Trust Deed Setup
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Hong Kong Trust Setup Guide
Establishing a trust in Hong Kong is a premier strategy for high-net-worth individuals (HNWIs) seeking a stable, common-law environment for asset protection and succession planning. Following the 2013 amendments to the Trustee Ordinance (Cap. 29), Hong Kong has emerged as one of the few jurisdictions allowing perpetual trusts, making it a top choice for multi-generational wealth preservation.
This guide outlines the essential steps, legal requirements, and strategic benefits for setting up a trust deed in Hong Kong in 2026.
1. Why Setup a Trust Deed in Hong Kong?
A Hong Kong trust offers a "firewall" of legal protections and tax efficiencies that are highly competitive with Singapore and the BVI.
Asset Protection: Shields assets from future creditors, provided the transfer is not intended to defraud (subject to the "Statute of Elizabeth" principles).
Tax Neutrality: No capital gains tax, no gift tax, no estate duty, and no dividend tax on offshore-sourced income.
No Rule Against Perpetuities: Unlike many jurisdictions, Hong Kong trusts can exist indefinitely (perpetual duration), which is vital for dynasty planning.
Confidentiality: Trust deeds are private documents; there is no public registry for private trusts in Hong Kong.
Reserved Powers: Settlors can legally retain powers to manage and invest assets without invalidating the trust structure.
2. Core Legal Requirements
To create a valid trust in Hong Kong, you must satisfy the "Three Certainties":
Certainty of Intention: The settlor must clearly demonstrate the intent to create a trust.
Certainty of Subject Matter: The assets being placed into the trust (the "corpus") must be clearly identifiable.
Certainty of Objects: The beneficiaries must be clearly defined or ascertainable.
Key Participants
Settlor: The individual or entity transferring the assets.
Trustee: The legal owner/manager. In 2026, many families use a Private Trust Company (PTC) to maintain greater control.
Beneficiaries: The parties who will benefit from the trust assets.
Protector (Optional): A third party appointed to oversee the trustee and exercise veto powers over major decisions.
3. Step-by-Step Setup Process
Setting up a trust deed typically takes between 1 to 4 weeks, depending on the complexity of the asset transfers.
Step | Action | Description |
1 | Define Objectives | Determine if the trust is for succession, asset protection, or charitable purposes. |
2 | Structure Choice | Choose between a Discretionary Trust (flexible) or a Fixed Trust (defined interests). |
3 | Draft Trust Deed | Legal drafting of the governing document including trustee powers and distribution rules. |
4 | Execute Deed | The settlor and trustee sign the document; stamp duty may apply if HK immovable property is involved. |
5 | Asset Settlement | Transfer legal title of assets (shares, property, cash) from the settlor to the trustee. |
4. Cost Breakdown (2026)
While costs vary by provider, a standard setup in Hong Kong follows this general range:
Legal & Professional Fees: $5,000 – $15,000 USD (depends on complexity).
PTC Incorporation (if applicable): ~$2,000 USD (including gov fees).
Annual Maintenance: $3,000 – $8,000 USD for professional trustee or corporate secretarial services.
Registration Fees: Private trusts generally have zero registration fees as they are not filed with the government.
5. Frequently Asked Questions
Is a Hong Kong trust public record? No. Unlike a company, a private trust deed is a private contract. There is no requirement to register the trust with the Hong Kong Companies Registry or the Inland Revenue Department (unless the trust earns taxable HK-sourced income).
Can I manage the investments myself? Yes. Under the reserved power provisions, a settlor can retain the power to make investment decisions without the trust being labeled a "sham."
What assets can I put in a Hong Kong trust? Global assets including real estate, intellectual property, cryptocurrency, and shares in both HK and offshore companies (e.g., BVI or Cayman entities).
Checklist of Documents you'll Need to provide to a Hong Kong trustee to begin the Onboarding process
To establish a trust in Hong Kong, trustees (whether professional or private trust companies) must adhere to strict Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
In 2026, the documentation requirements have become more streamlined yet thorough, focusing on the verification of identity and the "Source of Wealth."
Onboarding Checklist: Required Documents
1. Verification of Individuals
This applies to the Settlor, Protector, and all Named Beneficiaries (or anyone with a vested interest of 10% or more).
Proof of Identity: A certified true copy of a valid Passport or Hong Kong Identity Card (HKID).
Proof of Address: Original or certified utility bills, bank statements, or government letters issued within the last 3 months.
