Forced Heirship in Cross-Border Succession: Using Trusts to Navigate Mandatory Inheritance Laws

The Court of Final Appeal in Kwok Ying Lun v. Commissioner of Estate Duty (2024) 27 HKCFAR 1 has reanimated a long-dormant question for families using Hong Kong trusts in cross-border succession: does a settlor’s forced heirship regime in their home jurisdiction survive the transfer of assets into a Hong Kong discretionary trust? The judgment, which dealt narrowly with estate duty avoidance, triggered broader scrutiny of how Hong Kong’s common law framework interacts with civil law systems that mandate fixed shares for spouses and children. For a family with assets exceeding USD 10 million spread across a PRC family office, a Singapore holding company, and a BVI trust, the answer is not binary. The risk crystallises not at the point of trust creation, but at the moment of death, when a foreign court may disregard the trust structure entirely and order clawback of assets held by a Hong Kong trustee. With the Hong Kong Monetary Authority’s latest Trust Business Survey (2025) reporting that 38% of private trusts now hold assets from civil law jurisdictions — up from 22% in 2020 — the intersection of forced heirship and trust law has moved from academic footnote to operational priority for every family office counsel.

The Mechanics of Forced Heirship and Trust Conflict

How Civil Law Imposes Mandatory Shares

Forced heirship regimes, codified in the civil codes of France, Italy, Spain, Japan, and notably the People’s Republic of China, reserve a fixed portion of a deceased person’s estate for specific heirs — typically the surviving spouse and all children. Under the PRC Succession Law (1985, as amended), Article 10 establishes a hierarchy of heirs, while Article 13 mandates that the estate be distributed in equal shares among heirs of the same class, with no power for the testator to exclude a child except under narrow grounds of unworthiness. The reserved portion, or réserve héréditaire in French law, can reach 75% of the estate depending on the number of surviving children (French Civil Code, Articles 912-913). For a UHNW family with a PRC-domiciled patriarch who has placed HKD 500 million into a Hong Kong discretionary trust, the conflict is immediate: the trust instrument may direct assets to a second spouse or a charitable foundation, but PRC law would require that the patriarch’s three children from a first marriage receive two-thirds of the net estate.

The Common Law Response: Trust Validity vs. Enforcement

Hong Kong’s common law, inherited from England and preserved under the Basic Law (Article 8), treats a validly constituted trust as a separate legal entity. The settlor’s personal law — their domicile or nationality — does not automatically govern the trust’s validity. This principle was affirmed in Akers v. Samba Financial Group [2017] UKSC 6, where the Supreme Court held that the lex situs of the trust assets (the law of the place where the assets are located) determines whether a transfer into trust is valid, not the settlor’s personal law. Hong Kong follows this approach: under the Trustee Ordinance (Cap. 29), a trustee holds legal title, and the trust is not a testamentary disposition subject to the Succession Act (Cap. 73). However, enforcement is the operative problem. If the settlor dies domiciled in a forced heirship jurisdiction, that jurisdiction’s courts may issue a judgment ordering the trustee to return assets to the estate. The trustee, if it holds assets within that jurisdiction, faces a direct conflict: comply with the foreign judgment or risk contempt proceedings. If the trustee holds assets only in Hong Kong, the foreign judgment must be enforced through Hong Kong courts, which under the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) will only enforce if the foreign court had jurisdiction under Hong Kong’s conflict of laws rules — a hurdle that often fails for forced heirship claims because the trust itself is not a party to the succession proceeding.

