Matter note: succession planning across Hong Kong CIS

A family with substantial assets spread across a Commonwealth of Independent States jurisdiction, a Hong Kong operating entity, and offshore holding structures faces a question that sits at the intersection of at least three legal systems. Which law governs the succession? Where is forced heirship a real constraint? And how does a Hong Kong trust fit into an estate plan whose centre of gravity is thousands of kilometres to the north-west?

Succession planning across Hong Kong and the CIS requires mapping at least two distinct legal regimes – the civil-law forced-heirship rules of the relevant CIS jurisdiction and the common-law trust and estate mechanisms available in Hong Kong – against the asset map and the family's actual residence and domicile positions. The governing instruments are the Trustee Ordinance (Cap. 29), as substantially reformed with effect from 1 December 2013, and the succession and conflict-of-laws rules of the relevant CIS state. The sequencing decision – which structure is established first, and in which jurisdiction – frequently determines whether the plan holds.

This matter note sets out an anonymised cross-border succession matter. It describes the situation, the legal constraint, the route chosen, the sequence, and the transferable lesson for principals in comparable positions.

The situation: a family with assets on three maps

The principal was the founder of a diversified group. The group had an operating presence in a CIS state, a Hong Kong holding vehicle, and financial assets held through a BVI intermediate company. The founder was a national of the CIS jurisdiction, and had spent substantial time in Hong Kong without establishing a new domicile there. Two adult children were resident in different European Union member states.

The family had no succession plan in place. There was no will valid in any of the three principal asset jurisdictions. There was no trust. The only document in existence was an older, informal letter of wishes addressed to no one in particular.

The trigger was practical. One of the children was about to make a significant investment of her own. The question of how the family's wealth would pass – and whether her share was protected from sibling dispute – had become urgent. The window was not indefinite.

In our cross-border private wealth practice, we see this pattern regularly. A founder builds assets across jurisdictions over a career. The succession question is deferred, year after year, because the commercial work takes priority. Then a specific event – a child's marriage, a business sale, a health episode, a regulatory change – puts the question on the table.

The constraint: forced heirship across the CIS boundary

The CIS jurisdiction whose law was most directly engaged operates a mandatory share regime. Under the succession law of that state, certain close family members – including a spouse and minor or dependent children, and in some systems disabled adult children – hold a statutory right to a defined proportion of the estate. That right cannot be defeated by will. It applies to assets situated in the jurisdiction and, under some choice-of-law rules, may follow the domicile of the deceased.

This is the central constraint for most families in this position. The founder, being domiciled in the CIS state, faced the real prospect that the forced-heirship regime would reach beyond the assets physically located there. Hong Kong law, by contrast, has no forced-heirship regime. A Hong Kong trust, properly established and governed by Hong Kong law, benefits from the statutory firewall protection strengthened by the 2013 reform to the Trustee Ordinance: a trust is not invalidated by a foreign forced-heirship claim directed at its assets, provided the trust is genuinely established and the assets genuinely transferred.

The word "genuinely" carries substantial weight. A trust settled in contemplation of a specific claim, or settled at a time when the settlor was effectively insolvent or in clear breach of a known obligation, may be vulnerable. The firewall is real, but it is not absolute. Timing and substance are both material.

What does the CIS forced-heirship regime actually reach? That depends on the situs rules of the CIS state and on the conflict-of-laws analysis in the forum where any claim is brought. The short answer, which we gave the family at the outset, is that anyone who tells you the offshore structure automatically solves the forced-heirship problem is not giving you the full analysis.

The route chosen: Hong Kong discretionary trust with a structured holding layer

After reviewing the asset map, the domicile position, and the family dynamics, the route recommended and adopted was a Hong Kong discretionary trust, with the founder as settlor and a professional trustee in Hong Kong. The trust was to hold the BVI intermediate company, which in turn held the financial assets and the economic interest in the Hong Kong operating vehicle.

The rationale for locating the trust in Hong Kong, rather than in one of the more commonly used offshore trust jurisdictions, was specific to this family's position. First, the operating substance of the group was in Hong Kong. Second, the family wanted a common-law system with a well-tested court system and a trustee market that was established and regulated. Third, the 2013 reform to the Trustee Ordinance had removed the rule against perpetuities and strengthened the forced-heirship firewall, making Hong Kong a materially stronger choice than it had been a decade earlier.