Nationality Proof: For non-HK residents, a second form of government-issued ID may be required if the passport does not list a current address.
2. Proof of Wealth & Funds (The "Tax Compliance" Pillar)
Trustees are legally required to verify how the assets were originally generated.
Source of Wealth (SoW): Evidence of the settlor’s cumulative wealth (e.g., audited financial statements of a family business, inheritance documents, or sale of property/shares records).
Source of Funds (SoF): Documentation specifically for the assets being transferred into the trust (e.g., bank statements showing the specific sum, or a share transfer form).
3. Trust Entity Documents
If you are using a Private Trust Company (PTC) structure:
Certificate of Incorporation and Business Registration Certificate.
Articles of Association (with restricted "trustee-only" objects).
Register of Members & Directors (certified).
Certificate of Incumbency (if the PTC is offshore, issued within the last 6 months).
4. Governing Documents
Final Trust Deed: The executed legal contract.
Letter of Wishes: A non-binding but essential document guiding the trustee on how to exercise their discretion.
Asset Schedule: A clear list of initial assets (cash, property, IP, etc.) being settled.
Certification Standards
In Hong Kong, "Certified True Copies" must typically be signed by a qualified professional, such as:
A Justice of the Peace.
A lawyer or notary public.
A Certified Public Accountant (CPA).
A chartered secretary or a director of a licensed TCSP.
Pro Tip: If your assets are held in multiple jurisdictions, ensure your "Proof of Address" is in English or accompanied by a certified translation. Hong Kong trustees will reject documents in non-English/non-Chinese scripts without official translations.
Sample "Letter of Wishes" template to show You How to provide Guidance to your Trustee
A Letter of Wishes (LoW) is a confidential document that sits alongside the Trust Deed. While the Deed is the "legal rulebook," the Letter of Wishes is your personal voice, guiding the Trustee on how you want the family wealth managed and distributed.
In Hong Kong, the LoW is non-binding (to ensure the trust isn't viewed as a "sham"), but professional trustees almost always follow it unless it contradicts the law or the best interests of the beneficiaries.
Sample Letter of Wishes Template (Hong Kong)
To: [Name of Trustee / Private Trust Company]
Date: [Date]
Trust Name: [Name of the Trust, e.g., The Smith Family Heritage Trust]
Re: Guidance on the Exercise of Trustee Discretion
Dear Directors,
This letter is written to provide you with guidance as to my wishes regarding the administration of the above-mentioned Trust during my lifetime and after my death. I understand that this letter is not legally binding but represents my current desires for the Trust Fund.
1. Primary Objective
The primary purpose of this Trust is to provide for the long-term education, health, and maintenance of my children and their descendants, while preserving the core capital for at least three generations.
2. During My Lifetime
During my lifetime, I wish for the Trustee to consult with me regarding all major distributions. I would like the Trust to provide:
Funds for my personal medical expenses and general maintenance should my own resources be insufficient.
Support for any charitable causes I may designate from time to time.
3. Distribution Guidelines for Children
Upon my death, I wish for the following guidelines to be observed for my children, [Name] and [Name]:
Education: Full funding for undergraduate and postgraduate studies at reputable international universities, including reasonable living expenses.
Life Milestones: A one-time "start-up" distribution (e.g., $100,000 USD) should a child wish to start a legitimate business, subject to a viable business plan reviewed by the Protector.
Property: Assistance with a down payment for a primary residence in Hong Kong or [Other Country].
4. Investment Philosophy
I wish for the Trust assets to be managed with a [Moderate/Conservative] risk profile. I have a preference for [e.g., Blue-chip equities, Hong Kong real estate, or Sustainable/ESG investments].
5. Exclusions (Optional)
It is my wish that no distributions be made to [Name/Entity] under any circumstances, nor to any spouse of a beneficiary in the event of a divorce.
6. Periodic Review
I intend to review this Letter of Wishes every [3/5] years to ensure it remains relevant to my family’s circumstances.
Yours sincerely,
[Settlor Name]
Key Considerations for your LoW
Flexibility: Use phrases like "I would like you to consider" rather than "You must," to maintain the discretionary nature of the trust.
The "Protector" Role: If you have appointed a Protector, mention that the Trustee should seek their "consent" or "consultation" before major payouts.
Updates: You can change this letter as often as you like without the need for expensive legal amendments to the main Trust Deed.
