A private trust for a family with assets in the CIS

The decision to establish a private trust rarely arrives in calm water. For a family with assets across the CIS – whether operating businesses in Kazakhstan, real property in Ukraine, or financial holdings in Russia – the trigger is almost always specific: a succession event, a shift in the political environment, a second generation reaching adulthood, or a residency change that suddenly makes the existing arrangements inadequate. By that point, the window for orderly structuring is already narrowing.

A private trust governed by Hong Kong law, structured through the Trustee Ordinance (Cap. 29) as reformed, provides a CIS-connected family with a common-law holding arrangement that offers tested succession planning, statutory protection against forced-heirship claims from foreign jurisdictions, and a neutral forum for the administration of assets distributed across multiple systems. Where the family's asset map spans the CIS and one or more offshore centres, Hong Kong sits at a workable intersection of recognition, enforceability and institutional depth.

This note explains the service as we run it: the trigger, the structure, the sequence, the documents the family must own, and the cross-border interface between Hong Kong and the CIS jurisdictions typically on the map.

When does a CIS family actually need a private trust – and what triggers the move?

The need crystallises around four recurring pressure points. Each one narrows the available options if left unaddressed.

The first is succession exposure. CIS jurisdictions vary considerably in their treatment of testamentary freedom. Several impose mandatory shares for surviving spouses and children – a form of forced heirship – that can override the principal's intentions if no prior structuring is in place. A trust established under Hong Kong law, and administered from Hong Kong, is not automatically subject to those overrides. The 2013 reform to the Trustee Ordinance strengthened the position: Hong Kong law expressly protects a trust from foreign forced-heirship claims where the trust is governed by Hong Kong law. That protection is statutory, not discretionary.

The second pressure point is residence movement. A principal relocating from a CIS country to the United Arab Emirates, Cyprus, the United Kingdom, or Hong Kong itself will find that the tax and reporting treatment of offshore assets is jurisdiction-specific and almost always depends on the timing of the move relative to the trust's establishment. Acting after the new residence has crystallised is frequently more expensive than acting before.

The third is business transition. A family that controls an operating group through a BVI holdco or a Cayman Islands structure will eventually face the question of how that holdco passes between generations. Without a trust layer, the answer is determined by whichever succession law has the strongest claim on the principal's estate at the moment of death. That answer may not be the family's preferred one.

The fourth – and the most time-sensitive – is enforcement exposure. Where a principal or a family member is a party to commercial litigation or arbitration in a CIS jurisdiction, unprotected assets can become enforcement targets. A properly constituted trust, settled at arm's length and not for the purpose of defeating a then-existing claim, separates legal ownership of the trust assets from the personal estate of the settlor. That separation is the core protective mechanism. Its effectiveness depends on the timing and the structure – which is why the trigger, not the intention, is the starting point of our assessment.

What does the governing instrument actually provide?

The Trustee Ordinance (Cap. 29), as substantially reformed with effect from 1 December 2013, is the primary governing statute for trusts administered in Hong Kong. Several features matter specifically for CIS-connected families.

Hong Kong law abolished the rule against perpetuities and the rule against excessive accumulations for Hong Kong trusts through the 2013 reform. A trust can now run for as long as the family requires without a fixed perpetuity date. For a family managing multigenerational assets across the CIS and an offshore holding layer, this removes a structural constraint that exists in many competing jurisdictions.

The settlor may reserve certain powers without invalidating the trust. That is a statutory protection: the trust is not treated as a sham merely because the settlor retains investment direction, the power to add or remove beneficiaries, or the power to change the governing law. For a principal who is not ready to relinquish full control at the point of settlement – which is the normal position for a first-generation CIS entrepreneur – this flexibility is material.

The forced-heirship firewall means that Hong Kong courts will not apply the forced-heirship provisions of a foreign law to a Hong Kong trust, provided the relevant conditions are met. That directly addresses the succession exposure that drives most CIS families to structure in the first place.

Hong Kong has no forced-heirship regime of its own. There is no mandatory share for a surviving spouse or children under Hong Kong law. The principal's letter of wishes, the trust deed, and the class of beneficiaries together govern the beneficial outcomes, subject to the trustee's fiduciary duties.

How does the cross-border interface between Hong Kong and the CIS affect the structure?

The CIS is not a single legal system. It is a group of successor states to the Soviet Union, each with its own civil-law inheritance code, property law, and – in several cases – a foreign-ownership regime for specific asset classes. The interface between that environment and a Hong Kong common-law trust requires careful mapping before the trust deed is drafted.

