1. What are the key advantages of your jurisdiction in terms of privacy & asset protection for a Chinese HNWI or Family (etc.) looking to succeed their assets to the next generation?
Setting up a trust in an overseas (to China) jurisdiction gives more freedom and protection. There is no public register of the settlor and beneficiaries so this ensures privacy. Certain jurisdictions such as Hong Kong provide some advantages such as reserved investment power to the settlor of the trust. We also utilize other jurisdictions such as New Zealand where Chinese nationals want removal from the overall Chinese legal system.
2. In terms of cost, how is the cost of a setting up a trust/foundation in your jurisdiction compare to other jurisdictions? If it’s more expensive, what is the additional value that a client receives for this?
Establishing a trust in Hong Kong is cost effective in comparison with other jurisdictions where the statutory costs of accounting, registered agents etc. can be high. Whilst cost is of course a consideration it is important that a client seeks the appropriate jurisdiction and rules that best satisfies their needs.
3. What are some of the biggest issues & challenges you come across when planning for Chinese or Asian clients in general? What are the solutions that your jurisdiction provides for these issues?
Many Chinese and Asian clients concerned with keeping control of their assets. This creates challenges since a trust is essentially divestment of that control to a trustee in order to protect the assets. For those clients wanting control of their operating companies, we offer a number of options, a) trusts in various jurisdictions which allow such control, b) establishment a private trust company with the settlor as a director or c) utilize a limited partner/ general partner structure with the limited partner being the investor and the general partner operating the business. The limited partnership can be owned by a trust.
4. What are some of the major features of the law that make the trust/foundation in your jurisdiction particularly attractive to investors?
The settlor’s right to make investment decisions on the trust, and the statutory duty of care requirements which are imposed on Hong Kong professional trustees, provide more control to settlors and also comfort to the client that a minimum standard of professionalism is required in dealing with the trust.
5. Are there any recent developments in trust/foundation law in your jurisdiction that investors should be aware of?
In Hong Kong changes to the trust laws in December 2013 have provided some key improvements. In addition to the settlor’s right to make investment decisions on the trust, Hong Kong trusts will also be the upheld against forced heirship provisions. This means that settlor is able to determine beneficial entitlement amount and beneficiaries without forced rules of other countries. In addition the introduction of perpetual trusts and the abolition of rules requiring distribution generally within 21 years means the trust does not need to make distributions within a certain time frame and can continue indefinitely through multiple generations.
Contributed by: Carolyn Butler , Director & CEO, The Hong Kong Trust Company Limited