Roles and Powers You should consider Granting to a "Protector" in your Hong Kong Trust
In Hong Kong, the Protector acts as the "watchdog" of the trust. While the Trustee has the legal title and day-to-day management of the assets, the Protector holds specific powers to ensure the Trustee follows your original intent.
Under the Hong Kong Trustee Ordinance, the role of a Protector is not strictly defined by statute, which gives you immense flexibility to customize their powers in the Trust Deed.
1. Essential Powers to Grant a Protector
You can divide a Protector’s powers into two categories: Positive Powers (ability to make things happen) and Negative Powers (the power to stop things from happening).
Power Type | Specific Action | Why it’s Important |
Positive | Appoint/Remove Trustees | If the professional trustee becomes too expensive or unresponsive, the Protector can replace them without going to court. |
Positive | Add/Remove Beneficiaries | Allows the trust to adapt if family dynamics change (e.g., adding a new grandchild or removing an estranged relative). |
Negative | Veto Distributions | The Trustee cannot send money to a beneficiary without the Protector's prior written consent. |
Negative | Veto Investment Decisions | Ensures the Trustee doesn’t invest in high-risk assets that contradict your "Letter of Wishes." |
Administrative | Change Proper Law | The Protector can move the trust’s jurisdiction (e.g., from Hong Kong to Singapore) if the legal or tax environment changes. |
2. Who Should You Appoint?
Choosing the right Protector is a balance between trust and expertise. Common choices include:
The Settlor: You can be your own Protector to maintain control. Note: In 2026, many advisors recommend a co-protector or successor to avoid the trust being labeled a "sham" by tax authorities.
Trusted Family Friend/Advisor: Someone who knows your family values and can mediate conflicts between beneficiaries and the Trustee.
Professional Protector: A law firm or specialized trust consultancy. This is ideal for high-value trusts where technical oversight of investments is required.
3. Critical Risks: Fiduciary vs. Personal Powers
One of the most important decisions in your Trust Deed is defining whether the Protector’s powers are Fiduciary or Personal:
Fiduciary Powers: The Protector must act in the best interests of the beneficiaries. They can be sued if they act selfishly.
Personal Powers: The Protector can act according to their own discretion (often used when the Settlor is the Protector).
Warning for 2026: If the Protector is given "too much" power (e.g., the power to direct every single transaction), a court might rule that the Trustee is just a "rubber stamp." This could lead to the trust being declared a Sham, potentially exposing the assets to creditors or divorce claims.
4. The "Protector Committee" Trend
In complex family offices, we increasingly see a Protector Committee instead of a single individual. This usually consists of:
A family member (to represent the family "heart").
A long-term legal/tax advisor (to ensure compliance).
A neutral third party (to break ties).
Comparison table between a "Standard Discretionary Trust" and a "Reserved Power Trust"
Choosing between a Standard Discretionary Trust and a Reserved Power Trust (RPT) is the most critical structural decision for a Settlor in Hong Kong.
Following the Trustee Ordinance amendments, Hong Kong now specifically allows Settlors to retain investment powers without "breaking" the trust's legal validity.
Comparison: Discretionary Trust vs. Reserved Power Trust
Feature | Standard Discretionary Trust | Reserved Power Trust (RPT) |
Asset Control | Trustee has full legal and investment control. | Settlor retains power to direct investments. |
Trustee Liability | Trustee is liable for investment performance. | Trustee is exempt from liability for following Settlor's investment directions. |
Flexibility | High (Trustee can adapt to changing family needs). | Extremely High (Settlor maintains "hands-on" management). |
Asset Protection | Strongest. Maximum separation between Settlor and assets. | Moderate/Strong. Still protected, but excessive control can be scrutinized. |
Ease of Setup | Standard. | Requires more complex drafting of "Reserved Power" clauses. |
Best For... | Families wanting a professional to handle everything. | Entrepreneurs/Active investors who want to manage their own portfolio. |
Why the Reserved Power Trust is Popular in 2026
Most HNWIs in Hong Kong are uncomfortable handing over their life's work to a bank's trust department to manage. The RPT solves this by:
Directing Investments: You can tell the Trustee exactly which stocks, properties, or private equity deals to buy.
Anti-Bartlett Clauses: This legal clause prevents the Trustee from interfering in the day-to-day management of a family business held within the trust.