Asset location is the first variable. Real property in a CIS jurisdiction is subject to the lex situs – the law of the place where the property is situated – for purposes of transfer, registration, and succession. A Hong Kong trust can hold shares in a CIS operating company or a BVI holdco sitting above CIS assets; it does not change the local law governing the underlying assets. What it does is control who holds those shares and on what terms. The distinction is between the trust layer and the asset layer. Both must be mapped.

The second variable is recognition. CIS jurisdictions generally operate civil-law systems. The concept of a trust – a common-law creation separating legal and beneficial ownership – does not have a direct equivalent in most civil-law codes. That does not make the structure unworkable, but it does mean that local advisers in the relevant CIS jurisdiction need to be engaged on the specific question of how the trust's ownership of shares or interests in a local entity will be treated for local-law purposes. In our cross-border practice, we coordinate that engagement: the Hong Kong trust counsel runs the trust layer; allied counsel admitted in the relevant CIS jurisdiction advises on the local-law treatment of the holding structure.

The third variable is reporting and transparency. Several CIS jurisdictions have introduced controlled foreign corporation rules, beneficial ownership disclosure requirements, or automatic exchange of information arrangements. A principal who is a tax resident of a CIS jurisdiction at the point of settlement needs to understand the reporting obligations that attach to the trust in that jurisdiction. Failure to report is not a planning strategy; it is an enforcement risk. We treat the reporting position as a structuring input, not an afterthought.

The fourth variable is the offshore layer. The standard architecture for a CIS family's international assets runs through a BVI or Cayman holding entity above the operating assets. The trust sits above the holdco. Hong Kong is the administration forum and the governing law jurisdiction. That three-layer structure – CIS asset / offshore holdco / Hong Kong trust – is well-tested in our cross-border practice. The interaction between the BVI Business Companies Act or the Cayman Islands Companies Act and the Trustee Ordinance is manageable, but the sequencing of the corporate and trust steps matters.

For families with UK assets or connections, the interaction between the Hong Kong trust and UK inheritance tax and trust-taxation rules adds a further dimension. We have written separately on the estate-planning position for assets in the United Kingdom, available at our UK estate-planning analysis. For families with BVI-incorporated holding entities, the guide to wills and estate plans covering BVI assets is available at our BVI estate-planning guide.

The full range of our private wealth work, covering succession, asset protection, and holding structures for cross-border families, is described at our private wealth practice page.

The route we run – step by step

The engagement follows a defined sequence. Each step has a decision point. The family's readiness to move through those decision points is the primary variable in the timeline.

Step one: the family and asset map. Before any document is drafted, we prepare a working map of the family's jurisdictional footprint. That covers: the principal's country or countries of tax residence; the location of each material asset class (operating businesses, real property, financial accounts, intellectual property); the existing corporate structure above those assets; and the family's intended beneficiary class across the generations. The map drives the structure. It also identifies the mandatory cross-border advisory inputs – which CIS local-law questions need allied counsel and which can be handled from the Hong Kong desk.

Step two: structure design. We model the holding options. The standard CIS family structure involves a BVI or Cayman holdco above the CIS operating assets and a Hong Kong discretionary trust above the holdco. We test whether that architecture works for the specific asset map, whether any amendments to the existing corporate layer are required before settlement, and whether the trust should be a discretionary trust, a fixed-interest trust, or a hybrid. The choice between those trust types is a family decision with tax and succession consequences; our role is to present the options in terms of those consequences, not to make the choice for the family.

Step three: locally licensed Hong Kong trust counsel joins. The drafting of the trust deed and the trustee appointment are matters of Hong Kong law. We work alongside locally licensed Hong Kong firms who hold the capacity to act as professional trustee or to prepare the deed in compliance with the Trustee Ordinance. Our role at this stage is to ensure that the international brief – the CIS asset picture, the forced-heirship analysis, the offshore holdco interaction – is fully reflected in the drafting instructions.

Step four: the document suite. The family's own documents are as important as the trust deed itself. The letter of wishes records the principal's intentions for the trustee in circumstances the deed cannot foresee. The memorandum of settlement records the terms on which the trust is established. Where a protector is appointed, the protector deed defines the scope of that role. We assist in preparing the letter of wishes and the memorandum as working documents that the family owns and can update over time.

