Matter note: a private trust for a family with Cyprus

The question arrived in our private wealth practice in the summer of 2025. A family with origins in the Eastern Mediterranean, a primary residence in Hong Kong, and a portfolio of real property and investment holdings in Cyprus needed a succession structure that could survive the family's geographic complexity – and the legal systems it straddled. The window was closing: a senior family member was approaching a health event that would, under several of the jurisdictions in play, trigger forced-heirship claims that the family had not anticipated and had not planned around.

A private trust established under Hong Kong law can provide asset-protection and succession planning for a family with Cyprus-situated assets, but the structure must address the interaction between Hong Kong's trust statute, Cyprus inheritance law and the forced-heirship provisions of the national law governing the principal beneficiaries – all of which point to different outcomes on default rules. The Trustee Ordinance (Cap. 29), as substantially reformed with effect from 1 December 2013, provides the primary Hong Kong governing instrument. Absent deliberate planning, forced-heirship obligations of a non-Hong Kong personal law may follow assets across borders regardless of where the trust deed is executed.

The sections below set out the situation, the constraint, the route taken, and the transferable lesson – all fully anonymised.

What was the situation and what made it complex?

The family comprised three generations resident across three jurisdictions: Hong Kong, a European Union member state, and Cyprus itself. The principal wealth-holder held permanent residency in Hong Kong but retained a European nationality. Two adult children held different nationalities and different residency statuses – one in Hong Kong, one in the United Kingdom. Cyprus-situated assets included real property registered in the name of a Cyprus-incorporated company and a portfolio of financial assets held through a Cyprus investment account.

This is a configuration our desk sees with increasing regularity. Families from the CIS region, the Middle East and Southern Europe have accumulated asset-holding structures across Cyprus and the Gulf over the preceding decade, then relocated a family branch to Hong Kong as a second hub. The assets follow a different map from the people. And the succession rules follow the people, not the assets – which is the source of the planning problem.

The immediate complexity was this: the wealth-holder's personal law – the law of the state of nationality – incorporated mandatory forced-heirship provisions. Those provisions would, absent a valid counterstructure, apply to a prescribed share of the estate regardless of any contrary testamentary intention. The Cyprus assets sat inside a company, which offered some protection, but the shares in that company formed part of the estate. The Hong Kong investment holdings were unstructured. Time was short.

What issue did the structure need to solve?

The structural problem was not merely about where to place a trust. It was about which law would govern succession to the trust assets, whether Hong Kong's anti-forced-heirship firewall could be made to work, and whether the Cyprus position – both the company shares and the underlying real property – could be brought inside a credible trust structure without triggering adverse Cyprus stamp duty or other transfer costs.

Hong Kong law has no forced-heirship regime. The 2013 reform to the Trustee Ordinance (Cap. 29) reinforced the protection of Hong Kong-law trusts against foreign forced-heirship claims, providing a statutory firewall where the trust is governed by Hong Kong law. That firewall is not automatic. It requires deliberate choice-of-law and careful framing of the trust's governing instrument. A trust deed that does not clearly elect Hong Kong law, or that creates structural connections to a forced-heirship jurisdiction at the level of asset registration, can lose the protection it was intended to provide.

The second issue was the Cyprus layer. Cyprus is an EU member state and applies EU Succession Regulation principles in relation to EU nationals. Where the EU national's habitual residence is outside the EU – in this case, Hong Kong – the regulation permits a choice of the law of nationality to govern succession. That choice had not been made by this family, expressly or impliedly. The default would have applied the law of habitual residence, which was Hong Kong law. A calibrated approach could work with that default, but it required both the trust structure and the testamentary documents to be aligned.

What foreign counsel in Cyprus and in the European member state had, in our reading, missed was the interaction point. Each jurisdiction had been advised on in isolation. No single instrument had considered how the Hong Kong trust, the Cyprus company shareholding, and the EU Succession Regulation position fitted together. That gap was the mandate.

