or Cayman Islands; real property situated in a CIS state; bank accounts in multiple jurisdictions; and beneficiaries with mixed residence across the CIS, Europe and Asia.

The gate at Step 1 is completeness. A partial map produces a partial structure. In our cross-border practice, the most common structural failure we encounter is a trust established to cover the offshore holding layer while CIS-situated real property and operating interests are left outside – fully exposed to local forced-heirship rules at the moment succession opens.

The asset map should document: the jurisdiction of incorporation or registration for each entity; the situs (legal location) of each asset class; the tax-residence position of the principal; and the residence and citizenship of each intended beneficiary. That document is the foundation on which the structural analysis runs.

Step 2: Assess the forced-heirship exposure

Once the asset map is complete, the second step is a jurisdiction-by-jurisdiction forced-heirship analysis. This is the gate that determines how much structural work is needed and how urgent it is.

CIS forced-heirship rules vary by state, but the common feature is a reserved share – typically a fraction of the estate – that must pass to defined relatives regardless of any will or lifetime transfer. In several CIS states, that reserved share applies to assets situated domestically, to the estate of a national or long-term resident, or both. A principal who is a Russian national with Russian-situated assets will carry that exposure even if the rest of the estate is held through a Hong Kong trust.

Hong Kong law takes a fundamentally different position. The Trustee Ordinance (Cap. 29) contains no forced-heirship regime. Since the statutory reform that took effect on 1 December 2013, a Hong Kong trust is not invalidated merely because the settlor reserved certain powers over the trust property – a protection that matters greatly to CIS founders who cannot practically transfer control of an operating business without retaining involvement. The same reform strengthened Hong Kong's firewall against foreign forced-heirship claims: a Hong Kong-law trust is protected against a challenge mounted under a foreign forced-heirship rule, provided the assets are properly situated under the trust at the relevant time.

The firewall is powerful, but it is not universal. It applies to trust assets. Assets sitting outside the trust structure – in a personally held Hong Kong company, for instance, or in CIS-situated real property held directly – are exposed to the legal rules of the jurisdiction where they sit. The forced-heirship analysis must therefore be run asset class by asset class, not at the portfolio level.

The gate at Step 2 is specificity. A generic assessment that "CIS law may apply" is not workable. The analysis must identify which assets are exposed, under which state's rules, and what the reserved share is under those rules. That analysis must be conducted with the assistance of advisers admitted in each relevant CIS jurisdiction; we coordinate that work alongside locally qualified counsel in the relevant state.

Step 3: Select and sequence the structural instruments

With the asset map and forced-heirship analysis in hand, the structural selection follows a defined logic. The question is: which instrument protects which asset class, governed by which law, and in what sequence?

The primary instrument for most CIS families engaging the Hong Kong system is a discretionary trust governed by Hong Kong law and settled by the principal during lifetime. Under the Trustee Ordinance (Cap. 29), the trust can be structured to allow the settlor to retain reserved powers – powers to direct the trustee on investment decisions, to change the trustee, or to add or remove beneficiaries – without invalidating the trust. That settlor-friendly position is a material distinction from the legal environment in many CIS home jurisdictions.

The trust holds the offshore and Hong Kong holding layer. The holding entities – BVI or Cayman companies, or a Hong Kong holding company under the Companies Ordinance (Cap. 622) – sit beneath the trust and hold operating interests or financial assets. That layered structure separates the principal's legal ownership (transferred to the trustee on settlement) from economic control (retained through the reserved-powers mechanism), while placing the assets within the firewall protection of Hong Kong law.

For CIS-situated assets – real property, locally held operating entities, local bank accounts – the options are more constrained. Some CIS states permit lifetime transfers into offshore trust structures; others require assets to pass through the domestic estate. Where the asset cannot be structurally removed from the CIS perimeter, the planning focus shifts to will coordination: a local will in each relevant CIS jurisdiction dealing with CIS-situated assets, coordinated with the trust to avoid overlap and conflict.

