Matter note: a private trust for a family with UK

Succession planning for a family with assets on two sides of the world rarely fails at the level of drafting. It fails at the level of sequencing: which jurisdiction is addressed first, which instrument governs which layer, and whether the trust structure has been tested against the forced-heirship rules of the jurisdiction the family is leaving. For a family with meaningful assets in the United Kingdom and a principal base in Asia, those questions converge in a single transaction.

A private trust governed by Hong Kong law, settled by a settlor with cross-border connections to the United Kingdom, is subject to a layered analysis: the Trustee Ordinance (Cap. 29) governs the trust's validity and administration; UK succession, domicile and potentially inheritance tax rules govern the UK-situated assets; and the residency and domicile position of the settlor and beneficiaries determines which set of forced-heirship or forced-distribution rules, if any, can reach the structure. Since the reform of the Trustee Ordinance took effect on 1 December 2013, Hong Kong trusts have benefited from a statutory firewall against foreign forced-heirship claims, making Hong Kong a structurally attractive governing law for families with assets in forced-heirship jurisdictions – but not, on its own, a complete answer for UK-situated property.

This matter note describes an anonymised engagement. The family's situation, the constraint they brought to us, and the route we recommended are described without any identifying detail. The transferable lesson is in the sequencing.

What was the situation, and what was the constraint?

The family comprised a settlor who had spent the better part of two decades in Hong Kong, two adult children resident in different jurisdictions, and a portfolio of UK real estate and financial assets accumulated over a period of significant commercial activity. The settlor held a long-standing connection to the United Kingdom: years of prior residence, an estate with UK-situated assets, and a domicile question that had never been formally resolved.

The constraint the family brought to us was a familiar one in our cross-border practice. A structure had been informally discussed with advisers in an earlier year. Nothing had been signed. The settlor's health position had changed, and the family now needed to move with purpose. The core commercial question was whether a private trust could be settled in a way that would hold together across the Hong Kong and UK dimensions simultaneously – and whether any prior steps had created a structural problem.

The second constraint was less visible but more significant. One of the adult children resided in a jurisdiction with a forced-heirship regime. That regime, in its domestic form, reserved a proportion of the estate for the child regardless of testamentary disposition. The family had not focused on whether that rule could be imported into the UK layer of the estate, or indeed the Hong Kong layer. The answer to that question depended entirely on domicile.

In our cross-border practice, the domicile question is almost always the turning point. It is also the question that tends to arrive last, after clients have already made assumptions about what their estate plan will achieve.

What was the cross-border interface, and which instruments governed?

The engagement turned on two legal systems in direct conversation: Hong Kong trust law and UK succession law. They do not speak the same language on several critical points, and the gap between them is where the risk for this family sat.

On the Hong Kong side, the governing instrument was the Trustee Ordinance (Cap. 29). The 1 December 2013 reform brought three features of direct relevance. First, Hong Kong trusts are no longer subject to the rule against perpetuities or excessive accumulations, giving the family flexibility over the trust's duration. Second, the Ordinance permits a settlor to reserve certain powers without the trust being invalidated on that basis – a useful feature for a settlor who intended to retain some oversight. Third, and most importantly for this family, the 2013 reform introduced a statutory firewall: a Hong Kong trust is not to be set aside or varied by reason of any foreign forced-heirship rule that would otherwise apply. That protection is available under Hong Kong law. It does not, however, extend to the UK-situated assets without more.

On the UK side, UK succession law and the rules governing domicile and the applicable law for succession apply to UK-situated assets. For immovable property – real estate – the law of the place where the property is situated generally governs succession. For movable property, domicile at death is typically the connecting factor. If the settlor remained domiciled in the United Kingdom at death, UK succession law could govern the movable estate irrespective of any trust structure settled under Hong Kong law. The inheritance tax analysis turned on the same domicile question, and UK inheritance tax has its own rules for deemed domicile that extend the charge to individuals who have been UK-resident for a sufficient number of years. Those rules were in active consideration during the engagement.