Speed: You can execute trades directly with your broker via a Power of Attorney granted by the Trustee, rather than waiting for the Trustee's internal committee to approve every trade.
The "Sham" Risk Warning
While the law permits reserved powers, there is a limit. If you reserve the power to revoke the trust at any time or withdraw money for yourself without any oversight, the trust could be deemed a "Sham" or an "Alter Ego."
In such cases:
Creditors can pierce the trust and seize the assets.
Ex-spouses can claim the assets are still part of your personal net worth.
Tax Authorities may treat the trust income as your personal income.
Summary Table of the Tax Implications for a Hong Kong Trust
Hong Kong remains one of the world’s most tax-efficient jurisdictions for trusts in 2026. Because Hong Kong operates on a territorial basis, the Inland Revenue Department (IRD) generally only taxes income that "arises in or is derived from" Hong Kong.
Below is the tax breakdown for a Hong Kong trust.
1. Hong Kong Trust Tax Summary (2026)
Tax Type | Rate | Application to Trusts |
Capital Gains Tax | 0% | No tax on the sale of stocks, crypto, or global real estate. |
Estate Duty / Inheritance Tax | 0% | Abolished since 2006; no tax on assets passing to heirs. |
Dividend Tax | 0% | No tax on dividends received from HK or offshore companies. |
Withholding Tax | 0% | No tax on distributions sent to beneficiaries worldwide. |
Profits Tax (Onshore) | 8.25% / 16.5% | Only applies if the trust carries on a trade/business in HK. |
Profits Tax (Offshore) | 0% | Applies to income generated entirely outside of Hong Kong. |
2. Onshore vs. Offshore Income
The "Source of Income" determines whether your trust needs to file and pay tax in Hong Kong.
Offshore-Sourced Income (Generally 0% Tax)
If the trust assets and activities are outside Hong Kong, the income is generally tax-exempt.
Examples: Rental income from London property, dividends from a US stock portfolio, or profits from a business operated entirely in Vietnam.
FSIE Regime Note: Since 2024/25, Hong Kong has tightened rules on Foreign-Sourced passive income (interest, dividends, IP income). To remain exempt, the trust (or its holding company) must meet Economic Substance requirements or be part of a qualifying family office structure.
Onshore-Sourced Income (Taxable)
If the trust generates income from within Hong Kong, it is subject to Profits Tax.
Examples: Rental income from a Hong Kong apartment (Property Tax at ~15%), or profits from a Hong Kong-based trading business managed by the Trustee.
The Two-Tiered System: For taxable profits, the first $2 million HKD is taxed at 8.25%, and the remainder at 16.5%.
3. Taxation of Beneficiaries
One of the biggest benefits for Hong Kong trusts is the treatment of distributions:
No Tax on Distributions: Whether the Trustee distributes income (dividends/rent) or capital (cash from an asset sale), the beneficiary receives the funds gross (no HK tax deducted).
Recipient’s Residence: While Hong Kong doesn't tax the payout, the beneficiary may still owe tax in their own country of residence (e.g., if they live in the UK, USA, or Australia).
4. 2026 Compliance: The "Family Office" Exemption
If your trust is part of a Single Family Office (SFO) managing at least $240 million HKD (~$30M USD) in assets, you may qualify for a unified tax exemption. This provides absolute "Tax Certainty" for typical investment profits, even if the management happens locally in Hong Kong.
Important: To maintain these benefits, the trust should not be used for "general commercial purposes" (e.g., active day-to-day retail trading). It should remain an investment holding vehicle.
Final Setup Checklist Summarizing all the Steps
To wrap up our deep dive, this final checklist consolidates every phase of the process into a timeline. In 2026, the critical "bottleneck" is no longer the legal drafting, but the banking and KYC (Know Your Customer) compliance.
The Master Checklist: Setup to Launch
Phase 1: Structural Design (Week 1)
[ ] Select Trust Type: Choose between Discretionary (max protection) or Reserved Power (max control).
[ ] Appoint Key Roles: Identify your Trustee, Protector, and any "Key Controllers" for the bank's records.
[ ] Draft the Deed: Ensure it includes a "Firewall Clause" and modern "Electronic Communication" provisions.
[ ] Finalize Letter of Wishes: Draft your non-binding guidance for the Trustee.
Phase 2: Incorporation & Settlement (Weeks 2-3)
[ ] Form a PTC (Optional): If using a Private Trust Company, incorporate it with the HK Companies Registry (requires a local Company Secretary and Registered Office).
