Hong Kong: the best location in which to establish a family trust

As an adviser in the trust industry, among the most frequently asked questions I get are “What is the best location in which to establish my family trust?” and “Is Hong Kong a safe place in which to establish my trust?”, writes Alan Fong, Sovereign Trust Managing Director – Asia.

I am obviously biased and, naturally, my answer to the first question is “Hong Kong” and to the second is “Of course”. But don’t get me wrong, my answers are not blindly based on my emotional and commercial attachments to Hong Kong; they simply reflect my confidence in the strengths of Hong Kong as a trust jurisdiction.

The initial enactment of Hong Kong’s trust law dates back to 1934, when the Trustee Ordinance (Cap. 29) was first introduced. This legislation was modelled closely on English trust law, reflecting Hong Kong’s then status as a British colony, and it laid the foundations of the legal framework governing trustees, their powers, duties, and the administration of trusts.

In 2013, there was a timely overhaul. The Trust Law (Amendment) Ordinance modernised trustee powers and introduced a statutory duty of care for trustees, as well as allowing settlors to reserve investment powers for themselves without invalidating the trust. This provides settlors of a Hong Kong trust with a high degree of control over how trust assets are invested, ensuring that their investments can align with their financial objectives.

Importantly, it also abolished the rule against perpetuity, which previously required trusts in Hong Kong to last for no more than 80 years, and introduced forced heirship protections. This makes Hong Kong an attractive location for estate planning, as settlors can place assets into a Hong Kong trust and be assured those assets will be managed according to the trust’s terms rather than according to forced heirship rules.

These changes highlight the evolving nature of trust legislation in Hong Kong. It is aligned with modern estate and legacy planning needs and the amendments served to reinvigorate Hong Kong as a highly competitive global trust jurisdiction and to enhance its status as an international asset management centre.

Hong Kong, which is a Special Administrative Region of the People’s Republic of China (sharing a similar status to Macau), operates under the principle of “One Country, Two Systems”. This means that Hong Kong continues to operate under common law and the Hong Kong courts continue to apply English case law in trust matters.

This ensures a high level of confidence in the legal framework and the effective protection of assets. English is also the business and legal language of Hong Kong and is used alongside Chinese for doing business within the Chinese-speaking countries of the Asian region. English is the language used in commercial contracts.

Further, as part of the wider Greater Bay Area project, the Qianhai Shenzhen-Hong Kong Modern Service Industry Co-operation Zone is designed to integrate Hong Kong’s legal, financial and economic systems with Shenzhen’s mainland framework, fostering a unique cross-border collaborative environment.

Hong Kong’s strong, legal framework has been a major contributing factor in enabling Hong Kong to reclaim its title as Asia’s top international finance centre (and third globally behind New York and London). Another, is the strength of its financial services ‘eco-system’, which offers an exceptionally deep pool of professionals with expertise in legal, fiduciary and wealth management services.

This means that Hong Kong isn’t just a trust jurisdiction; it’s a strategic platform for legacy planning, asset managment and global wealth mobility. It has a robust regulatory framework that is aligned with global standards and can be used by families, regardless of their nationality or place of residency, as the ideal location for establishing a trust.