A family trust is a legal arrangement in which a settlor transfers assets to a trustee, who holds and manages them under a trust deed for the benefit of beneficiaries. By separating legal ownership from beneficial enjoyment, it becomes the core instrument of wealth succession, asset protection and philanthropic planning. This guide explains how trusts work, the common types, how to choose a jurisdiction and the 2026 tax compliance essentials — with sourced facts throughout.
How a family trust works: three roles
A trust deed typically establishes 3 core roles: the settlor, who creates the trust and contributes assets; the trustee, who holds the assets in law and owes fiduciary duties; and the beneficiaries, who enjoy the trust benefits. Rights and duties are set by the deed and the governing law — the trustee must always act in the beneficiaries’ best interests.
| Role | Who | Core duties |
|---|---|---|
| Settlor | The original asset owner | Creates the trust, transfers assets, sets the deed terms |
| Trustee | A trust company or professional | Holds assets in law, manages prudently, files reports |
| Beneficiary | Family members or charitable purposes | Receives distributions and benefits |
What family trusts are used for
- Wealth succession — orderly distributions to the next generation without inheritance disputes.
- Asset protection — lawful separation of trust assets from personal liabilities.
- Philanthropy — charitable trusts or structures paired with foundations.
- Next-generation development — distribution clauses that guide education, enterprise and values.
- Privacy — trust documents are not public registrations.
Common types
| Type | Character |
|---|---|
| Revocable | Settlor keeps the right to amend or revoke; flexible but weaker protection |
| Irrevocable | Cannot be casually undone; stronger protection and succession effect |
| Discretionary | Trustee decides timing and amounts of distributions; maximum flexibility |
| Fixed | Distributions follow fixed deed proportions; high certainty |
| Offshore | Established in BVI, Cayman, Singapore and similar jurisdictions |
Choosing a jurisdiction
Common jurisdictions include BVI, Cayman, Singapore, Hong Kong and Jersey. Consider four factors: legal maturity, trustee service supply, tax transparency duties (CRS), and fit with where the family business operates. See What Is BVI? and the Hong Kong vs Singapore comparison.
2026 compliance: a trust is not a tax dodge
MOF and STA Announcement No. 15, effective from 1 January 2026, applies a uniform 20% individual income tax rate to offshore trust arrangements of Chinese tax residents, with no reductions or concessions. Families should treat tax compliance as the first principle of trust design rather than the purpose. See the practical filing guide.
Key industry data
A trust deed typically establishes 3 core roles: settlor, trustee and beneficiary.
Announcement No. 15 applies from 1 January 2026, with a uniform 20% rate on offshore trust arrangements.
China’s wealth management market totalled RMB 179.33 trillion in 2025, second globally (Sina Finance, 2026).
The global family office market is projected to grow at a 7.1% CAGR from 2026 to 2035 (Research Nester, 2025).
Hong Kong hosted more than 3,380 single family offices by the end of 2025 (InvestHK / Deloitte).
FAQ
How is a trust different from a will?
A will takes effect on death through probate; a trust takes effect on creation — assets are already legally held by the trustee and distributions continue under the deed. Trusts therefore combine lifetime management with post-death succession, and the two are often used together.
Are assets still mine once in the trust?
Legally, ownership has passed to the trustee; what you keep are the rights defined in the deed (amendment rights in a revocable trust, or specific benefits). That separation is exactly the source of asset protection and succession power — which is why careful design before creation matters.
Should trusts be written into the family charter?
Trusts are the legal execution layer; the family charter is the governance manifesto. The charter defines intent, trusts implement distribution. Used together they work best — see how to write a family charter.
Further reading
For holding vehicles, see What Is BVI?; for filing duties, see the practical filing guide; for the big picture, see the Complete Guide; and see the FAQ.