How to approach succession planning across Hong Kong and the United Kingdom

A family with assets in both Hong Kong and the United Kingdom faces a legal question that neither jurisdiction resolves on its own. Two systems meet: a common-law territory with no forced-heirship regime and no inheritance tax, and a jurisdiction with one of the more demanding inheritance-tax regimes among major financial centres. The gap between them is where planning either succeeds or fails.

Succession planning across Hong Kong and the United Kingdom requires a structured approach that maps each asset to its governing law, identifies the residence and domicile position under both systems, and sequences the instruments – typically a combination of wills, trusts and holding entities – so that the family's intentions hold across borders. The Trustee Ordinance (Cap. 29) governs Hong Kong-law trusts; United Kingdom inheritance-tax rules operate separately and turn heavily on domicile and, increasingly, residence history. The interaction between the two is where the outcome is decided.

This guide sets out the practical sequence, the gate at each step, and the mistakes that most commonly derail a cross-border structure before it can be tested.

What decision are you actually making?

The starting question is not which instruments to use. It is where the family sits – legally – at the moment the structure is built.

Domicile is the critical variable in the United Kingdom's succession and inheritance-tax analysis. It is not the same as tax residence, and it is not the same as the jurisdiction whose passport you carry. A person domiciled in the United Kingdom for inheritance-tax purposes may face United Kingdom inheritance tax on their worldwide estate, regardless of where those assets are held or how they are structured. In our cross-border practice, we regularly see families assume that holding assets through a Hong Kong or offshore entity resolves the exposure. It does not, if the underlying beneficial owner remains UK-domiciled under the relevant rules.

Hong Kong takes a different position entirely. The territory has no inheritance tax, no estate duty (abolished in 2006), and no forced-heirship rule. A Hong Kong-law trust is not vulnerable to forced-heirship claims from foreign legal systems – the 2013 reform to the Trustee Ordinance strengthened that protection explicitly. The rule against perpetuities and excessive accumulations was abolished for Hong Kong trusts by the same reform, effective 1 December 2013. That makes Hong Kong-law trust structures genuinely useful for families with assets in both jurisdictions – but only if the domicile and residence analysis is done correctly first.

The decision you are actually making is: in which legal system does the family's centre of gravity sit, and does the structure you build match that reality? Getting that question wrong at the outset means the structure may be challenged, taxed, or re-characterised at the point of death – when it is too late to correct it.

Step one: map the family's legal position across both systems

Before any instrument is drafted, the adviser must establish the domicile and residence position under both Hong Kong law and United Kingdom law for every principal family member involved in the structure.

This is not a mechanical exercise. Domicile under English and Welsh law – which applies across most of the United Kingdom for succession purposes – can be a domicile of origin, a domicile of choice, or, in limited circumstances, a domicile of dependency. Each carries different evidentiary requirements. A person who left the United Kingdom decades ago may retain a domicile of origin there if they have not established an alternative domicile of choice with the required quality of intention. Conversely, a person who has spent significant years in Hong Kong may have acquired a Hong Kong domicile of choice without being fully aware of the legal consequences in the United Kingdom.

The Hong Kong analysis runs separately. Hong Kong courts apply common-law domicile principles, but the practical consequence in Hong Kong is different from the United Kingdom consequence: Hong Kong has no inheritance tax to trigger and no forced-heirship rule to apply. The more pressing Hong Kong question for succession purposes is usually which system's law governs the administration of the estate and whether a grant of probate in one jurisdiction will be recognised in the other.

The mapping exercise should produce a clear statement for each family member: domicile position under UK law, tax-residence history, connection to Hong Kong, and the location and legal form of each material asset. That document is the foundation for every subsequent step. Without it, any structure built is built on an assumption rather than a position.

Step two: identify the assets and their governing law

The second step is an asset-by-asset analysis. The governing law for succession purposes depends on the nature and location of each asset, not on the family's preferred outcome.

For immovable property – real estate – the general rule under private international law is that the succession to the property is governed by the law of the place where it sits. A flat in London follows United Kingdom succession and tax rules. A property in Hong Kong follows Hong Kong rules. No trust, will or holding structure overrides the underlying lex situs (the law of the place where the asset is situated) analysis – though the choice of holding entity can affect how the interest in the asset is characterised for succession and tax purposes.

