A private trust for a family with assets in the UAE

A family with significant assets in the United Arab Emirates faces a structuring question that most advisers in the region handle only partially: how does a private trust – governed by a law that offers real asset-protection depth – interact with UAE succession rules, residence, and the enforcement of foreign orders in an emirate that operates across two legal systems simultaneously? The commercial stakes are not abstract. Without a structure that has been tested against the laws that actually apply to the family's assets, a trust document is, at best, an incomplete answer.

A private trust for a family with assets in the UAE requires coordination across at least three legal systems – the law governing the trust, UAE federal and emirate-level law, and the law of any intermediate holding jurisdiction. Hong Kong, whose Trustee Ordinance (Cap. 29) was substantially reformed with effect from 1 December 2013, offers a mature trust statute with abolished perpetuity rules, statutory protection for settlor-reserved powers, and an express firewall against foreign forced-heirship claims. The governing instrument, selected jurisdiction, and the family's asset map must be aligned before any document is signed.

This note describes how we approach that alignment: the trigger, the route, the cross-border interface, and the documents and decisions the client must own throughout.

When does a UAE-connected family need a private trust, and what brings the question to a head?

The trigger is rarely abstract planning. In our private wealth practice, the question arrives at a specific moment: a death in the family with no estate plan, a change in the family's residence profile, a liquidity event attached to a UAE real-estate portfolio, or the arrival of a new generation with a different citizenship map. Each of these creates a window – and a risk if the window closes without a structure in place.

UAE-connected families typically hold assets across several categories that do not travel the same legal road. Real property in Dubai or Abu Dhabi is subject to local succession rules that differ from the family's home-country law. Moveable assets – financial accounts, fund interests, shares in offshore holding entities – travel with the governing law of the instrument holding them. A family that has not mapped those categories against the relevant succession rules is almost certainly exposed.

The UAE is not a single legal environment. Federal civil law applies across the country, but the Dubai International Financial Centre and the Abu Dhabi Global Market operate as common-law jurisdictions with their own courts, their own trust statutes, and their own wills registries. A family with assets in a DIFC structure and also in a mainland Dubai property portfolio is already inside two parallel regimes. Adding a settlor in a third jurisdiction – Hong Kong, the United Kingdom, a CIS country – introduces a third layer.

The structural complexity trigger activates when the family recognises that no single adviser in any one of those jurisdictions can give a complete answer. That is precisely where international counsel with a cross-border remit adds traction.

The governing legal environment: Hong Kong and the UAE in parallel

Hong Kong trust law, as reformed by the Trustee Ordinance, provides a clear statutory base for a private trust designed to hold international assets. The 2013 reform abolished the rule against perpetuities and the rule against excessive accumulations for Hong Kong-law trusts, removing a timing constraint that had limited trust planning in earlier decades. It also introduced statutory protection for a settlor who reserves certain powers – a provision that matters greatly to a founder or patriarch who is not ready to relinquish control of the asset base entirely.

The firewall provision is the element most directly relevant to a UAE-connected family. Hong Kong law expressly protects a trust governed by Hong Kong law from foreign forced-heirship claims. Forced heirship (a legal rule, common in civil-law and Sharia-influenced systems, that mandates specified shares of an estate to particular relatives) is a real exposure for families whose members hold citizenship or habitual residence in jurisdictions that apply such rules. The UAE federal personal-status law applies a Sharia-based inheritance regime to Muslim nationals; non-Muslim residents of the UAE may register wills in the DIFC or ADGM to opt into a different regime. A properly constructed Hong Kong-law trust, holding assets through appropriate intermediate vehicles, can provide a structural answer to that exposure – though the interaction with UAE-situated real property requires careful, jurisdiction-specific analysis.

Hong Kong has no forced-heirship regime of its own. It has no capital gains tax, no withholding tax on dividends or interest, and it imposes profits tax only on Hong Kong-sourced income. These are not the primary reasons for choosing Hong Kong as the trust's governing law, but they are consistent with the wider structuring rationale.

The DIFC and ADGM trust frameworks are common-law instruments and offer their own estate-planning tools. They are not in competition with a Hong Kong-law trust; they frequently serve different functions within the same family's structure – the DIFC Wills Service covering UAE-situated immoveable assets, a Hong Kong-law trust holding the offshore and financial asset base. Our desk works with both layers, coordinating with locally licensed UAE counsel on the in-country elements.