Step five: CIS and offshore local-law steps. The transfer of shares in the BVI holdco (or the Cayman entity) to the trustee requires compliance with the relevant company law, the share transfer mechanics, and – where applicable – stamp duty analysis on the transfer. Transfer of Hong Kong stock carries ad valorem stamp duty of 0.2% in total; for shares in a non-Hong Kong company holding no Hong Kong-situated assets, the position is generally outside Hong Kong stamp duty, but must be verified on the specific facts. Allied counsel in the relevant CIS jurisdiction advises on any local-law notification, registration, or consent requirements triggered by the change in beneficial ownership above the CIS assets.

Step six: ongoing administration and review. A trust is not a one-time event. The family's circumstances change; the principal's residence may move; beneficiaries are born or reach majority; the asset mix evolves. We build a review schedule into the engagement from the outset and remain available as the international adviser for the life of the structure.

The documents and decisions the family must own

Many families delegate the trust structure entirely to their advisers and then find themselves unable to engage with the trustee at a critical moment. That is a governance failure, not a legal failure. Our engagement model is designed to prevent it.

The principal must understand – not merely sign – the trust deed's key provisions: the power of revocation (if any), the class of beneficiaries, the trustee's discretion, and the protector's role. Where the trust is irrevocable, the principal must understand that the assets are no longer legally theirs. That is the mechanism; it is also the risk if the structure is used incorrectly.

The letter of wishes is the principal's document, not the trustee's. It should be written with sufficient specificity to guide the trustee in non-standard situations – the business succession question, the beneficiary with particular needs, the asset that should not be distributed before a certain age – without being so prescriptive that it fetters the trustee's discretion. We work with the principal to strike that balance.

The beneficiary class definition is a decision the family makes once but lives with across generations. An overly narrow class creates rigidity; an overly wide class creates disputes. In the CIS context, where family structures are often complex and where the family's geographic footprint may shift between generations, the definition of the class and the mechanism for adding or removing beneficiaries warrants careful attention.

The protector appointment – if the family wants one – is a governance question as much as a legal one. The protector's role is to monitor the trustee and to exercise the negative powers (typically, the power to remove the trustee and appoint a replacement) in the interests of the family. A well-chosen protector, with a clear mandate and a documented succession within the protector role itself, is a material protection for a multigenerational structure.

What foreign principals commonly misunderstand about Hong Kong trusts

The most common misunderstanding is that a Hong Kong trust automatically protects assets from all claims in all jurisdictions. It does not. The trust's protective effect depends on the governing law of the trust, the proper establishment and administration of the structure, the timing of the settlement relative to any then-existing claims, and the treatment of the trust's ownership position under the local law of each asset jurisdiction.

A second misunderstanding is that the CIS civil-law environment makes a Hong Kong common-law trust unworkable. The two systems can operate together. The trust holds shares in an entity incorporated in a common-law jurisdiction; that entity holds the CIS assets. The civil-law jurisdiction engages at the asset level; the common-law framework governs the trust level. The mapping of that interface is a planning question with a workable answer, not a structural contradiction.

A third misunderstanding – one we see frequently in our cross-border practice – is that urgency is a reason to simplify. A structure established quickly without full mapping of the asset picture and the jurisdictional footprint frequently needs to be unwound or rebuilt within a few years at greater cost and complexity. The window is narrowing, but the structure still has to be right. That tension between speed and completeness is exactly where experienced cross-border counsel earns its position.

A micro-scenario illustrates the point. A Central Asian manufacturing principal relocated to the UAE in early 2025, with operating companies held through a BVI holdco and significant real property in Kazakhstan. His existing estate plan – a will drafted in his country of origin – had no provision for the offshore layer and contained no mechanism for managing the BVI shares across the generations. When his eldest child reached majority and entered the business, the succession question became urgent. We were engaged to map the jurisdictional footprint, coordinate with allied counsel on the Kazakhstan real-property question, and run the Hong Kong trust structure above the BVI holdco. The protector appointment and the letter of wishes were completed before the year end. The real-property succession question – a CIS local-law matter – was addressed through allied counsel in parallel.

A second scenario: a CIS-based technology entrepreneur with a Cypriot holding structure and financial assets in London sought to establish a family trust after receiving legal advice in a commercial dispute that his personal exposure was wider than he had assumed. The timing question – whether the trust could be established without creating a preference against the then-uncrystallised commercial claim – required careful analysis of both the applicable rules on transactions at an undervalue and the family's genuine succession motivation. We framed the structure around the established succession and asset-protection purpose; the commercial question was addressed through separate dispute counsel. The trust was settled on terms that reflected the family's long-term intentions rather than the immediate commercial pressure.