The gate at Step 3 is legal validity in each jurisdiction. A Hong Kong trust that is valid under Hong Kong law must also be assessed for recognition in the CIS jurisdiction whose law might otherwise claim the assets. Some CIS states have ratified the Hague Convention on the Law Applicable to Trusts; others have not, and do not recognise the trust form as a matter of domestic law. Where recognition is uncertain, the structure must be tested against that jurisdiction's conflicts-of-law rules before settlement proceeds.

For a related perspective on the reserved-powers approach as applied in a cross-border matter, see our matter note at Reserved Powers Trust: Founder-Controlled Business Matter.

Step 4: Address the residence and tax-residence dimension

Structural planning that resolves the forced-heirship question can create a separate problem if it is not run alongside a residence and tax-residence analysis. The gate at Step 4 is consistency: the structure must work in the tax environment the principal actually occupies.

Hong Kong operates on a territorial basis. Profits tax applies to Hong Kong-sourced profits only. There is no capital gains tax and no withholding tax on dividends or interest in the general position. The foreign-sourced income exemption (FSIE) regime – which applies to certain categories of passive income brought into Hong Kong by entities with a Hong Kong presence – has applied since 1 January 2023, with economic-substance conditions that must be met. A holding structure established for succession purposes must satisfy those substance requirements if it is to benefit from the FSIE regime.

For CIS-based principals, the tax-residence position is more complex. Several CIS states tax residents on worldwide income; a principal who remains tax-resident in Russia or Kazakhstan while settling a Hong Kong trust may face domestic tax consequences on the settlement itself or on distributions from the trust. Those consequences must be assessed before any structural step is taken.

The interaction between the succession structure and the Pillar Two minimum top-up tax – effective for fiscal years beginning on or after 1 January 2025 for in-scope multinational enterprise groups with consolidated revenue of EUR 750 million or more – is relevant for CIS families whose businesses operate at that scale. The trust structure does not resolve Pillar Two exposure; it must be modelled alongside the succession plan.

For detailed tax-positioning analysis across the CIS–Hong Kong interface, the Private Wealth practice page sets out our approach to residence, substance and structuring.

The sequence above describes the standard analytical framework. Your matter turns on the specific assets, the specific jurisdictions actually engaged, and the order in which steps are taken – which is where the route is won or lost.

To discuss how the Hong Kong trust and holding-structure options interact with your family's CIS asset and residence profile, write to us at info@lockhartyip.com.

Step 5: Execute the documentation in the correct sequence

The gate at Step 5 is sequence. Structural instruments executed in the wrong order can produce unintended tax events, invalid transfers, or gaps in the asset coverage that the structure was designed to close.

The general sequence for a CIS family establishing a Hong Kong-law trust with an offshore holding layer is as follows. First, the principal's tax-residence and domicile position is confirmed in the relevant CIS jurisdiction. Second, the offshore holding entities are incorporated or confirmed in the relevant jurisdiction (BVI or Cayman, typically). Third, the trust deed is executed and the trustee takes legal ownership of the trust assets by transfer. Fourth, the local CIS wills are executed, coordinated in scope with the trust to avoid double-coverage or conflict. Fifth, where required, the trust structure is notified to the relevant tax authorities in the CIS jurisdiction.

The Significant Controllers Register – the SCR (a register of beneficial owners that all Hong Kong-incorporated companies must maintain) – must be maintained accurately at each stage. The requirement has applied since 1 March 2018. When the trust takes ownership of a Hong Kong company, the change in beneficial ownership must be reflected in the SCR promptly. Failure to do so creates a compliance gap that can complicate subsequent enforcement or transaction steps.

Where the family's CIS operating interests are held through a Hong Kong intermediate company, the timing of any transfer into the trust must be assessed against any stamp-duty implications. The transfer of Hong Kong stock attracts ad valorem stamp duty (a tax calculated as a percentage of value or consideration) at 0.1% per party – that is, 0.2% in total – on the higher of consideration or market value. Where the intermediate company holds no Hong Kong-situated assets, stamp-duty treatment should be verified on the specific facts before execution.

