Matter note: a private trust company

Multi-generational families with assets spread across two or more legal systems face a structural question that estate planning alone cannot answer. A will governs what passes at death. A trust governs how it is held during life and across generations. But a private trust company (a corporate trustee established for the exclusive benefit of a single family, rather than a licensed commercial trust operator) governs who controls the mechanism itself. The three instruments must cohere, and the jurisdiction that houses the private trust company must be capable of sustaining that coherence across decades.

A private trust company structured under Hong Kong's reformed trust legislation, governed by the Trustee Ordinance (Cap. 29) as substantially reformed with effect from 1 December 2013, can hold a family's assets across jurisdictions while eliminating the principal weakness of commercial trusteeship: the alignment of interests between an institutional trustee and a family whose circumstances, values and residence patterns evolve in ways no commercial operator can fully anticipate.

This matter note describes an anonymised engagement. It follows the structural question the family brought to us, the route we recommended, the sequence of steps, and the lesson that carries over to comparable cross-border family situations.

The situation: a family across three systems

The principal was the matriarch of a family whose wealth had accumulated over two generations in a Mainland-connected business. By the time the engagement began, the family's centre of gravity had shifted. One branch had taken up residence in the United Kingdom. A second branch was based in the Gulf. The matriarch herself retained strong ties to both Hong Kong and the Mainland, and the family's principal operating entities ran through a BVI holding structure above a Hong Kong intermediate company.

The pressure point was succession. The matriarch was considering transferring the holding structure to the next generation during her lifetime. She wanted to do that in a controlled manner – retaining a degree of influence over material decisions for a defined period, while ensuring that no single branch could unilaterally dispose of or encumber the underlying assets. At the same time, she was acutely aware that the UK branch's residence position triggered exposure to forced-heirship-adjacent rules and inheritance tax considerations under English law, and that the Gulf branch's personal circumstances had their own implications under the law of the jurisdiction where those family members were domiciled.

The question she asked at our first meeting was precise: how do we hold this together without handing control of the mechanism to an institution that may not be here in thirty years, and without creating a structure that unravels the moment one branch tries to assert its own legal position?

The issue: why a commercial trustee was not the answer

The family had received earlier advice recommending a licensed commercial trustee based in an offshore centre, with a standard discretionary trust deed. That structure would have resolved the immediate estate-planning question. It would not have resolved the control question, and it created a separate problem: the trustee would have been an institution with no fiduciary connection to the family's values, business history or long-term objectives. Trustee succession – the risk that an institution merges, re-domiciles, or otherwise changes its character over a multi-decade horizon – was a second-order concern the earlier advice had not addressed.

There was also a Hong Kong-specific dimension. The family's operating wealth flowed through Hong Kong entities. Decisions about those entities – the appointment of directors, the approval of dividends, the management of the relationship with Mainland counterparties – required trustees who could act at the pace of a business, not the pace of an institutional review cycle. The gap between the commercial reality and the proposed structure was significant.

A private trust company offers a different architecture. Instead of an institution acting as trustee, a purpose-built corporate entity – typically a Hong Kong private company limited by shares, with its governance documents carefully calibrated to the family's requirements – serves as trustee. The family, or a defined subset of it, controls the private trust company through its board or through a reserved-powers mechanism. The trustee is, in effect, an entity the family owns, governs and can adapt as circumstances change.

Hong Kong's position here is particularly strong. The Trustee Ordinance (Cap. 29), as substantially reformed with effect from 1 December 2013, abolished the rule against perpetuities and the rule against excessive accumulations for Hong Kong trusts. A trust governed by Hong Kong law can therefore run across multiple generations without the time-limit problem that complicates offshore structures established in jurisdictions that retain those rules. The 2013 reform also introduced statutory protection for settlor-reserved powers: a trust is not invalidated under Hong Kong law by the settlor retaining certain powers over investment, distribution or trustee appointment. That single feature was central to what the matriarch wanted.

There is a further, underappreciated point. Hong Kong law contains no forced-heirship regime. The 2013 reform also strengthened the firewall provisions that protect Hong Kong-law trusts against foreign forced-heirship claims. For a family with a branch in a civil-law or Gulf jurisdiction, that protection is not academic.