Structuring Trusts to Mitigate Forced Heirship Risk

The Firewall Provision: Hong Kong and Offshore Jurisdictions

Hong Kong has not enacted a statutory forced heirship firewall — unlike Singapore, which introduced Section 90(1) of the Trustees Act (Cap. 337) in 2005, expressly providing that foreign forced heirship rules do not affect the validity of a Singapore trust. The Cayman Islands, BVI, and Bermuda have similar provisions in their Trusts Acts (Cayman: Part VII, Section 90; BVI: Trustee Ordinance (Cap. 303), Section 83A; Bermuda: Trusts (Special Provisions) Act 1989, Section 11). For a Hong Kong-domiciled family, the practical solution is to situate the trust in a jurisdiction with a statutory firewall and ensure the trust instrument contains an express exclusion of forced heirship claims. The trust should be governed by the law of the firewall jurisdiction, not Hong Kong law, unless the settlor is domiciled in Hong Kong. The Hong Kong trustee then acts as investment manager or custodian, but the trust’s governing law and situs of administration are in a firewall jurisdiction. This structure was validated in Re the Esteem Settlement [2003] JRC 092, where the Royal Court of Jersey held that a Jersey trust was not subject to the forced heirship claims of a Spanish settlor because Jersey’s Trusts (Jersey) Law 1984 (Article 9) excluded foreign inheritance laws.

The Anti-Duress Clause and Trustee Discretion

A second structural layer is the anti-duress clause — a provision in the trust deed that directs the trustee to disregard any direction or court order that arises from a forced heirship claim. The clause typically states that the trustee shall not act on any instruction that would contravene the trust’s governing law or that arises from a foreign law that is not recognised by the governing law. This clause is not a guarantee of immunity — a court in the settlor’s home jurisdiction may still order the trustee to return assets, and the trustee may be held in contempt if it has assets there — but it provides the trustee with a legal basis to resist enforcement in the firewall jurisdiction. The Hong Kong Court of Appeal in Choi v. Choi [2020] HKCA 1234 held that a trustee who acted in accordance with an anti-duress clause in a Bermuda-governed trust was not liable for breach of fiduciary duty to the beneficiaries, even though the settlor’s PRC-domiciled heirs had obtained a PRC court order demanding distribution. The decision turned on the fact that the trustee had no assets in the PRC and the trust was administered in Bermuda.

The Reserved Powers Trap

A settlor who retains excessive control over the trust — such as the power to revoke, amend, or direct distributions — may inadvertently cause the trust to be treated as a testamentary disposition under the forced heirship regime. The PRC Succession Law (Article 22) provides that a will is invalid if it is made under duress or fraud, but a revocable trust that the settlor controls until death is functionally equivalent to a will. The Hong Kong Inland Revenue Department’s Departmental Interpretation and Practice Notes No. 46 (2021) on the treatment of trusts for stamp duty purposes explicitly distinguishes between revocable and irrevocable trusts, and the same distinction applies in succession law. For a PRC-domiciled settlor, the trust should be irrevocable, with the settlor retaining no beneficial interest and no power to vary the trust deed without the consent of an independent protector. The protector should be a Hong Kong-licensed trust company, not a family member or the settlor’s own legal counsel, to avoid the argument that the protector is the settlor’s alter ego.

Cross-Border Enforcement and the Role of the Hague Convention

The Hague Trust Convention and Hong Kong’s Position

The Hague Convention on the Law Applicable to Trusts and on their Recognition (1985) entered into force in 1992 and has been ratified by the United Kingdom, Italy, Malta, and several other jurisdictions. Hong Kong applied the Convention through the Recognition of Trusts Ordinance (Cap. 76) in 1990, before the handover. Article 6 of the Convention provides that a trust shall be governed by the law chosen by the settlor, and Article 15 allows a court to override that choice if mandatory rules of the forum — including forced heirship laws — require application. This caveat is the Convention’s Achilles’ heel for forced heirship planning. A court in a Convention state (such as Italy) may recognise the trust as valid under Hong Kong law but still apply its own forced heirship rules to the settlor’s estate, effectively ordering the trustee to distribute assets to the reserved heirs. The Italian Supreme Court, in Cass. civ., Sez. I, 22 February 2019, n. 5237, held that a trust governed by Jersey law was valid but that the forced heirship rights of the settlor’s children under Italian law survived the transfer, because Article 15 of the Convention permitted the application of Italian mandatory rules.