[ ] Execute the Deed: Sign in the presence of a witness (or notary if signing from abroad).
[ ] Stamp Duty: If the trust includes Hong Kong real estate or HK shares, submit the deed to the Stamp Office for adjudication.
[ ] Asset Transfer: Legally move the title of assets. For cash, this happens after the bank account is open; for shares, this requires an "Instrument of Transfer."
Phase 3: Banking & KYC Compliance (Weeks 4-12)
[ ] KYC Dossier: Gather certified ID, address proof, and "Source of Wealth" evidence for all parties (Settlor, Trustee, Protector, and 10%+ Beneficiaries).
[ ] Bank Interview: Most HK banks (HSBC, DBS, BOC) require at least one director of the PTC or the Settlor to be physically present or join a secure video link.
[ ] Initial Deposit: Minimums usually range from $50,000 to $500,000 HKD depending on the bank's tier.
[ ] FATCA/CRS Self-Certification: Complete the forms declaring the tax residency of the trust to comply with global reporting standards.
Phase 4: Ongoing Maintenance (Annual)
[ ] Annual Return: For PTCs, file the NAR1 form with the Companies Registry.
[ ] Accounting: Maintain 7 years of financial records (Mandatory under HK law).
[ ] Tax Filing: Receive and return the IRD Tax Return (Form B) if the trust has HK-sourced income.
[ ] Review Meeting: Hold an annual meeting with the Protector to update the Letter of Wishes.
A Final Note on 2026 Trends
In 2026, Digital Asset Clauses are now standard. Ensure your trust deed specifically mentions the management of private keys, cold storage, and exchange accounts if you plan to settle Bitcoin or other virtual assets.
How Bestar Hong Kong can Help
Trust Deed Setup
When setting up a trust deed in Hong Kong, the complexity of legal compliance and banking hurdles makes having a licensed partner essential. Bestar Hong Kong serves as a specialized Trust or Company Service Provider (TCSP), bridging the gap between high-level legal theory and the practical realities of wealth management in 2026.
Here is how Bestar’s expertise streamlines your trust setup:
1. Licensed TCSP Expertise
Operating under the latest Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) guidelines, Bestar is a licensed provider (TCSP).
Regulatory Security: We ensure your trust or Private Trust Company (PTC) is registered in full compliance with the Hong Kong Companies Registry.
Audit-Ready Documentation: Bestar manages the mandatory Significant Controllers Register (SCR) and ensures
2. Bespoke Trust & PTC Structuring
Bestar doesn't just offer "templates"; we architect the governance framework that fits your family's specific needs.
Reserved Power Trusts: We specialize in drafting deeds that allow you (as the Settlor) to retain investment control while maintaining the trust’s legal integrity.
Private Trust Company (PTC) Formation: Bestar provides a "one-stop" solution for PTCs, handling incorporation, providing the mandatory local Company Secretary, and offering a prestigious registered office in Sheung Wan.
Succession Planning: We assist in drafting the Letter of Wishes and defining the roles of Protectors to ensure multi-generational continuity.
3. Navigating the 2026 Tax Landscape
With recent updates to the Foreign-Sourced Income Exemption (FSIE) and the Unified Tax Exemption for Family Offices, tax compliance is more technical than ever.
Tax Neutrality: Bestar advises on how to structure your trust assets to benefit from Hong Kong’s 0% capital gains and dividend tax.
Economic Substance: We monitor your local operating expenditures and staffing to ensure your structure meets the "substantial activity" requirements for tax concessions.
4. Strategic Banking Support
Opening a bank account for a trust is often the most difficult step. Bestar leverages its established relationships with tier-1 banks (like HSBC, DBS, and BOC) and modern Neobanks.
KYC Pre-Screening: We review your "Source of Wealth" evidence before submission to the bank, significantly reducing the risk of rejection.
Onboarding Guidance: Bestar specialists guide you through the bank interview process, whether in-person or via secure digital channels.
Bestar 2026 Fee Transparency
Service | Fee (HKD) | Strategic Value |
Trust Deed Drafting | Quote-based | Bespoke legal clauses for your specific goals. |
PTC Incorporation | $5,500+ | Includes government fees and BRC setup. |
Licensed Co-Sec | $2,400 / yr | 100% TCSP compliance and annual filing. |
Registered Address | $2,100 / yr | Premium CBD presence for your family office. |
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