Matter note: succession planning across Hong Kong UAE

A family with assets in two jurisdictions governed by different legal traditions faces a structural question before any document is drafted: which law governs succession, and where does that answer actually hold? For a principal with a private operating group in the UAE and a holding entity and residential property in Hong Kong, the answer was not straightforward. The forced-heirship rules of one system sat in direct tension with the dispositive intentions of the other. Getting the structure right required working through both legal environments before a single instrument was executed.

Succession planning across Hong Kong and the UAE requires a deliberate sequencing of instruments under two distinct legal regimes – the Trustee Ordinance (Cap. 29) as amended and the UAE's personal-status framework – because the two systems reach different conclusions on forced heirship, governing law, and the validity of advance dispositions. A structure that is legally sound in one jurisdiction may be ineffective or challengeable in the other unless the interfaces are addressed at the design stage.

This matter note describes the principal concern, the route taken, and the transferable lesson. All identifying particulars have been removed.

What was the situation, and why did the standard approach not work?

The principal was the founder of a regional manufacturing and trading business, with operational entities in the UAE and a holding company registered in a common-law offshore centre, held through a Hong Kong structure. The family included adult children resident across three countries. The principal's intention was to direct the succession of the group and of Hong Kong-situated real property to specific family members, on terms that departed from an equal-shares division.

The immediate constraint was the application of UAE personal-status law. In the UAE, succession for Muslims is governed by Sharia inheritance rules (a mandatory Islamic succession regime that prescribes fixed shares for defined heirs), which override a testamentary disposition that conflicts with those shares. For a non-Muslim expatriate principal, the relevant question was which law the UAE courts would treat as applicable: the law of the principal's nationality, the law of the UAE, or the law of the asset's location.

The answer was not uniform across the asset map. The UAE courts' approach to the governing law of succession for expatriates has evolved, and the position on real property situated in the UAE differs from the position on shares in non-UAE entities. Our desk has acted on a number of matters where this distinction was handled too late – after a will was already executed – requiring the structure to be unwound and rebuilt.

In parallel, the Hong Kong angle introduced a separate set of questions. The principal held interests through a holding structure that included a discretionary trust subject to Hong Kong law. The Trustee Ordinance as reformed in 2013 provides that a trust governed by Hong Kong law is not invalidated by the settlor reserving certain powers, and that the trust is protected against forced-heirship claims brought under a foreign law. That protection, however, is not self-executing. The structure must be correctly constituted, and the choice of governing law must be a genuine and defensible one on the facts.

What was the core cross-border legal issue?

The core issue was a conflict-of-laws problem with an asset-specific dimension. The principal's estate sat in three categories: UAE-situated operating assets; shares in an offshore holding entity; and Hong Kong-situated real property, together with the beneficial interest under the discretionary trust.

Each category raised a different question. For the UAE operating assets, the relevant question was whether the UAE courts would accept a disposition in favour of the principal's chosen beneficiaries, or whether a mandatory succession regime would operate to redirect a portion of those assets. For the offshore holding entity shares, the question was which law governed their succession – the law of the issuing jurisdiction, the law of the principal's habitual residence, or the law of the principal's nationality. For the Hong Kong property and the trust, the question was whether the Hong Kong law protection against forced-heirship claims under the Trustee Ordinance would apply, and whether the structure was properly set up to benefit from it.

The risk was not theoretical. A challenge to the distribution of the offshore holding entity shares, brought in a UAE court on the basis that a Sharia succession regime applied to the principal's entire estate, could have produced a judgment inconsistent with the intended disposition. Whether that judgment could then be registered or enforced in Hong Kong depended on a further set of questions about the nature of the judgment and the grounds for refusal of registration.

This is where the cross-border interface became operationally significant. Since 29 January 2024, the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) has changed the enforcement position between Mainland China and Hong Kong, but that regime did not directly apply here. The relevant enforcement question was whether a UAE court order could be recognised and given effect in Hong Kong. That analysis ran separately from the Mainland–HK enforcement track, and the answer turned on common-law principles of foreign-judgment recognition rather than a statutory registration scheme.

What route was chosen, and what did the sequence look like?

The approach was to separate the asset classes structurally, and to address each with the instrument best suited to the governing-law position of that class. This is not always the obvious starting point; clients and their tax advisers frequently approach succession planning as a single-document exercise, drafting a will and assuming it will hold across every jurisdiction. That assumption does not survive contact with a cross-border fact pattern of this kind.

The first step was to map the succession position for each asset class under the laws that were most likely to be applied by the courts of each relevant jurisdiction. This was a legal analysis exercise, not a drafting one. It produced a clear picture of where the principal's intentions were at risk of being overridden, and in which forum that risk was live.

The second step was to restructure the holding of the offshore entity shares so that the succession of those shares was clearly governed by the law of the issuing jurisdiction – a common-law offshore centre – rather than left to be determined by reference to the principal's personal law. This involved reviewing the share register, the memorandum and articles, and the terms of any existing shareholder arrangement. The restructuring did not require a change of entity; it required a change in the documentation around how those shares were held and how succession to them was documented.

The third step was to review the discretionary trust against the requirements of the Trustee Ordinance. Since 1 December 2013, Hong Kong trust law has explicitly provided that a Hong Kong-law trust is not rendered invalid by a foreign forced-heirship rule that would apply under the law of another jurisdiction. That protection is real, but its application depends on the trust being genuinely constituted under Hong Kong law, with a defensible choice of governing law and an appropriate trustee. The review identified two drafting points in the existing trust deed that, left uncorrected, could have given a challenger an argument that the trust was not in substance a Hong Kong-law trust. Those points were addressed by deed of amendment.