A third system sat in the background: the private international law of the jurisdiction where the forced-heirship-resident child was living. We assessed that risk and formed a view on its enforceability in both Hong Kong and the United Kingdom. The matter then had three interlocking systems to manage, not two.

For principals in a comparable position, our Private Wealth practice regularly works through this multi-system analysis before a trust is settled.

How did the sequence run, and where was the turning point?

The first step was a domicile assessment. This is not a mechanical exercise. Domicile of origin, domicile of choice, and the abandonment of a prior domicile all involve questions of fact and intention. The settlor had left the United Kingdom with some finality, but the connection remained stronger than the family had assumed. That assessment shaped everything that followed, because it determined which law would govern the movable estate on death and which tax regime had first claim on the asset base.

Once the domicile position was mapped, we worked through the order of steps with allied counsel admitted in the United Kingdom. The sequence was not complicated in principle, but it required coordination across two desks at the same time. Three questions needed answers before the trust deed was prepared.

First: which assets could be settled into the trust with the greatest structural protection, and in what order? UK-situated immovable property presented a different answer from financial assets held through structures above the UK layer. The real estate was addressed separately, with locally licensed firms handling the UK-law elements.

Second: was the intended trust deed properly calibrated for the settlor's retained-power position? The family wanted the settlor to retain a significant degree of oversight. The Trustee Ordinance permits that, but the drafting requires care: a retained power that goes too far can be read as a sham or as a resulting trust back to the settlor's estate. The drafting was tested against both risks before execution.

Third: how was the forced-heirship-resident child's position to be handled? The family's instinct was to exclude that child from the trust entirely. That approach carries its own risks, both in terms of family relationships and in terms of what a foreign court with jurisdiction over the child might do with a challenge. We advised a different approach: the structure acknowledged the child's interest in a manner that reduced the practical incentive to litigate.

The turning point in the matter was the domicile assessment, not the trust drafting. Once the domicile position was established – and, crucially, steps were taken to consolidate the settlorʼs connections to Hong Kong going forward – the rest of the structure became clearer. The trust was settled under Hong Kong law. The UK real estate was addressed through a combination of instruments advised upon by UK-admitted counsel. The forced-heirship layer was managed by the structuring of beneficial interests rather than by exclusion.

If you are working through a comparable structure and have already taken some steps that may need to be reconsidered, the route is still open. The second engagement on a partially built structure is a standard part of our desk's work. Write to us at info@lockhartyip.com to discuss where your matter currently sits.

What was the outcome, and what does it transfer?

The qualitative outcome was a settled structure that the family and their advisers assessed as workable across both the Hong Kong and UK dimensions. No single instrument resolved every risk: the trust addressed the Hong Kong law layer and the forced-heirship firewall; allied counsel in the United Kingdom addressed the UK succession and tax position; and the forced-heirship-resident child's interest was managed structurally rather than by exclusion. The combination held together because the sequencing was planned from the beginning, not assembled from separately advised layers that were never tested against each other.

What transfers from this matter to others in the same area is the sequencing principle. A private trust settled under Hong Kong law offers real protection against foreign forced-heirship claims. The 1 December 2013 reform made Hong Kong one of the few common-law jurisdictions to encode that protection in statute. But the protection applies to the trust itself and to assets properly within it. It does not automatically govern UK-situated assets, and it cannot override UK inheritance tax rules or the UK's own domicile-based analysis. The two systems must be addressed in sequence, not independently.

The forced-heirship dimension is the element that most frequently surprises families at the planning stage. It is also the element that most frequently arises after a structure has already been settled – when a beneficiary challenges the arrangement from a foreign court with its own jurisdictional reach. The practical answer is to address the forced-heirship question before settlement, not after.