For a preliminary read on how the Hong Kong trust framework interacts with your family's cross-border asset map, write to us at info@lockhartyip.com.

How does the cross-border element affect the trust's design and operation?

The cross-border element affects every material decision: the choice of governing law, the trustee's seat, the protector's role, the holding structure beneath the trust, and the approach to succession documents in each relevant jurisdiction. A trust that is structurally sound under Hong Kong law but has not been pressure-tested against UAE succession rules and UAE enforcement practice is not a complete structure.

Consider a concrete pattern our desk encounters regularly. A founding family has built a UAE real-estate portfolio over two decades. The portfolio is held partly in their personal names and partly through a UAE free-zone entity. The family also holds financial assets in accounts outside the UAE and interests in an offshore holding company. The founding generation is approaching a succession moment; the next generation holds different citizenships and is resident in multiple countries.

What happens on the death of the founder without a structure? The UAE-situated real property descends under the applicable succession law – which, for a Muslim national, means Sharia inheritance shares. The free-zone entity shares may be subject to a different rule. The offshore holding company descends under the law of its incorporation and the terms of any shareholders' agreement. The financial accounts are each governed by the institution's own terms and the law of the account jurisdiction. Four parallel processes, each requiring separate probate or succession steps, each capable of producing a different outcome for different beneficiaries.

A well-designed private trust addresses the moveable and financial asset layers. The UAE-situated immoveable property is handled through a combination of DIFC or ADGM wills registration (for non-Muslims) or through advice that explicitly addresses the Sharia framework (for Muslim families), coordinated with the trust structure so that the overall succession plan is coherent.

Enforcement is a separate question. A trust deed is not self-enforcing. If a beneficiary or a creditor challenges the trust in a UAE court, the recognition of a Hong Kong-law trust and the application of Hong Kong's firewall provisions will depend on UAE private international law – a field that is still developing, particularly in the onshore UAE courts. The DIFC and ADGM courts, operating on common-law principles, are generally more receptive to recognising common-law trust structures. This difference in forum is a structural design input, not an afterthought.

Our cross-border practice coordinates the Hong Kong and UAE layers, working alongside locally licensed counsel in the UAE. The goal is a structure that holds under the laws that actually apply in each jurisdiction where the family's assets sit – not a structure that holds only on paper.

The route we run, step by step

Every engagement begins with an asset and family map. Before a single document is drafted, we need to understand the full picture: where the assets sit, how they are currently held, where each family member is resident and domiciled, what citizenships are in play, and what the family's objectives are for succession, asset protection, and control during the settlor's lifetime.

That mapping exercise surfaces the conflicts. In a UAE-connected family, the conflicts most commonly involve the interaction between UAE succession law and the family's intended distribution plan, the holding structure for UAE real property, and the residence profile of the next generation. We document those conflicts explicitly, because they are the design inputs for the trust and the ancillary documents.

Step one is structure selection. We model the options: a Hong Kong-law discretionary trust, a purpose trust, a trust with a protector, a trust combined with a family investment vehicle beneath it. The choice depends on the family's control preferences, the asset composition, and the tax position of the relevant family members. We do not start with a preferred structure and fit the family into it.

Step two is holding structure design. In most UAE-connected mandates, the trust does not hold UAE-situated real property directly. The property sits in a UAE entity or remains in individual names, with the succession for that property managed through separate instruments – DIFC or ADGM wills, for instance, or through Sharia-compliant succession planning where applicable. The trust holds the offshore and financial asset base, including interests in any intermediate holding entity.

Intermediate holding entities frequently sit in the BVI or the Cayman Islands. Both are common-law jurisdictions with well-tested company statutes and economic-substance regimes that must be satisfied. We advise on the holding structure and coordinate with locally licensed counsel in those jurisdictions for the entity-level work.

Step three is document preparation. The core trust deed is the primary instrument. It must address the governing law, the trustee's powers and duties, the class of beneficiaries, the distribution mechanism, the protector's role and veto rights, the trustee's removal and replacement mechanism, and the governing-law clause with a proper choice-of-court or dispute-resolution provision. Ancillary documents typically include a letter of wishes, a memorandum of guidance, and – where relevant – a family investment policy statement.