The fourth step addressed the UAE-situated operating assets directly. For these assets, the structure needed to reflect the position that would be taken by UAE courts rather than fight against it. A registered will under the UAE's non-Muslim wills framework – which allows an expatriate non-Muslim to make a disposition of UAE-situated assets in accordance with the law of their choice, registered with the relevant UAE authority – was prepared and executed. This instrument addressed the UAE-situated assets on their own terms, removing the risk of an intestacy position or a forced-heirship distribution applying to assets that should have passed differently.

The turning point in the matter came during the third step. The drafting review of the trust deed identified a provision under which the settlor had retained a power that, in combination with another clause, could be characterised as a power to revoke the trust. That characterisation, if successfully argued before a foreign court, could have supported the position that the trust assets remained part of the principal's estate for succession purposes. The amendment removed the ambiguity. Without that review, the entire Hong Kong structure would have been exposed to challenge at the point it mattered most: the principal's death.

We have seen similar patterns on a number of cross-border wealth matters. The existing documents usually contain the answer to why the structure is vulnerable; the analysis is in reading them carefully against the laws that are likely to be applied, not only the law under which they were drafted.

What was the outcome, and what is the transferable lesson?

The matter concluded with a coherent cross-border succession structure: a corrected and properly constituted Hong Kong discretionary trust for the holding-layer assets, a documented succession position for the offshore entity shares under the law of the issuing jurisdiction, and a registered UAE will addressing the operating assets on terms that the UAE legal framework would recognise and give effect to.

No single instrument governed the whole estate. That is the transferable lesson. A principal with assets in Hong Kong and the UAE does not face a succession problem that can be solved with one document or one governing law. The asset classes have different succession laws applied to them by the courts of each relevant jurisdiction, and those laws do not converge. The task of the adviser is to map that divergence, address each class with the appropriate instrument, and ensure that the instruments do not create conflicts with each other.

The second transferable lesson concerns timing. The structural exposure identified in this matter – the potentially revocable trust, the undocumented succession position for the offshore shares – would have been invisible to the family until the principal's death. By then, the only route would have been litigation across multiple jurisdictions, at substantial cost and with uncertain outcomes. Succession planning done in advance is not a formality; it is the exercise that determines whether the structure actually works when it is called upon.

A third point is specific to the Hong Kong angle. The protections available under the Trustee Ordinance as amended are meaningful, but they are not automatic. They apply to trusts that are genuinely constituted under Hong Kong law, with documentation that reflects that choice. A trust that was drafted without the 2013 reform in mind, or that has accumulated amendments that create internal tensions, may not benefit from the full scope of those protections. A periodic review of existing trust instruments against the current state of Hong Kong law is a practical step, not an academic one.

For further reading on asset-protection structures and their exposure points for principals based in common-law and civil-law jurisdictions, see our analysis at asset protection and principal exposure – the Cyprus angle. For a matter involving estate planning across Hong Kong and Mainland China, see wills and estate plans covering assets in Mainland China.

Our broader practice in this area is described at Private Wealth.

If your succession structure spans Hong Kong and the UAE – or another jurisdiction where the forced-heirship and governing-law questions intersect – a review of the existing instruments against the cross-border position is the appropriate starting point.

The sequence above describes the standard position for a matter of this type. Your situation turns on the documents, the jurisdictions actually engaged, and the order of steps. To discuss your position in confidence, write to info@lockhartyip.com.

Common questions about succession planning across jurisdictions

Frequently asked questions

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

The timeline depends on the complexity of the asset map and the condition of any existing instruments. A clean structure with no existing trust instruments and assets in two jurisdictions can be documented in a matter of weeks once the legal mapping is complete. Where existing trusts require amendment, or where UAE-registered wills must be prepared and executed before the relevant authority, the process extends accordingly. Parties should allow for the registration step in the UAE, which adds calendar time regardless of how quickly the documents are prepared.

Do I need a Hong Kong adviser for succession planning across Hong Kong and the UAE?

Where Hong Kong-situated assets are involved – real property, a Hong Kong holding company, or a trust governed by Hong Kong law – a cross-border adviser with direct experience of the Hong Kong legal environment is a practical necessity. The protections available under the Trustee Ordinance require the trust to be properly constituted under Hong Kong law. An adviser focused only on the UAE side of the structure will not have the tools to assess whether the Hong Kong instruments are effective, or whether they expose the estate to challenge. The two sides of the structure need to be read together.

What is the first step in succession planning across Hong Kong and the UAE?

The first step is a legal mapping exercise: identifying each asset class, the jurisdiction in which it is situated or held, and the succession law that the courts of that jurisdiction are most likely to apply. This exercise precedes any drafting. It produces the picture of where intentions are at risk of being overridden and where the instruments need to be placed. Without this foundation, documents are executed against an incomplete understanding of the legal position – which is how structures end up vulnerable at the point they matter most.

About Lockhart & Yip

Lockhart & Yip is an independent international and cross-border counsel based in Hong Kong. We advise international groups, founders, family offices and their advisers on succession planning, trust structures, and cross-border private wealth matters across Hong Kong, the UAE, and the principal offshore centres, working alongside locally licensed firms on matters of Hong Kong law. Our desk is built around disputes and arbitration, holding structures, private wealth and cross-border enforcement across Greater China and the principal offshore centres. We do not act for consumers; our practice is B2B and principal-facing. To discuss your cross-border succession position, write to info@lockhartyip.com.

Lockhart & Yip advises on international and foreign law. We do not practise the law of Hong Kong; matters of Hong Kong law are handled together with locally licensed firms. This publication is general information, not legal advice. For advice on your situation, contact info@lockhartyip.com.

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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 UAE