Hong Kong is a popular destination for setting up trusts. Trusts can be used to achieve various purposes, including personal estate planning, intergenerational wealth transfer, asset protection and family business continuity. This article explains the definitions of common terms relating to trusts, and provides guidance on establishing a Hong Kong trust through FAQs and a step-by-step guide. If you’d like more information about setting up or managing a trust, please contact our Trusts & Estates lawyers.
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Table of Contents
Letters of Wishes in Discretionary Trusts
A letter of wishes enables a settlor to provide guidance to a trustee as to how the trustee will exercise its powers under the trust
Protector of a Trust
A protector of a trust may assist the settlor in retaining influence over the operation of a trust but may increase the risk of undermining the trust
Hong Kong’s New Capital Investment Entrant Scheme - A Boost for Family Offices, Open-Ended Fund Companies & Limited Partnership Funds
Details of Hong Kong’s new capital investment entrant scheme (CIES) unveiled to attract capital and high net worth individuals to boost economic growth.
Family Offices: Advantages of a Hong Kong Trust
Hong Kong is a global hub that allows families to centralize the administration of trust assets in a centre that does not discriminate based on nationality
SPOTLIGHT ON
FAMILY OFFICES
Table of Contents
What is a trust?
Generally, a trust is an arrangement for a person (settlor) to transfer assets (trust property) to another person (trustee) who holds them for the benefit of other persons (beneficiaries).
Hong Kong trusts are governed primarily by common law principles and the Trustee Ordinance (Cap. 29).
What are the common features of a trust?
- No legal personality: Unlike corporate structures, a trust is not a legal person. Matters involving a trust are generally pursued by the trustee on behalf of the trust.
- Tripartite relationship: At a minimum, a trust has a settlor, a trustee and a beneficiary.
- Trust deed and letter of wishes: The powers, rights, duties and obligations of the settlor, the trustee and the beneficiaries are governed by written instruments, such as a trust deed (also known as a deed of settlement). A letter of wishes (which is non-legally binding) is commonly used in discretionary trusts to guide the trustee on how to manage and distribute the trust assets.
- Separation of legal and beneficial ownership: Legal title of the trust assets is held by the trustee who has power and authority to manage and administer them. Subject to the specific terms of the trust, beneficial (or equitable) title of the trust assets is held by the beneficiaries who are entitled to receive them.
- Asset ring-fencing: Trust property is generally ring-fenced from the personal assets and creditors of the settlor and the trustee, unless in situations where a trust is deliberately set up for the purpose of defrauding creditors.
What constitutes a trust?
Under the common law doctrine established in the landmark English case Knight v Knight [1840] 49 ER 58, for a trust to be validly constituted, the “three certainties” must be satisfied:
- Certainty of intention: The settlor must demonstrate a clear intention to create a trust, as opposed to making an outright gift. For the purpose of creating a trust, it would not suffice to merely express a wish, a hope, a request or confidence that a person receiving the asset would deal with it in a certain way.
- Certainty of subject matter: The trust property (whether tangible or intangible) must be identifiable.
- Certainty of object: The beneficiaries (objects) must be identifiable. This enables the trustee to understand to whom the trustee owes fiduciary duties. It is possible to define a class of beneficiaries if it can be determined with certainty whether an individual is or is not a member of that class.
What roles do different persons play in a trust?
Settlor The person who creates the trust by transferring assets to the trustee to be held on trust for the beneficiaries | Powers / Rights
Duties / Obligations
|
Trustee The legal owner of the trust property who holds and administers it for the benefit of the beneficiaries | Powers / Rights
Duties / Obligations
|
Beneficiaries The persons for whose benefit the trust property is held. They can be the settlor’s family members (including persons to be born) | Powers / Rights
Duties / Obligations
|
Protector
| Powers / Rights Depending on the terms of the trust deed:
Duties / Obligations Depending on the terms of the trust deed:
|
What are the advantages of setting up a trust?
Setting up a trust provides a legal framework to protect wealth, govern intergenerational distributions, maintain privacy and ensure financial continuity.
To enable estate planning:
In the absence of a trust, when an individual dies, his executors (if he died testate, i.e. he has left a will) or administrators (if he died intestate, i.e. he has not left a will) will have to make applications to the Court for a grant of probate or a letter of administration to give them authority to administer the estate. This application process can be lengthy, costly and may become contentious (e.g. when two or more persons fight for the role).
With a trust, the settlor can pass ownership of the trust property to a trustee, so that the property will not form part of his estate upon his death and will not be subject to the probate process.
To preserve privacy:
In the absence of a trust, a will becomes public record once submitted to the Court during the probate process.
By contrast, a trust deed does not have to be submitted to the Court upon the settlor’s death and remains private and confidential.
To protect assets: When assets are transferred from the settlor into a trust, they no longer form part of the settlor’s personal assets. Therefore, unless excepted in certain situations, these assets will not be subject to enforcement action by adverse parties, such as a creditor seeking to enforce a claim against the settlor.