The trust was drafted as a discretionary trust. No beneficiary has a fixed entitlement. The trustee holds the power to distribute to any of a class of beneficiaries, in such shares and at such times as the trustee determines, guided by a letter of wishes. This structure is intentional. A fixed-share trust would replicate, at the trust level, the very entitlement dispute the family was trying to avoid.

Alongside the trust, the family's advisers prepared a Hong Kong will for the founder, dealing with his Hong Kong-situated assets that remained outside the trust. A separate will was prepared under the law of the CIS jurisdiction, dealing with assets there. The two documents were coordinated so that their scope did not overlap and each was valid in the jurisdiction it addressed.

For a structured read on how this interacts with the position in offshore holding centres, see our analysis on wills and estate plans covering assets in the Cayman Islands, which addresses the holding-layer interface in comparable fact patterns.

The sequence and the turning point

The sequencing had three phases. The first was the legal analysis: domicile position, asset situs, forced-heirship exposure, and the conflict-of-laws question. This phase identified the vulnerability. The CIS assets were exposed. The BVI assets were exposed to the extent the CIS courts might apply domiciliary succession law to reach them. The Hong Kong operating interest was the most defensible, because it was situated in a common-law jurisdiction with no forced-heirship rule.

The second phase was trust establishment. The trust deed was prepared, the trustee was appointed, and the assets – beginning with the BVI shares – were transferred to the trust. This phase required careful attention to timing. The founder was not in financial difficulty, and there were no pending claims. The transfer was made at a time when it was plainly a genuine succession-planning step, not a response to a known claim. The documentation recorded the purpose and the circumstances.

The CIS assets posed a different question. They could not easily be transferred into the Hong Kong trust: the CIS jurisdiction's foreign-ownership restrictions and the nature of the assets made a direct transfer impractical. Instead, the route for those assets was the CIS will, supplemented by a family agreement among the adult children, made under the law of the CIS jurisdiction, that set out the agreed allocation of those assets and committed the parties to a particular administration process. That agreement was not a waiver of any legal right; it was a recorded, legally reviewed expression of the family's shared intentions.

The turning point came during the second phase. One of the children, on receiving advice from counsel in her EU jurisdiction of residence, raised a question about whether the trust transfer would be recognised in her state for the purposes of any future claim she might bring there. This was a real question, and it was the right question to ask. The answer required a review of the EU member state's conflict-of-laws rules on trusts and a consideration of how the trust structure would be characterised in that jurisdiction.

We coordinated with allied counsel admitted in the relevant jurisdiction. The conclusion – which we set out in a memo to all parties – was that the trust would be recognised in the EU state for most purposes, but that a forced-heirship claim under the domestic law of that state (which has its own mandatory-share rules) could not be ruled out if the child became domiciled there at the time of the founder's death. The solution was to document, in the letter of wishes, the founder's express intentions with respect to each beneficiary, giving the trustee clear guidance on the family's expectations while preserving the trustee's discretion.

In our experience, this is where many cross-border succession plans stall. The trust is established. The wills are prepared. But the multi-residence, multi-jurisdiction dimension of the beneficiary class is not addressed. A child who moves from the UK to France, or from Germany to the UAE, or from Hong Kong to a CIS state, takes her succession law with her. The plan must account for that movement.

The qualitative outcome and the transferable lesson

The trust was established and the wills coordinated. The family entered a position where the largest part of the wealth – the financial assets held through the BVI structure and the economic interest in the Hong Kong operating vehicle – sat within a Hong Kong discretionary trust governed by Hong Kong law, with the forced-heirship firewall in place and the trustee holding a detailed letter of wishes.

The CIS assets remained exposed to the mandatory-share regime of that jurisdiction. That exposure was not eliminated; it was documented, understood, and mitigated to the extent that the family agreement and the CIS will allowed.

The transferable lesson has four parts.

First, the choice of trust jurisdiction is not interchangeable. Hong Kong's 2013 reform – the abolition of the rule against perpetuities and the strengthening of the forced-heirship firewall – makes it a materially stronger choice for a family with CIS or civil-law forced-heirship exposure than many offshore alternatives where the firewall provision is weaker or untested.