Decision matrix: situation, structure, route, and timing

The right structure for a CIS family depends on the family's specific position. A simplified decision matrix:

Where the principal is currently resident in a CIS jurisdiction with controlled foreign corporation rules, and the trust settlement will occur while that residence continues, the reporting obligations in the residence jurisdiction must be built into the structure from day one. The trust is not a reporting exemption; it is a succession and holding mechanism. Reporting obligations follow the principal's residence, not the trust's governing law.

Where the principal is actively relocating – moving residence from a CIS jurisdiction to the UAE, Cyprus, the United Kingdom, or Hong Kong – the timing of the trust settlement relative to the residency break is a tax-structuring input of the first importance. Acting before the new residence crystallises gives one set of options; acting after gives another. Neither is necessarily wrong, but they are different, and the choice must be deliberate.

Where the family already has a BVI or Cayman holdco above the CIS assets, the question is whether to add a trust layer above the existing structure or to restructure the holdco layer at the same time. The answer depends on whether the existing holdco has economic-substance compliance, whether shares in the holdco have been gifted or transferred in ways that affect the trust's ownership position, and whether any shareholder agreements or pledge arrangements sit on the holdco that would be affected by the transfer to the trustee.

Where the family has no existing offshore holding structure, the sequencing is typically: establish the offshore holdco first, ensure economic-substance compliance for the relevant offshore jurisdiction, then settle the trust above the holdco. The trust is the last piece in the structure, not the first.

Where forced heirship is the primary driver – a surviving spouse or child from a previous relationship who has a legitimate claim under the CIS jurisdiction's domestic law – the analysis requires an honest assessment of whether the trust can legitimately be established at the relevant point in time. A trust settled for the express purpose of defeating an existing or anticipated claim carries significant risk of being set aside. The planning window for an effective forced-heirship structure is before the claim arises, not after.

The sequence described above applies to the standard case. Where a family's map includes sanctions-sensitive jurisdictions, counterparties, or financial relationships, an additional layer of compliance and source-of-funds analysis is required before any cross-border structuring step. Lockhart & Yip's sanctions and AML practice supports that analysis in coordination with the private wealth work.

If a previous trust structure has produced an adverse outcome – a trustee dispute, a forced-heirship challenge in a CIS court, or a collapse of the holding structure above the trust – a second read can identify the structural error and the routes available to re-establish the arrangement on proper terms. We regularly advise on restructuring work of this kind. The position is rarely as fixed as a stalled matter appears.

For a structured assessment of your trust, succession and holding position across Hong Kong and the relevant CIS jurisdictions, write to us at info@lockhartyip.com.

Self-assessment: is your family's position ready for this step?

The following questions are the ones we ask at the start of every engagement. A negative answer to any of them does not mean the trust cannot be established; it means there is a preliminary step to address first.

Does the family have a current asset map that accounts for every jurisdiction in which assets are held, including indirect holdings through corporate entities? Without that map, the trust deed cannot be properly drafted and the local-law steps cannot be identified.

Is the principal's current and intended residence position clear, and has its interaction with the trust settlement been considered? A trust settled from the wrong residence position – at the wrong moment in a relocation – can produce unintended tax or reporting consequences in the new residence jurisdiction.

Does the family have an existing offshore corporate structure, and is it in economic-substance compliance in its jurisdiction of incorporation? A trust settled above a non-compliant holdco inherits that non-compliance as a structural risk.

Is there any current or anticipated litigation or regulatory investigation in any CIS jurisdiction that might create a risk that the trust settlement is characterised as a transaction at an undervalue or a fraudulent preference? If so, the timing and structure of the settlement require specific analysis before any documents are prepared.

Does the family have a clear view of the intended beneficiary class, the succession intention for the operating businesses, and the role – if any – of a protector? The trust structure reflects the family's governance decisions; those decisions must be made before the deed is drafted, not after.

To discuss how the private trust structure applies to your family's specific position across Hong Kong and the CIS, contact info@lockhartyip.com.

Related practices

• Holding Structures – structuring offshore and Hong Kong holding entities above cross-border operating assets
• Tax Positions – advising on residence, source and FSIE implications for international families and holding groups

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