What route did the structure take?

The sequence ran in four stages. The first was a full map of the family's jurisdictional exposure: residency, nationality, domicile arguments available under each system, and the asset-holding chain from beneficial ownership through to the real property in Cyprus. This mapping exercise is not glamorous work. It is the stage at which the analysis earns its value – or fails to.

The second stage was the trust deed. A discretionary trust governed by Hong Kong law was established under the Trustee Ordinance (Cap. 29), with an independent trustee. The deed incorporated the statutory protections available under the 2013 reform: an express choice of Hong Kong law as the governing law; a clause invoking the anti-forced-heirship firewall; provisions dealing with reserved powers in terms that would not inadvertently collapse the trust for tax or recognition purposes. Critically, the forced-heirship provisions of the wealth-holder's national law were identified by name and category in the deed, with a direction that no claim under those provisions should be capable of affecting the trust property.

The third stage addressed the Cyprus holding. The shares in the Cyprus company were transferred into the trust. This is not a mechanical step: the transfer required consideration of the Cyprus-side position on whether the transfer would constitute a disposal, the stamp duty position on the share transfer, and – looking forward – the Cyprus succession and inheritance tax position on the trustee holding non-EU assets. Cyprus has no inheritance tax on most categories of assets, but the position on company shares with real property underneath warrants specific verification on the current rules. We coordinated with allied counsel admitted in Cyprus for the transfer mechanics and the local corporate steps.

The fourth stage was testamentary alignment. A will was drawn in Hong Kong in terms consistent with the trust structure, expressly electing Hong Kong law for the wealth-holder's movable estate to the extent permitted by the applicable conflict-of-laws rules. A complementary instrument was prepared for the European jurisdiction to address the nationality-law position and to formally exercise the EU Succession Regulation choice of nationality law for any assets remaining outside the trust at death. That election brought the two instruments into a coherent sequence rather than a competition.

Where was the turning point?

The turning point – the moment when the route became clear – was the recognition that the structure was not one problem but three separate conflict-of-laws questions that needed to be sequenced correctly. Get the sequence wrong and the Hong Kong firewall becomes unenforceable. Get it right and the forced-heirship claim has no point of entry.

Consider the alternative that the family had informally explored before engaging us. They had been advised by counsel in Cyprus that placing the assets into a Cypriot foundation might achieve similar protection. Cyprus introduced a dedicated foundation law, and its provisions have attracted attention from families with CIS and Middle Eastern connections who have historically used Cyprus as a holding and residence centre. But a Cypriot foundation governed by Cyprus law would not benefit from the Hong Kong anti-forced-heirship firewall. The foundation law in Cyprus is relatively untested in cross-border enforcement proceedings. And the family's primary anchor – the Hong Kong branch and the Hong Kong investment portfolio – would have remained outside the structure.

A Hong Kong-law trust, properly constructed, offered tested statutory protection, an established trustee market, and a natural home for the Hong Kong assets. The Cyprus company holding could be brought in as a trust asset. The centre of gravity of the structure followed the family, not the historical accident of where the first assets were held.

We regularly advise on the point at which a trust structure gains or loses its choice-of-law protection. The Trustee Ordinance's firewall provisions are a material advantage – but they require the governing instrument to be drafted to use them, and the asset transfer sequence to avoid inadvertently submitting the structure to a competing jurisdiction.

What was the outcome and what is the transferable lesson?

The structure was completed before the health event that had created the urgency. The forced-heirship claim that would otherwise have arisen on the wealth-holder's death was addressed through the combination of the trust, the will elections, and the coordinated instruments across jurisdictions. No litigation arose. The outcome is qualitative: the family has a documented, legally coherent structure that expresses what they intended, in terms that are defensible in each of the relevant legal systems.