Second, the situs of each asset class determines the analysis. Assets physically located in a CIS jurisdiction are governed, for succession purposes, by the rules of that jurisdiction. No offshore trust changes that position. The plan must address each asset class separately.

Third, timing matters enormously. A trust established in contemplation of a known claim is vulnerable in any jurisdiction. The window for clean succession planning is when the family is not in dispute, not when a claim is imminent. For families reading this note, that is the most immediate practical point.

Fourth, the beneficiary class is not static. Children move. Marriages happen. Domiciles change. A succession plan that is sound at establishment may become vulnerable within a decade if the beneficiary class has shifted its jurisdictional footprint. Annual or biennial reviews of the plan are not a formality; they are the mechanism by which the plan remains fit for purpose.

The sequence above describes the standard position for a family of this profile. Your matter turns on the documents, the jurisdictions actually engaged, and the order of steps – which is where the route is won or lost.

To discuss how this approach applies to your family's cross-border position, contact info@lockhartyip.com.

The objection handled: "We already have an offshore structure"

The most common position we encounter from families in this situation is that an existing offshore structure – a BVI or Cayman holding company, or an older trust established in a jurisdiction selected years ago for different reasons – already solves the problem. This is the most consequential misreading of the cross-border succession position.

An offshore holding company is not a succession plan. It defers the succession question to the level of the shares in that company, which are themselves an asset subject to the succession law of the deceased's domicile. A trust that pre-dates the 2013 Hong Kong reform may not carry the forced-heirship firewall in the same terms. A trust established in a jurisdiction whose courts have not been tested on the forced-heirship question provides less certainty than one established in a jurisdiction with a clear statutory provision and a functioning common-law court system.

None of this means an existing structure is worthless. It means the existing structure must be reviewed against the current asset map, the current domicile and residence positions of the family members, and the current forced-heirship exposure. That review is the starting point, not the end point.

For families with assets across the UAE and comparable wealth-holding hubs, our briefing on private trust and family assets in the UAE addresses the comparable holding-and-succession interface in that corridor.

If an earlier filing, structure or succession plan produced an outcome that no longer reflects the family's position – or a legal environment that has shifted – a structured second read can identify the gap and the routes still open. Write to us at info@lockhartyip.com.

Related practices

Private Wealth – succession, trust structuring, asset protection and family office across Greater China and offshore centres
Holding Structures – Hong Kong and offshore holding vehicle design, review and restructuring for cross-border groups

Frequently asked questions

What does the route look like for succession planning across Hong Kong and the CIS?

The route begins with a domicile and asset-situs analysis, then determines the forced-heirship exposure in the relevant CIS jurisdiction, before selecting the governing trust or testamentary instrument. For most families, a Hong Kong discretionary trust – governed by the Trustee Ordinance (Cap. 29) as reformed in 2013 – is established to hold the offshore and Hong Kong assets, while a coordinated will under CIS law addresses assets situated there. Timing is critical: the plan must be established before any known claim arises. Coordination between the Hong Kong, offshore, and CIS documents is the central technical task.

Which jurisdiction's law applies to succession planning across Hong Kong and the CIS?

No single law governs the entire estate. Hong Kong law governs assets situated in Hong Kong and a Hong Kong trust established under the Trustee Ordinance. The succession law of the CIS jurisdiction – typically the law of the deceased's domicile and the law of the situs of immovable assets – governs assets located there, including any mandatory-share entitlements. Offshore holding structures introduce a further layer: the shares of a BVI or Cayman company are situated, for conflict-of-laws purposes, in that offshore jurisdiction. The practical consequence is that every asset class requires a separate situs analysis before the plan is finalised.

How long does succession planning across Hong Kong and the CIS usually take?

The legal analysis and documentation phase for a matter of this type – covering a Hong Kong trust, coordinated wills in two or more jurisdictions, and review of an existing offshore holding structure – typically runs across several months of active work. The timeline depends on the complexity of the asset map, the number of jurisdictions engaged, the availability of the relevant family members for instruction, and the speed at which locally licensed counsel in the CIS jurisdiction can prepare and validate the local will. Families should not assume the plan can be completed in weeks where a major asset restructure is required.

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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: succession planning across Hong Kong and the CIS