For moveable property – shares, cash, investment portfolios, beneficial interests in trusts – the conflict-of-laws position is more flexible. Here the domicile analysis from step one directly controls: a person domiciled in the United Kingdom may face UK succession rules on their worldwide moveable estate.

Interests in Hong Kong companies and offshore holding entities require separate attention. A shareholding in a BVI or Cayman entity holding Hong Kong operating assets is a moveable asset whose succession is, in principle, governed by the owner's domicile. That can create a United Kingdom inheritance-tax exposure on assets that are operationally and economically in Hong Kong. We see this configuration regularly in family groups that grew through the Greater Bay Area but whose founders retained UK domicile. The asset map makes the exposure visible; the structure that follows is designed around it.

The gate at this step is completeness. A partial asset map – one that omits pension rights, life-insurance interests, or beneficial interests in trusts settled by another family member – will produce a partial structure. A partial structure may leave material assets outside the intended regime at the point of death.

Step three: choose and sequence the instruments

With the domicile analysis complete and the asset map confirmed, the structure can be designed. The typical toolkit for a Hong Kong – United Kingdom cross-border succession plan includes some combination of: a will or wills, a Hong Kong-law trust or an offshore trust, and (where appropriate) a holding entity at the asset level. The sequence in which these instruments are put in place matters.

Wills first. Most families with assets in two jurisdictions benefit from having two wills – one governing the Hong Kong and Asian assets, one governing the United Kingdom assets. The two wills must be drafted so that neither revokes the other: a standard revocation clause in one will can inadvertently revoke a will made in the other jurisdiction. This is one of the most common structural errors we encounter. The solution is careful drafting of the revocation clause in each instrument, limiting its scope to the assets it covers.

Trusts second. A Hong Kong-law trust, settled and administered in Hong Kong, with a professional trustee and genuine Hong Kong substance, can hold assets that the family wishes to place outside the UK inheritance-tax regime – provided the domicile and residence position of the settlor has been correctly established first. The Trustee Ordinance (Cap. 29) provides the statutory foundation. The trust is not affected by the rule against perpetuities, and it carries strong anti-forced-heirship protection. However, the United Kingdom tax authority's analysis of whether a trust reduces a UK-domiciled settlor's inheritance-tax exposure turns on a body of UK tax rules that operate independently of Hong Kong trust law. A Hong Kong trust that is structurally sound under Hong Kong law may still be transparent for UK inheritance-tax purposes if the settlor's domicile position has not been addressed.

Holding entities third. Where operating assets or real estate are held through companies, the choice of corporate vehicle – Hong Kong incorporated, BVI, Cayman, or United Kingdom – affects both the succession analysis and the tax consequences. In our cross-border practice, we advise that the holding-entity analysis runs alongside the trust and will structure, not as an afterthought. An asset moved into a corporate vehicle after the wills and trust are in place may not be covered by the intended succession instruments.

The gate at this step is sequencing. The will, the trust, and the holding entity must be designed as a system, not as three separate projects. Changes to one affect the others.

Step four: address the forced-heirship and domicile interaction

For many families with connections to continental Europe, the Middle East, or parts of Asia, there is a third legal system in the picture: a jurisdiction whose law imposes forced-heirship rules and whose courts may claim the right to apply those rules to assets held through a Hong Kong or UK structure.

Hong Kong-law trusts carry significant protection here. The 2013 reform to the Trustee Ordinance introduced a statutory provision that a Hong Kong trust is not invalidated by the fact that the law of another jurisdiction – including one with forced-heirship rules – would treat the transfer to the trust as invalid or would give a forced heir a claim to the trust assets. The protection is not absolute: it operates within the framework of Hong Kong private international law, and there are circumstances where a foreign court's judgment might reach trust assets through other mechanisms. But as a starting point, a Hong Kong-law trust is one of the better-tested instruments for insulating assets from forced-heirship claims in the families we advise.

The United Kingdom has its own interaction with forced-heirship: where a person dies domiciled in the United Kingdom, the courts may apply the law of a third jurisdiction to immovable property there, and the United Kingdom's own courts do not apply forced-heirship rules to UK-situated moveable assets of a UK-domiciled deceased. The practical point for a Hong Kong – UK succession plan is that forced-heirship exposure is most acute where a family member may be treated as domiciled in a third jurisdiction that imposes such rules – and that the trust structure needs to anticipate that risk, not assume it away.

