FAQ
What is a trust?
A trust is a legal arrangement in which one person (the settlor) transfers assets to another person or entity (the trustee) to hold and manage for the benefit of specified individuals or a class of people (the beneficiaries), according to the terms of a written trust deed.
The defining feature of a trust is the separation between legal ownership and beneficial ownership. The trustee holds legal title to the assets. The beneficiaries hold the beneficial interest — the right to enjoy and benefit from those assets. This separation is the source of most of a trust's practical advantages.
Who are the key parties in a trust?
Settlor — the person who creates the trust and transfers assets into it
Trustee — the person or corporate entity that holds and manages the assets
Beneficiaries — those who benefit from the trust assets and income
Protector — an optional appointee with defined supervisory powers over the trustee, such as the power to remove and replace the trustee, or to consent to distributions
What is the difference between a trust and a will?
A will takes effect only on death and must pass through the probate process — which is public, time-consuming, and can be contested. A trust operates during the settlor's lifetime and continues seamlessly after death, without any probate requirement.
A trust also provides ongoing governance of assets after death, rather than simply transferring ownership. For clients with assets in multiple jurisdictions or beneficiaries who are minors or have special needs, a trust is almost always the more effective tool.
Can a trust protect my assets from creditors?
When assets are properly settled into a trust, they are no longer legally owned by the settlor — they are held by the trustee on behalf of the beneficiaries. In principle, this places them outside the reach of the settlor's personal creditors, provided the transfer is not a fraudulent conveyance.
Two critical caveats apply. First, the timing of the transfer matters: settling assets into a trust after a creditor claim has arisen — or in anticipation of insolvency — may be challenged and set aside by a court. Second, different jurisdictions have different statutory look-back periods for fraudulent transfers. We advise clients to implement structures well in advance of any anticipated business or personal risk.
What is CRS and who gets reported?
The Common Reporting Standard (CRS) is a global framework developed by the OECD under which financial institutions automatically exchange account information with the tax authorities of participating jurisdictions. Over 100 countries now participate, including Hong Kong, most of Europe, and the major offshore trust jurisdictions. The purpose of CRS is to identify tax residents who hold financial accounts — including trust interests — in other jurisdictions, and to share that information with their home tax authority.
Under CRS, the following persons connected to a trust are treated as "account holders" or "controlling persons" and are reportable to their respective tax authorities:
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Settlor — always reportable, regardless of whether the settlor is also a beneficiary
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Trustee — reportable as a controlling person
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Protector — reportable under CRS even if the protector has no economic interest in the trust.
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Named beneficiaries — reportable in the years when distributions are actually made to them. Discretionary beneficiaries who receive no distribution in a given year are generally not reportable for that year
How does a trust interact with a life insurance policy?
A trust and a life insurance policy are natural complements in an estate plan. A trust can be nominated as the beneficiary of a life insurance policy, which means that on the insured's death the policy proceeds are paid directly into the trust rather than into the estate.
This arrangement achieves several things simultaneously: the proceeds bypass probate entirely; they are distributed to beneficiaries in a governed, trustee-managed process rather than as a lump sum; they are protected from the beneficiaries' own creditors; and they can be staggered over time according to the Letter of Wishes.
What assets can be placed into a trust?
A trust can hold virtually any asset capable of being transferred to a trustee: cash, listed securities, shares in private companies, real property (subject to local conveyancing rules), insurance policies, intellectual property, and other valuable assets. The mechanics of how each asset class is transferred will depend on the jurisdiction in which the asset is located.
Note: assets located in mainland China are subject to PRC restrictions on cross-border capital transfer, and cannot generally be transferred directly into an offshore trust without navigating PRC exchange control rules. We advise clients on structuring options for mainland China assets as part of our engagement.
Is FA Trust a licensed trustee?
Yes. FA Trust holds a Trust or Company Service Providers (TCSP) licence issued by the Companies Registry of Hong Kong. Our licence number is TC010267, which can be verified on the Companies Registry public register at www.cr.gov.hk.
Clients should always verify that their trustee holds a valid TCSP licence before engaging any trust service provider. Holding a TCSP licence means the firm has met fit-and-proper requirements and is subject to ongoing AML/CFT compliance obligations under Hong Kong law.