How to effectively establish an offshore trust

Trusts, particularly offshore trusts, have become an indispensable wealth-management tool for an increasing number of high-net-worth individuals, thanks to their unique advantages. As asset allocation becomes increasingly globalized. The diversification of wealth management needs, coupled with the varying trust and legal regulations across different countries and regions, has led an increasing number of high-net-worth individuals to opt for offshore trust structures to manage their wealth.

On October 14, 2022, at 3:00 p.m., a thematic sharing session titled “How to Effectively Establish an Offshore Trust,” presented by Attorney Han Xiping, was held in the Grand Conference Room of

’s Shenzhen headquarters.

At the outset of the lecture, Attorney Han first guided the audience through a review of the concept of trust, which is a creation of both common law and equity. He then discussed the equitable duties (Fiduciary Duty and Duty of Skill and Care) that trustees owe upon the establishment of a trust, as well as the equitable rights enjoyed by beneficiaries (in personam rights and in rem rights).

First, Attorney Han used clear and easy-to-understand diagrams to explain how to transfer assets into a trust in practical terms. Subsequently, Attorney Han discussed, from a “personnel” perspective, how to establish an effective offshore trust. Specifically, “person” refers to the settlor’s capacity to act: being at least 18 years old, of sound mind, and not bankrupt.

This also covers the meaning of conflict-of-laws rules and their solutions; the transfer procedures for different types of assets; the three certainties that must be satisfied for an offshore trust to be validly established—certainty of intention, certainty of subject matter, and certainty of object—and the consequences of failing to meet any one of them (as the absence of any one will render the trust invalid).

When discussing the requirement that the settlor must have a genuine intention to create a trust, Attorney Han cited the case of Abdel Rahman v. Chase Bank Trust Company Limited (1991), holding that if such a genuine intention is lacking, even if the arrangement is dressed up to appear like a trust, it will still be invalid.

Finally, Attorney Han also outlined the duration of offshore trusts and the establishment process.

In this lecture, Attorney Han Xiping used vivid and engaging common-law cases to help participants gain a deeper understanding of the key principles involved in trust formation, while also providing a more comprehensive overview of how to establish an effective offshore trust. The attending lawyers all remarked that they found the session highly beneficial.