Step five: document and maintain the structure

A succession plan that is correctly designed but poorly documented does not hold up at the point of challenge. The documentation standard for a cross-border structure is higher than for a single-jurisdiction arrangement, because the plan may be scrutinised by courts, tax authorities, and trustees in more than one system, potentially at different times.

The minimum documentation set for a Hong Kong – United Kingdom succession plan typically includes: executed wills with correct revocation-clause drafting for both jurisdictions; the trust deed and any letters of wishes; corporate governance documents for any holding entities; a clear record of the asset map and the governing-law analysis; and, where relevant, evidence of the domicile and residence position that the structure relies upon. That last category – the domicile evidence – is frequently missing. A family that has taken the position that one or more members is not UK-domiciled should have contemporaneous records that support that position: where they live, what ties they have retained or severed, what their intention was and what steps they took to give effect to it.

The structure should also be reviewed periodically. Changes in residence, changes in family composition, changes in the asset base, and changes in the law – particularly in the United Kingdom, where the inheritance-tax rules have been amended with some regularity – can affect the plan. A structure that was optimal at the time of creation may be suboptimal five years later if it has not been revisited.

The gate at this step is maintenance. A succession plan is not a filing exercise. It requires ongoing management, and the family's advisers across both jurisdictions need to communicate when circumstances change.

The common mistake: treating the two systems as independent

The single most frequent error in Hong Kong – United Kingdom succession planning is treating the two systems as parallel but independent tracks. Under this approach, the family has a UK will dealing with UK assets, a Hong Kong trust dealing with Hong Kong assets, and no document that addresses the interface.

The interface is exactly where the exposure sits. Consider a family with a UK-domiciled patriarch, a Hong Kong company holding operating assets in the Greater Bay Area, and a trust settled in Hong Kong with the patriarch as settlor. If the UK domicile analysis has not been done, the entire value of the trust – including the Hong Kong operating assets – may be drawn into the UK inheritance-tax calculation on death. The Hong Kong structure is sound. The UK tax position has not been addressed. The outcome is a UK tax charge on assets that the family understood to be outside that system.

A second common error is the use of a single will with a worldwide revocation clause and no consideration of whether that will displaces an earlier instrument made in the other jurisdiction. We have seen families arrive with a recently executed UK will that inadvertently revokes a Hong Kong will executed two years earlier, leaving Hong Kong assets without an effective testamentary disposition.

The route that avoids both errors is the sequence set out above: map first, analyse second, structure third, document fourth, and treat the two systems as a single integrated plan rather than two separate exercises.

To discuss how the cross-border interface between Hong Kong and the United Kingdom applies to your family's position, contact us at info@lockhartyip.com.

Decision checklist: key gates for a Hong Kong – United Kingdom succession plan

The following questions mark the gate at each stage of the process. A "no" or "uncertain" answer at any gate signals that the next step should not proceed until the position is established.

• Has the domicile position of each principal family member been determined under both UK law and Hong Kong law?
• Is the tax-residence history of each member recorded and consistent with the domicile position the structure relies on?
• Has every material asset been mapped to its legal form, its situs (location for legal purposes), and its governing law for succession?
• Have the wills for each jurisdiction been drafted so that neither revokes the other by operation of a standard revocation clause?
• If a Hong Kong-law trust is in the plan, has the UK inheritance-tax analysis addressed whether the settlement achieves the intended result for a UK-domiciled or formerly UK-domiciled settlor?
• Are the holding entities and corporate vehicles included in the succession instruments – not just the underlying assets?
• Is there contemporaneous evidence supporting the domicile and residence position the structure relies on, in a form that can be produced to a court or tax authority in either jurisdiction?
• Is there a review schedule, and are the advisers in both jurisdictions in communication?

If any item on this checklist returns an uncertain answer, that is the point at which cross-border counsel should be engaged, not after the instruments have been executed.

If an earlier structure has already been put in place without a full cross-border analysis, a structured review can identify the gap and the options still open. Write to us at info@lockhartyip.com to discuss your position.

Related practices

• Private Wealth – cross-border succession, trust and asset-protection structuring for family principals
• Private Trust Structures and Family Assets – how private trusts hold and protect family assets across jurisdictions
• Source of Wealth and Source of Funds – documentation standards for family offices and principals in cross-border structures

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• Private Wealth
• Private Trust Family Assets Singapore Singapore Guide
• Source Wealth Source Funds Files Family Office

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