To enable controlled distributions and milestone payouts: A trust enables a settlor to provide for how, when and under what circumstances the beneficiaries might become entitled to the trust property, and if so, how much of the trust property they will receive. This avoids lump-sum payouts, or untimely or disproportional distributions of wealth to beneficiaries who may be too young or immature to receive them.
To allow for family business continuity: A trust can be used to retain ownership of a family business upon the settlor’s death. It can be used to prevent the family business from being liquidated or transferred to others, or from falling into the hands of individuals whom the settlor considers unsuitable.
What are the different types of trusts?
The table below sets out some examples of the different types of trusts:
Type | Features |
|---|---|
Fixed trust |
|
Discretionary trust |
|
Revocable trust |
|
Irrevocable trust |
|
What types of assets can be put into a trust?
Common assets which can constitute trust property include (without limitation):
Types | Examples | Examples of practical considerations |
|---|---|---|
Cash and bank deposits | Cash and bank savings in any currencies, time deposits |
|
Real estate | Residential, commercial or industrial property |
|
Securities | Listed shares, bonds, unit trusts, mutual funds, investment portfolios |
|
Insurance policies | Life insurance policies |
|
Business interests | Shares in private companies, interests in a partnership |
|
Personal chattels | Jewellery, art and antiquities, vehicles, private jets, yachts, precious metals |
|
What is the minimum value of assets which the settlor must transfer into a trust?
There is no minimum value of assets required for establishing a trust.
A trust can be established by the settlor transferring and delivering to the trustee an initial nominal value (e.g. a small sum). Subsequently, the settlor can transfer to the trustee additional assets to constitute the trust property, e.g. money, investments or other property from time to time.
What power can the settlor retain over the trust property?
It is common for a settlor to reserve power to manage investment portfolios, i.e. the trustee will have no responsibility for any investment or asset management functions in respect of those portfolios.
A settlor may appoint an investment committee which may consist of professionals from regulated asset management firms.
What distributions can beneficiaries receive under a trust?
The table below sets out some examples of distributions:
Types | Examples |
|---|---|
Income | Dividends from listed stocks or shares of private companies, coupons from bonds, rental income from real estate property, interest on cash deposits |
Capital | Cash and bank deposits, proceeds from liquidating investment portfolios, sale of shares or real estate property |
Distribution in specie | The transfer of legal title of an asset to a beneficiary, e.g. a title deed, a share certificate, possession of chattels |
Maintenance | The trustee may have power to apply trust income for the ongoing healthcare, education and daily support of a beneficiary. This is common when the beneficiary is a minor |
Advancement | The trustee may have power to apply trust capital early for a beneficiary’s benefit |
Who can be a trustee?
In principle, any legal person, whether an individual or a corporation, possessing the legal capacity to hold title to trust assets and administer them can be appointed as a trustee.
In practice, settlors often engage the services of professional trustees who are licensed trust or company service providers (“TCSP”). In Hong Kong, a person carrying on a trust or company service business must have a TCSP licence, as provided for by section 53F of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615).
Can the settlor set up his own private trust company to be the trustee?
Yes, it is possible to incorporate a private trust company (“PTC”) to act as a captive trustee, especially for a family trust.
What are the key steps in establishing a trust in Hong Kong?
Define the objectives: The first step is to understand the objectives which the settlor seeks to achieve (e.g. intergenerational wealth transfer, preserving family business legacy, shielding assets from adversaries etc.). This involves weighing what matters to the settlor more, e.g. asset protection or flexibility to alter the trust terms from time to time?
Design the trust structure: Depending on the nature of the trust assets, the next step is to consider how those assets should be held, e.g. is there a need to incorporate holdings companies (whether onshore or offshore) for the purpose of holding specific types of assets?
Appoint a trustee and/or protector: Depending on the size of the trust assets and the complexity of management and administration, the settlor can consider appointing an institutional trustee, a professional trustee or to set up his own PTC.
Prepare documents: To ensure validity and enforceability, professional assistance should be sought when preparing trust documentation (e.g. trust deed, letter of wishes, deed of appointment of protector etc.). The settlor will often benefit from input and advice from professional trust practitioners who are able to identify potential areas of challenge in advance and provide solutions to resolve them.
Transfer assets into the trust: Professional assistance should be sought to ensure that property is validly transferred from the settlor to the trustee. This also ensures compliance with applicable requirements, e.g. payment of stamp duty or reliance on eligible exemptions.
Review wishes from time to time: In the context of a discretionary trust, after the trust is set up, the settlor may consider reviewing his wishes from time to time, and where appropriate, update the letter of wishes to ensure that the contents are responsive to the actual needs of the beneficiaries.
What is the cost of setting up and maintaining a trust?
The costs of setting up and maintaining a trust vary, depending on the trust structure, the complexity in managing and administering the trust assets, the extent of powers to be exercised by the trustee, the frequency of distributions to beneficiaries etc.
A general breakdown includes:
one-time cost of preparing the trust documentation
one-time cost of setting up holding vehicles for holding trust assets
annual cost of service providers (e.g. professional trustees, investment professionals, company secretaries)
annual cost of maintenance (e.g. costs of preparing and submitting annual filings)
Published: October 14, 2026
Last reviewed: October 14, 2026