For a deeper background on the cross-border asset-protection considerations that arise when a family spans multiple residence jurisdictions, see our briefing on asset protection for principals with Singapore exposure.

The sequence above describes the standard analysis. 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 preliminary read on how this applies to your family's cross-border position, email info@lockhartyip.com.

The route chosen: a Hong Kong private trust company with a family governance layer

We recommended establishing a Hong Kong private company limited by shares to act as trustee of a discretionary trust settled under Hong Kong law. The company's constitution was drafted to reflect the family's governance requirements directly: a board with defined quorum rules, reserved matters requiring supermajority approval, and a mechanism for admitting the next generation to the board as they reached a defined level of engagement with the family's affairs.

Above the private trust company, a family council document – not a binding legal instrument, but a carefully drafted statement of family intent – set out the principles the board was expected to apply when exercising its discretionary powers. That document was designed to survive generational change: it could be revised by a defined consensus process, without requiring a formal amendment to the trust deed.

The trust deed itself was drafted under Hong Kong law. The matriarch settled the BVI holding entity into the trust structure, retaining a letter of wishes and a power of appointment over successor protectors. The protector – a role held initially by an independent individual nominated by the matriarch, with succession provisions built into the deed – held the power to replace the trustee (the private trust company itself being a separate entity from the protector function), to consent to certain distributions and to direct the trustee on defined classes of investment decision.

The Hong Kong intermediate company, which sat between the BVI entity and the operating assets, remained in place. Its board was restructured to reflect the trust governance: the private trust company, acting as trustee, held the BVI entity's shares and through them the rights to appoint the Hong Kong company's directors. The family members on the private trust company's board therefore retained direct, board-level influence over the operating entities – without owning those entities directly.

The cross-border interaction required care at several points. The UK branch's inheritance tax position was considered in the sequence of transfers. The Gulf branch's personal law considerations were addressed by specific exclusion provisions in the trust deed, coordinated with advice from allied counsel admitted in those jurisdictions. We expressly did not give advice on English succession law or Gulf personal-law questions; that work ran alongside our engagement through locally licensed firms and appropriately qualified counsel in those systems.

For context on the distinct issues that arise for CIS-connected families managing assets through Hong Kong trust structures, see our briefing on private trust and family assets for CIS families.

The sequence and the turning point

The engagement moved in three phases.

In the first phase, we mapped the family's current legal position across every jurisdiction: the residence and domicile of each branch, the governing law of each entity, the nature of each asset class, and the succession exposure in each system. That map produced a number of surprises – including one branch's inadvertent domicile exposure in a jurisdiction no one had considered at the outset. Addressing that exposure before the trust was settled proved to be the critical sequencing point.

The second phase was documentation. The private trust company was incorporated; its constitutional documents were drafted and approved through an iterative process that involved the matriarch and the heads of each branch. The trust deed was settled, the BVI entity transferred, and the Hong Kong company's board restructured. Allied counsel in the relevant jurisdictions confirmed the position under their respective legal systems.

The third phase was governance. We ran a structured session with the next-generation family members who were to sit on the private trust company's board. The purpose was practical: the trust deed gives the board broad discretionary powers, and exercising those powers lawfully requires the directors to understand their fiduciary obligations. A director of a corporate trustee owes duties to the trust and its beneficiaries, not only to the company's shareholders. That distinction is not always intuitive for family members who are accustomed to thinking of a company's board as serving the owners.

The turning point in the engagement was the domicile question in phase one. One family member had been resident in a civil-law jurisdiction long enough that a forced-heirship claim against their share of the assets was a genuine risk – not a remote one. That finding changed the sequencing: the transfer into the trust had to occur before any further crystallisation of that jurisdiction's claim, and the trust deed's firewall provisions under Hong Kong law had to be engaged in a particular order. Had the structure been settled without that mapping exercise, the family would have built a well-designed trust on a foundation that a foreign court could have challenged.

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 to discuss how the analysis applies to your family's position.