The transferable lesson is about sequence and integration, not about any single instrument. Many families with cross-border asset maps have a trust somewhere and a will somewhere. What they frequently do not have is a deliberate analysis of how those instruments interact under the conflict-of-laws rules of each jurisdiction in play. That gap – the space between individually sound documents and a genuinely integrated structure – is where succession disputes are made.

Three points follow from this matter for any family with a comparable profile.

First, residency and nationality do not always point to the same succession law. A family member who is a national of an EU state but habitually resident in Hong Kong has a choice to make under the EU Succession Regulation. That choice should be made expressly, in a document that records the election and coordinates with the trust. Silence is not a neutral position; it is a default that may not reflect the family's intentions.

Second, the Hong Kong anti-forced-heirship firewall under the Trustee Ordinance is available – but it does not operate automatically. The trust deed must be structured to invoke it. A deed prepared by counsel unfamiliar with the specific statutory language of the 2013 reform may not achieve the protection the family assumes it has. This is not an abstract risk; in our cross-border practice we have reviewed trust instruments from families in this region that contain no choice-of-law clause and no firewall language.

Third, company-held assets require additional analysis. Holding a Cyprus property inside a Cyprus company does not remove it from the succession equation. The shares in the company are an estate asset, and the succession rules follow the shares. Whether those shares are treated as movable property – and therefore governed by the law of domicile of the shareholder – or subject to some other connecting factor depends on the conflicts analysis at the time of death. The structure needs to address this before, not after, the event.

For context on how a Hong Kong-law private trust interacts with the broader private wealth position for internationally mobile families, see our practice overview at Private Wealth. For families exploring the family-office angle, our briefing on the single family office structured through Hong Kong addresses the entity and governance layer that commonly sits alongside a private trust. The forced-heirship dimension across multiple jurisdictions is addressed in detail in our guide on forced heirship and cross-border succession risk.

If an earlier attempt at structuring has produced a result that does not integrate across the family's jurisdictions – or if a health or life event is creating urgency – a second read can identify the gap and the routes still open. To discuss the position, write to us at info@lockhartyip.com.

Related practices

Private Wealth – succession, trust structures and asset protection across borders
Holding Structures – entity selection and restructuring for international holding chains

Frequently asked questions

What is the first step in a private trust for a family with assets in Cyprus?

The first step is a full jurisdictional map of the family: nationalities, domiciles, residencies, and the asset-holding chain from beneficial ownership through to the Cyprus-situated assets. This mapping exercise determines which succession laws are in play, which conflict-of-laws rules govern the interaction between them, and whether the proposed trust structure can claim the anti-forced-heirship protection available under the Trustee Ordinance (Cap. 29) as reformed in 2013. Without the map, the trust deed cannot be properly calibrated, and may fail to achieve its intended protection.

Which jurisdiction's law applies to a private trust for a family with assets in Cyprus?

The governing law of the trust is a matter of express choice in the trust deed. A Hong Kong-law trust benefits from the anti-forced-heirship firewall introduced by the 2013 reform to the Trustee Ordinance (Cap. 29). However, Cyprus-situated assets – particularly real property and shares in Cyprus companies – also engage Cyprus succession rules and, where the settlor holds EU nationality, the EU Succession Regulation. These regimes interact, and the trust deed, the testamentary election and the asset transfer sequence must be coordinated to produce a coherent result across all relevant systems. Parties should verify the current position in each jurisdiction before acting.

How does the cross-border element affect a private trust for a family with assets in Cyprus?

The cross-border element is the central design challenge. A trust created in Hong Kong holding Cyprus-situated assets sits at the intersection of Hong Kong trust law, Cyprus inheritance and property law, and – where EU nationality is involved – the EU Succession Regulation's choice-of-law rules. Each system has its own default rules on forced heirship, asset characterisation and succession. The value of a properly structured Hong Kong-law trust is that it can address these competing systems in a single coherent instrument, provided the choice of law, the firewall language and the testamentary elections are correctly aligned and documented before any triggering event occurs.

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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 for a family with assets in Cyprus