A second lesson: the settlor's domicile is the connective tissue of the whole analysis. It determines the applicable law for movable property on death; it triggers or suspends the UK's inheritance tax reach; and it affects which rules apply to the trust's validity and administration. In our cross-border practice, we would not advise on the trust structure without first forming a view on the domicile position. The two exercises are not sequential – they are concurrent.

For families considering a comparable structure, the succession and asset-protection position across Hong Kong and the United Kingdom is addressed in greater depth in our guide to succession planning across jurisdictions. Principals with an offshore holding element may also find our analysis of asset protection and Cayman Islands exposure relevant to the wider structure.

The sequence above reflects the standard approach. Your matter will turn on the specific asset map, the domicile facts, and the jurisdictions actually engaged – which is where the route is won or lost. For a structured assessment of your position across Hong Kong and the United Kingdom, write to us at info@lockhartyip.com.

What a comparable engagement typically involves

Families approaching us with a cross-border private trust question across Hong Kong and the United Kingdom are often at one of three points. They are planning ahead, with time to sequence properly. They have an existing structure that has never been tested against the UK layer. Or they are responding to a change in circumstances – a health event, a change in residence, or an asset acquisition in a new jurisdiction – that has made an existing plan inadequate.

In each of those situations, the engagement follows a recognisable shape. We review the succession and asset-protection position first: the domicile question, the asset map, and the forced-heirship exposure. We then model the trust and residence options across the Hong Kong and UK systems, coordinating with allied counsel admitted in the United Kingdom for matters of UK law. We then prepare the structuring plan and, where the client is ready to proceed, coordinate the implementation steps across both desks.

The Hong Kong law layer – the Trustee Ordinance, the firewall, the retained-power question – is where our desk focuses. The UK layer is handled with locally licensed firms. The integration of the two is the cross-border work.

Hong Kong law has no forced-heirship regime of its own. That is not an accident; it reflects the common-law tradition that a testator may dispose of property freely. The Trustee Ordinance's firewall builds on that tradition by protecting a Hong Kong trust against foreign forced-heirship claims. For a family with exposure to a forced-heirship jurisdiction – whether through a beneficiary's residence, a prior domicile, or the location of assets – that protection is material. It is also not absolute, and understanding where it ends is as important as understanding where it begins.

Related practices

Private Wealth – succession, trust structures, asset protection and family-office planning across jurisdictions
Holding Structures – cross-border holding architecture above operating and real-estate assets

Frequently asked questions

Do I need a Hong Kong adviser for a private trust for a family with assets in the United Kingdom?

A Hong Kong adviser adds direct value where the trust is to be governed by Hong Kong law, the settlor or beneficiaries have connections to Hong Kong or Greater China, or the structure needs to engage the Trustee Ordinance's statutory firewall against foreign forced-heirship claims. The Hong Kong and UK layers must be addressed in parallel, not in sequence by a single desk. A cross-border counsel coordinating with UK-admitted colleagues is the standard model for this type of engagement.

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

The cross-border element means that two legal systems govern different parts of the structure simultaneously. Hong Kong law, under the Trustee Ordinance (Cap. 29), governs the trust's validity, administration and the forced-heirship firewall. UK law governs succession to UK-situated assets and, depending on the settlor's domicile, may govern the movable estate and the inheritance tax analysis. Those two systems must be made to work together; neither on its own produces a complete answer for a family with assets in both jurisdictions.

What does the route look like for a private trust for a family with assets in the United Kingdom?

The standard route begins with a domicile assessment, which determines the applicable succession law and the reach of UK inheritance tax. It then maps the asset base – separating immovable UK property from financial assets – and identifies the forced-heirship exposure, if any, through beneficiary residence or prior domicile. The trust is then drafted and settled under Hong Kong law, with the UK property addressed with UK-admitted counsel. The integration of those two layers, sequenced correctly from the outset, is where the structure's durability is determined.

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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 the United Kingdom