Locally licensed Hong Kong firms join the engagement at the trust deed stage. Lockhart & Yip advises on international and foreign law; the execution of a Hong Kong-law trust deed is carried out by Hong Kong-admitted solicitors, with whom we work closely. This is not a gap in our service – it is how cross-border practice is done correctly.

Step four is implementation. The trust is settled, the assets are transferred into the structure, the holding entities are established or re-aligned, and the relevant succession documents in the UAE (wills, registration with the DIFC or ADGM wills service) are executed in parallel. The succession plan is only complete when all the layers are in place.

Step five is ongoing governance. A trust is not a one-time exercise. Trustee reports, distribution records, protector consents, and periodic reviews of the family's residence and asset position are the ongoing work. Changes in a family member's residence or citizenship can affect the tax and succession implications of the trust; changes in the UAE legal environment – which has been active in recent years – can affect the in-country layer. We maintain an advisory role through the life of the structure.

If you have already made a first attempt at a structure and are finding that it does not hold under the laws of one or more of the relevant jurisdictions, a second-read engagement can identify the gaps and the routes still open. Write to us at info@lockhartyip.com.

The documents and decisions the client must own

A private trust is not a product delivered to a passive client. The settlor and the family must make a series of decisions that only they can make – and they must own those decisions, in writing, for the structure to be defensible.

The first decision is the class of beneficiaries. A discretionary trust gives the trustee the power to allocate among a defined class; the settlor's letter of wishes guides that discretion without binding the trustee. The family must define the class clearly, including whether future spouses, adopted children, or remoter descendants are included. In a UAE context, where Sharia inheritance rules apply to some family members and not others, this definition carries particular weight.

The second decision is the protector's identity and role. A protector – an individual or a body appointed under the trust deed with specific consent or veto powers – is a common feature of modern discretionary trusts designed for high-net-worth families. The protector can require trustee consent for major distributions, trustee changes, or changes to the governing law of the trust. Choosing the right protector, and defining the protector's powers precisely, is a decision the family must make with full information about the implications.

The third decision concerns the treatment of UAE-situated assets. The family must decide – with advice from locally licensed UAE counsel – how the UAE real property and any UAE-entity interests will be handled: whether through DIFC or ADGM wills, through Sharia-compliant succession instruments, or through a separate UAE-resident family structure. The international trust and the UAE instruments must be consistent; inconsistency between them is the most common source of structural failure in cross-border estate plans for UAE-connected families.

The fourth decision is disclosure. A private trust involves a degree of asset disclosure to the trustee and, in some circumstances, to regulatory bodies in the relevant jurisdictions. Anti-money laundering requirements apply to trustees in Hong Kong and in the offshore centres. The family must be prepared to provide source-of-funds documentation and to maintain ongoing compliance records. This is not optional; it is a condition of the structure's legal validity and the trustee's willingness to act.

The fifth decision concerns the succession plan for the structure itself. What happens to the trust if the protector dies? Who replaces the trustee? What is the mechanism for winding up the trust and distributing the assets to the beneficiaries? These are governance questions that must be answered in the trust deed, not left to be resolved at a later date.

What foreign principals often underestimate is the ongoing nature of these decisions. A trust deed signed in year one is not a finished document; it is the starting point for a governance relationship that will run for decades. The family's circumstances will change, the legal environment in both Hong Kong and the UAE will evolve, and the structure must be reviewed regularly to remain effective.

What foreign counsel and advisers in the UAE typically miss

The most common error we see in cross-border trust mandates for UAE-connected families is a structure that has been designed entirely within one jurisdiction's frame of reference. A trust deed drafted by local UAE counsel, governed by DIFC law, and administered by a DIFC trustee may be entirely well-crafted within its own system – but it may not address the family's succession position in a third jurisdiction where a family member is resident, and it may not hold assets efficiently in relation to the family's broader international structure.

Equally, a Hong Kong-law trust drafted without reference to the UAE succession environment may protect assets held outside the UAE very effectively while leaving UAE-situated property entirely exposed. The two instruments must be read as a system.

