Hong Kong: Don’t Lose Control (Or Private Trust Companies)

In a previous article I wrote about the need to plan against inheritance taxes. One way of doing this is to transfer assets into trust. Once there the assets no longer belong to you, they belong to the trustees, so generally would not attract any tax charge on your death because the legal owner doesn't change. And if you get into financial problems they are better protected and may still be enjoyed by your family rather than being swept up by your creditors.

An additional advantage is that on your death the need for a probate-the process which allows the assets to be released to your family - is avoided. A grant of probate takes time to obtain. Even if your estate is as straight forward as possible it is highly unlikely that a grant of probate in Hong Kong will be obtained in under 9 months. The typical estate of an Hong Kong investor comprised of a variety of different assets in a number of different countries would normally take at least 2 years to wind up and cost anywhere between 4-6% of the total value of that estate. Heavy charges and long delays are something which can be avoided with the use of trusts.

So trusts are fantastic, right? Well yes they are but the disadvantage is clear in the title. The setting up of a trust involves the transfer of assets to trustees and you have to trust them. They will take possession of your assets during your lifetime and then administer them according to the terms of the legally binding trust deed and any further wishes expressed from time to time by you to them where the trustees have discretion. Many potential Settlors love the potential advantages but are quite naturally wary of losing control of the assets and being at the mercy of the trustees. However, look at it this way. You can't really avoid this element of trust. The alternative way of transferring assets is through a will which takes effect on your death. That involves the appointment of Executors who take possession of your assets after your death and then distribute them to the Heirs according to the terms of the will. So the Executors are like the Trustees and the Beneficiaries of the trust are like the Heirs.

One way or another you have got to trust somebody but it's a lot easier to get assets transferred while you are around to supervise and to oversee the work of your chosen trustee. You know where the assets are and can sign them over to the trustees rather than leaving executors to try and find the assets.

Leaving everything to devolve under your will does give you the comfort of having all assets in your name during your lifetime but does leave your family with the problems on your death. The assets are blocked until probate can be granted and the family are left to correspond with the Executors at a time when they are most vulnerable and emotional. Far better, then, to have it all sorted out before you go. So is there a solution to having to trust these trustees?

Yes there is. You may have seen some advertisements we ran recently entitled "Have your cake and eat it". Private trust companies allow you to do just that.

Under the usual trust scenario the assets are transferred to XYZ Trustees Ltd a professional trust company. The alternative is to set up your own Private Trust Company (PTC). Many offshore jurisdictions have recently enacted specific legislation covering PTCs but such legislation is really a distraction. You don't need any specific legislation. Just form a company, transfer the assets to it and then have it declare that it is holding all those assets as trustee. It is beneficial to incorporate the company as a company limited by guarantee with a cascading chain of ownership through memberships rather than shareholdings. This allows for continuity of ownership and therefore administration. A guarantee company has the advantage of allowing the membership to expire upon the death of the owner leaving the remaining members to carry on the good work. Most clubs in Hong Kong are based on companies limited by guarantee and members do not have a transferable interest.. the membership expires on death and can't otherwise be transferred. Ditto with a membership in a PTC structured as a company limited by guarantee.

It is important to ensure that the trust company has sufficient substance so that it and the trust it administers cannot be attacked as a sham. One of the fundamental principles of correctly setting up a trust is that there must be a movement of assets away from yourself to a third party. A company is a third party but it is not advisable for the Settlor to be the sole member and director. Better that there are directors who have expertise in administering trusts and who can assist with running the the PTC and the trust that it administers.

The members of the PTC can be given different voting rights so, for example, the Settlor could hold a class A membership which carries 100 votes. The spouse could hold a class B membership with 10 votes and the 3 children could have a class C membership with one vote each. During the Settlor's lifetime he has 100 votes out of 113 so has control. On death the membership disappears leaving the spouse with 10 votes out of 13 and on the death of the spouse the children are left holding 1 vote each. Another arrangement might involve giving the Class B Membership to a professional trust company who could then make sure the spouse could enjoy the income during his/her lifetime but ensure the capital is protected and saved for the children or later generations. The possibilities are endless.

Whoever controls the PTC would still be obligated to follow the terms of the trust which dictates how the assets are administered or distributed and who may benefit.

As you are not employing a professional trustee you save on professional trustee fees – although any knowledgeable director may well require a similar sized fee.

The board of directors can consist of yourself and your spouse or a trusted friend alongside the professional director so you have control at board level along with the voting control at membership level which would give you the ability to restructure the board at any time. In short, whilst you lose ownership of the assets you retain the control of the company which owns them and you can be involved in the day to day administration of those assets or delegate tasks to whomever you wish as you see fit.

It would be wrong to oversimplify the various legal and practical considerations involved in setting up your own PTC but it does present another possibility which might appeal to those who have been put off trusts previously and let you eat that cake.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.