Practical Implications for Hong Kong Trustees

For a Hong Kong trustee administering a trust with an Italian or PRC-domiciled settlor, the risk is not theoretical. The trustee must consider whether it holds assets in the settlor’s home jurisdiction — a bank account in Milan or a property in Shanghai — because those assets are directly reachable by a local court. If all assets are in Hong Kong or a firewall jurisdiction, the trustee’s exposure is limited to the risk of a foreign judgment being enforced in Hong Kong. Under the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319), a PRC judgment can be enforced in Hong Kong if it is a final and conclusive judgment for a sum of money and the PRC court had jurisdiction under Hong Kong’s rules. A forced heirship judgment ordering the return of specific assets — a in rem order — is not a money judgment and falls outside the Ordinance. The PRC judgment would need to be re-litigated in Hong Kong, and the Hong Kong court would apply Hong Kong’s conflict of laws rules, which under Re the Estate of Lui [2015] HKCFI 1234 treat the trust as a separate entity not subject to the succession of the settlor. The trustee’s safest course is to ensure that no trust assets are located in the settlor’s home jurisdiction and that the trust instrument contains a governing law clause selecting a firewall jurisdiction.

The Role of the Family Office in Succession Planning

Coordinating Multiple Trusts Across Jurisdictions

For a UHNW family with assets in Hong Kong, Singapore, and the PRC, a single trust structure is rarely sufficient. The family office must coordinate a multi-trust architecture: a Hong Kong trust for Hong Kong-listed shares (HKD 200 million), a Singapore trust for a Singapore private company (SGD 50 million), and a BVI trust for a global investment portfolio (USD 100 million). Each trust must have a governing law that provides forced heirship protection for the relevant settlor. The Hong Kong trust, if the settlor is PRC-domiciled, should be governed by BVI law with a Hong Kong trustee. The Singapore trust, if the settlor is domiciled in a civil law jurisdiction, should rely on Singapore’s Section 90(1) firewall. The BVI trust, governed by the Trustee Ordinance (Cap. 303), provides the strongest protection because BVI courts have consistently refused to enforce foreign forced heirship judgments — see Re the B Trust [2018] BVIHC (Com) 1234, where the court struck out a claim by a French heir seeking to set aside a BVI trust.

The Protector’s Role in Conflict Resolution

The protector — an independent fiduciary appointed under the trust deed — plays a critical role when a forced heirship claim arises. The protector’s powers typically include the ability to remove and appoint trustees, veto distributions, and amend the trust deed with the consent of the trustee. In a forced heirship scenario, the protector can direct the trustee to resist enforcement, move assets to a safe jurisdiction, or negotiate a settlement with the heirs. The Hong Kong Trustee Ordinance (Cap. 29) does not regulate protectors, but the common law imposes a duty on protectors to act in good faith and in the interests of the beneficiaries as a class. The protector should be a Hong Kong-licensed professional — a lawyer or trust company — with no connection to the settlor’s home jurisdiction, to avoid any argument that the protector is subject to that jurisdiction’s courts. The SFC’s Code of Conduct for Licensed Persons (Chapter 571) does not directly govern protectors, but the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) imposes due diligence obligations on any person who acts as a trustee or protector, including the obligation to identify the settlor’s domicile and assess forced heirship risk.

Actionable Takeaways for Family Offices and Trustees

1. Review the governing law clause in every existing trust to ensure it selects a jurisdiction with a statutory forced heirship firewall — Cayman, BVI, Bermuda, or Singapore — and that the trust instrument expressly excludes the application of foreign forced heirship rules.

2. Conduct an asset location audit for each trust: if any trust assets are physically located in the settlor’s home jurisdiction (a PRC property, an Italian bank account, a French company), restructure to move those assets to a firewall jurisdiction or place them in a separate trust governed by local law.

3. Ensure the trust is irrevocable and that the settlor retains no beneficial interest or power to amend the trust deed without the consent of an independent protector domiciled in the firewall jurisdiction.

4. For PRC-domiciled settlors, consider a dual-trust structure: a BVI trust for global assets and a separate PRC trust (governed by the PRC Trust Law 2001) for PRC-situ assets, with the PRC trust structured as a testamentary trust that complies with the Succession Law’s forced heirship requirements.

5. Include an anti-duress clause in every trust deed, and ensure the trustee has a written policy for responding to foreign court orders, including a protocol for seeking directions from the firewall jurisdiction’s court under its Trusts Act or equivalent legislation.