A micro-scenario illustrates the sequencing point. An industrial holding group headquartered in Kazakhstan, with a Hong Kong operating entity and BVI holding vehicles, came to our desk in late 2025. The principal had already executed a trust deed – but before the BVI shares had been formally transferred to the trustee. The deed was valid, but the BVI layer remained in the principal's personal name. In the event of incapacity or death at that point, the BVI shares would have passed through the principal's estate, not the trust. We re-sequenced the transfer steps and updated the SCR entries across the Hong Kong entities. The structural gap was closed within one cycle.

What foreign advisers most commonly get wrong

The most common error in CIS-origin succession planning is treating Hong Kong as a self-contained planning environment and designing the structure inward from the Hong Kong layer outward. That approach works for purely Hong Kong-situated wealth. It fails when the client has CIS-situated assets that remain outside the structure, or when the CIS forced-heirship rules reach further than the adviser anticipated.

A second common error is relying on a single will drafted in the principal's home CIS jurisdiction to govern a multinational asset portfolio. A Russian or Kazakhstani will may be valid and enforceable in that state. It will not automatically be recognised in Hong Kong or in the BVI without a recognition or probate (the court process of formally establishing a will's validity) step in each relevant jurisdiction. If the will has not been structured with international executors and an express choice-of-law clause, that recognition step can be contested and slow.

A third error – specific to the CIS context – is underestimating the reach of the home state's reserved-share rules. In several CIS jurisdictions, those rules apply not only to assets situated in that state but to the entire worldwide estate of a national or habitual resident. A trust established over offshore and Hong Kong assets may be effective under Hong Kong law while remaining challengeable by a forced heir under CIS domestic law, depending on how that jurisdiction's courts characterise the transfer into trust. That cross-border characterisation risk must be assessed before settlement, not discovered in litigation after the principal's death.

These structural tensions are not unique to the CIS–Hong Kong interface; a related analysis appears in our Hong Kong–BVI succession planning guide, which addresses the offshore-holding layer in greater technical depth.

Decision checklist: assessing readiness to proceed

Before instructing advisers to draft structural instruments, the principal and the in-house team should be able to answer the following questions affirmatively. Where the answer is uncertain, that uncertainty is itself a planning gap that must be closed before execution begins.

Is the full asset map complete, covering every jurisdiction of incorporation, every situs of real property, and every account location? Has the forced-heirship analysis been run jurisdiction by jurisdiction, not at portfolio level? Has the principal's tax-residence position been confirmed in each relevant CIS state, and have any domestic tax consequences of the proposed settlement been assessed?

Has the choice of governing law for the trust been tested for recognition in the CIS jurisdiction most likely to assert a claim? Is the sequence of execution steps – entity formation before trust deed before asset transfer before local wills – confirmed with all relevant local advisers? Is the SCR of every Hong Kong-incorporated entity current, and has a plan been made to update it on execution? Have the local CIS wills been coordinated in scope with the trust deed to prevent overlap or gap?

If the answer to each question is yes, the matter is ready for structural execution. If one or more answers are uncertain, the honest assessment is that the planning process is not yet complete – and that proceeding to execution before the gaps are closed increases, rather than reduces, the succession risk the structure is designed to manage.

If an earlier structuring attempt has produced an uncertain or stalled result – a trust executed before asset transfer, a will that has not been tested for recognition in the relevant jurisdictions, or a holding structure that omits the CIS operating layer – a second read can identify what remains open and what routes are still available to close the gaps.

To discuss your cross-border succession position across Hong Kong and the CIS, write to us at info@lockhartyip.com.

Related practices

Related practices

• Private Wealth – succession, trust structuring, family office and cross-border asset protection
• Holding Structures – offshore and Hong Kong holding entity design for cross-border groups
• Tax Positions – FSIE, Pillar Two, tax-residence and treaty analysis for cross-border principals

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