A second error is failing to account for the residence and domicile profile of the settlor at the date of settlement. In many civil-law jurisdictions – and in some aspects of Sharia-influenced succession law – the settlor's domicile at the date of settlement is a factor in determining whether the trust is recognised and whether forced-heirship rules can reach through the structure. A settlor who is domiciled in a forced-heirship jurisdiction at the date of settlement may face a claim that a settlor with a different domicile at the same date would not. This is a factual and legal determination that must be made before the trust is settled, not after.

A third error is treating the trust as a purely private instrument, without regard to the regulatory environment in each relevant jurisdiction. Anti-money laundering requirements, beneficial-ownership registers, economic-substance rules in the offshore jurisdictions – these are compliance obligations that affect the trust's operation and, if unmet, can affect the structure's legal standing. Our desk incorporates compliance analysis as a standard element of every private trust mandate.

The decision framework: matching situation to structure

Not every UAE-connected family needs the same structure. The right choice depends on a combination of factors that must be assessed together.

Where the family's principal concern is succession clarity and the prevention of forced-heirship claims from a jurisdiction of origin, a Hong Kong-law discretionary trust with a firewall provision, holding the financial and offshore asset base, combined with jurisdiction-specific succession instruments for UAE-situated property, is typically the starting point. The protector mechanism adds a layer of family oversight without compromising the trust's legal integrity.

Where control during the settlor's lifetime is the primary concern – and this is common in first-generation founder families – a trust with extensive settlor-reserved powers, using the statutory protection available under the Trustee Ordinance, preserves the founder's management role while establishing the succession structure in parallel. The reserved-powers regime under the 2013 reform is a material advantage over some older trust jurisdictions.

Where the family has a complex multi-jurisdictional residence profile – family members in the UAE, in a European country, and in a CIS jurisdiction, for instance – the trust must be pressure-tested against the tax and succession rules in each of those jurisdictions before it is settled. A trust that is efficient from a Hong Kong perspective may have unintended consequences in a jurisdiction that taxes trusts as transparent vehicles or that attributes trust assets to a beneficiary for estate-tax purposes. This requires international tax analysis, coordinated with our Tax Positions practice and with locally licensed advisers in the relevant jurisdictions.

Where the family's primary concern is enforcement – specifically, the ability to enforce trustee obligations or beneficiary rights through a reliable court system – the choice of governing law and the choice of dispute-resolution mechanism in the trust deed are structural decisions. Hong Kong's Court of First Instance and Court of Appeal have a well-developed trust jurisprudence under common law. The DIFC and ADGM courts offer comparable quality within the UAE. A trust deed that specifies Hong Kong courts for trust disputes, held by a Hong Kong-resident trustee, gives the beneficiaries a clear enforcement path through a well-functioning common-law system.

Self-assessment: is your current structure holding?

A family that already has a trust structure in place should ask several direct questions about its current effectiveness.

Does the trust's governing-law clause specify a jurisdiction whose trust statute actually provides the protections the family intends? A trust governed by the law of a jurisdiction that does not have statutory forced-heirship protection may not deliver the protection the family believes it has.

Has the trust been reviewed since any family member's residence or citizenship changed? A change in residence can alter the tax treatment of the trust, the recognition of the trust in the family member's new jurisdiction, and the succession analysis for assets held in that jurisdiction.

Are the UAE-situated assets – particularly real property – covered by a succession instrument that is consistent with the trust's terms? If the UAE assets are not covered, or if the coverage document is inconsistent with the trust deed, the succession plan has a gap.

Is the trustee meeting its ongoing compliance obligations in the jurisdiction where it is resident? Anti-money laundering and beneficial-ownership requirements are active obligations, not one-time checks. A trustee that has not maintained the required records or filed the required registrations may have placed the structure's validity at risk.

Is the protector still the right person, and is that person still willing and able to act? A protector who is incapacitated, deceased, or unwilling to act – and for whom no replacement mechanism is specified in the trust deed – creates a governance problem that can paralyse the trust's operation.

If the answer to any of these questions raises a concern, the structure warrants a review before a succession event forces the issue. To map the options for your private trust structure through Hong Kong and the relevant offshore centres, reach us at info@lockhartyip.com.

Related practices

• Private Wealth – succession, asset protection, and trust structures for international families
• Tax Positions – cross-border tax analysis for trust structures and holding arrangements
• Holding Structures – offshore and Hong Kong holding entity design for international asset bases

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