In other words, a trust comes into effect when settlor or the original owner of the trust transfers his assets to trustor for the use of beneficiary. A trust is usually created as an instrument in writing, which should state matters like object of the transfer of the asset, subject, and duties and responsibilities that should be executed by trustee for beneficiary.



Settlement of trusts is done for a myriad of purposes such as protection against high taxation and economic instability, confidential purposes, to organize collective investments, to protect assets, and management planning. In addition, a trust is also created when assets cannot be held personally.

The Trust settlement law in Hong Kong is primarily modeled on the basis of the principles of the English Trustee Act 1925, and is included in the provisions of the Trustee Ordinance (Chapter 29.)

Among the key points regarding Trust Law in Hong Kong are:

-All types of trusts including fixed and discretionary trust can be established in Hong Kong. Discretionary trust is primarily established for the purpose of deriving benefit of owning a company's shares. A fixed trust is also established to derive benefits in connection with share ownership.

-Regarding taxation of trusts: only trading ones are taxable. Further, beneficiaries and settlors are not taxable

-Trusts such as fixed trust and discretionary trust can be used for international tax planning purposes

-Trusts are also used for the purpose of asset protection, i.e., an asset transferred to trust no longer forms part of the settlor's property. But, the transfer would be voidable, in case, if it is done to defeat creditors

-With effect from 11 February 2006, not any estate duty is levied on foreign assets

-Above all, the Trust Law in Hong Kong does not allow forced heirship. In case, if a person passes away leaving a will, then the executor distributes properties mentioned in it according to the will. However, the will is executed on the receipt of probate. In such a situation if a person dies without leaving a will, then all assets, both movable and immovable, are distributed as per the Intestates' Estate Ordinance

Further, when an asset is transferred, the person acting as trustee or protector is required to discharge certain duties, such as,

-A trustee holds the fiduciary responsibility as well as liability to handle the trust assets

-When assets are transferred to trustee, he becomes liable to prospective beneficiaries, claimants, and third parties

-In case, if a trustee incur a liability that go in excess of the property that has been transferred to him, then he is personally liable for that excess

-Trustee is paid for the duties executed as well as trouble in accordance with the trust agreement

-Trustees are usually considered prudent person with regard to meeting their fiduciary responsibilities, no matter it is any area of profession such as investment, finance, and legal

In Hong Kong, there are a large number of firms, providing superb services with regard to settlement of trusts, such as, payment of government rates and property tax, arrangement for repairs on behalf of the property owner, and rental collection. Further, on behalf of the property owners, these firms render services including preparing advertisements for letting, showing rental property to prospective clients, negotiation of rental rates, and making arrangement for tenancy agreements.

Superb services are also made available in connection with purchase and sale of property, like, dealing with documentation procedures on behalf of owners for completing the sale or purchase processes. Estate administration is also an area of specialization.

However, the quality of all these services depends on the professionalism and expertise of a firm as well as its staff. Hence, a thorough investigation must be done to find the most competent law firm or consultant to carry out your trust-related activities. With the introduction of the internet, a competent service provider can be easily searched online.