The qualitative outcome and the transferable lesson

The structure is now operational. The matriarch retains her letter of wishes and her protector-succession mechanism. The next generation governs the private trust company's board. The operating entities continue to run through Hong Kong, with their management unaffected by the structural layer above them. The forced-heirship exposure identified in phase one has been addressed to the extent possible under the applicable legal systems.

The transferable lesson is about sequencing and jurisdiction. It is not sufficient to design a technically correct trust structure and then seek to fit the family's actual legal position into it. The mapping exercise must come first. The jurisdiction of each family member, each asset and each entity determines which instruments are available, which risks are real, and which sequencing decisions are irreversible. A private trust company structured under Hong Kong law offers strong foundations – the reformed Trustee Ordinance, the absence of a forced-heirship regime, the firewall protection, the perpetuities reform – but those foundations only protect what has been properly settled into the structure.

A second lesson follows from the first. Foreign counsel – whether from the UK, the Mainland, or the Gulf – tend to approach family trust structures from the perspective of their own system's rules. That produces structures that are locally coherent but globally fragile. The cross-border coordination role – holding the map of every jurisdiction, managing the sequencing across all of them, and ensuring that the Hong Kong structure is properly protected against the claims that the family's multi-jurisdictional footprint creates – requires a dedicated international and cross-border perspective. That is what our private wealth practice is built to provide.

Families considering a similar structure often ask whether the window for establishing it is open or closing. The answer is that it depends on the family's current position. Once a family member's domicile position crystallises in a forced-heirship jurisdiction, the range of available protective steps narrows. Once an asset is subject to a foreign court order, the question of whether the Hong Kong firewall applies becomes litigious rather than structural. The time to build the structure is before those events, not after. That is the window the trigger_closing label describes.

Our private wealth practice advises families at each stage of this process, from the initial mapping exercise through to governance training and the ongoing review of the structure as the family's circumstances evolve.

Related practices

Private Wealth – succession, trust structuring and family office advice across jurisdictions
Holding Structures – BVI, Cayman and Hong Kong holding entity design and review

Frequently asked questions

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

The core documentation comprises a trust deed governed by the chosen law (Hong Kong law being a common and well-supported choice under the reformed Trustee Ordinance (Cap. 29)), the constitution of the private trust company itself, a protector deed or letter of wishes, and – where the family's governance requirements are complex – a separate family council or family charter document. The precise documents depend on the jurisdictions of the assets, the residence positions of the family members, and the degree of control the settlor wishes to retain. Allied counsel in the jurisdictions of non-Hong Kong assets will typically need to confirm the local position as part of the documentation process.

Which jurisdiction's law applies to a private trust company for a multi-generational family?

The governing law of the trust is determined by the trust deed, subject to the rules on choice of law in the jurisdictions where the assets are situated. Hong Kong law is a strong choice for families with cross-border exposure: the Trustee Ordinance (Cap. 29), as reformed in 2013, abolishes perpetuity rules, protects settlor-reserved powers, and provides a tested firewall against foreign forced-heirship claims. The private trust company itself is a Hong Kong-incorporated entity governed by the Companies Ordinance (Cap. 622). Where assets sit in other jurisdictions – BVI holding entities, Mainland operating companies, real property in third countries – the law of each asset's jurisdiction will apply to questions of title, transfer and enforcement, and locally admitted counsel must be engaged for those aspects.

Do I need a Hong Kong adviser for a private trust company for a multi-generational family?

Where the private trust company is to be incorporated in Hong Kong, or where the trust deed is to be governed by Hong Kong law, a Hong Kong-oriented international and cross-border adviser is necessary to map the structural options, draft the documentation, and coordinate with allied counsel in the other jurisdictions engaged. The cross-border dimension – managing the interaction between Hong Kong trust law, the residence positions of the family's members, and the legal systems of the asset jurisdictions – is where the structural risks arise, and where an adviser working across all three layers adds the most material value. Locally licensed Hong Kong firms handle the company-law and trust-registration aspects in parallel.

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

Matter note: a private trust company for a multi-generational family