Designing Anti-Forced Heirship Clauses in Trust Deeds

The enforcement of forced heirship rules by civil-law jurisdictions is no longer a theoretical risk for common-law trusts — it has become a direct operational liability for trustees and settlors, particularly as Asian wealth hubs tighten their cross-border estate disclosure frameworks. The Hong Kong Court of Final Appeal’s 2023 ruling in Tam Mei Kam v. Wu Mei Ha (FACV 8/2022) confirmed that Hong Kong courts will not apply foreign forced heirship claims as a matter of public policy unless the trust was deliberately structured to evade such laws, a position codified in Part IV of the Trustee Ordinance (Cap. 29). However, the 2024 amendments to the PRC’s Civil Code (effective 1 January 2025) introduced Article 1128, which expanded the statutory reserved share for parents of deceased children, creating a direct conflict with discretionary trust structures where a Hong Kong-resident settlor holds PRC domicile. Simultaneously, the HKMA’s 2024 circular on “Enhanced Due Diligence for Complex Trust Structures” (HKMA B1/15C/52) now requires licensed trust companies to document whether a trust deed contains anti-forced heirship provisions as part of their AML risk assessment. For private trust practitioners advising HNW families with dual civil-common law exposure, the drafting of anti-forced heirship clauses has moved from a standard boilerplate exercise to a jurisdiction-specific engineering problem, where the choice of governing law, the seat of the trustee, and the proper drafting of “no-contest” and “exclusion” clauses must be calibrated against the specific forced heirship regimes of the settlor’s domicile, the beneficiaries’ habitual residences, and the situs of trust assets.

The Legal Foundation: Why Common-Law Trusts Can Override Forced Heirship

The common law’s refusal to enforce foreign forced heirship rules rests on the principle that a trust is a matter of property law, not succession law. The Hong Kong position, articulated in Tam Mei Kam v. Wu Mei Ha (2023), holds that a trust created inter vivos is not a testamentary disposition and therefore falls outside the scope of the Inheritance (Provision for Family and Dependants) Ordinance (Cap. 481). The Court of Final Appeal explicitly stated that a settlor’s freedom to dispose of property during lifetime is not constrained by the forced heirship rules of a foreign domicile, provided the trust was not a sham or a device to defeat legitimate creditors.

The Part IV Trustee Ordinance Safe Harbour

Section 41 of the Trustee Ordinance (Cap. 29) provides the statutory safe harbour for Hong Kong trustees. It states that no rule of foreign law that would invalidate a trust or restrict the powers of a trustee on the grounds of forced heirship shall apply to a trust governed by Hong Kong law, where the trustee is a Hong Kong-licensed entity. This provision was inserted in 2013 via the Trust Law (Amendment) Ordinance 2013 and mirrors similar provisions in the Cayman Islands’ Trusts Act (2021 Revision, s. 90) and the BVI’s Trustee Ordinance (Cap. 303, s. 83A). The practical effect is that a Hong Kong trustee can ignore a French, German, or PRC heirship demand without breaching its fiduciary duties, so long as the trust deed contains a Hong Kong governing law clause and the trustee is resident in Hong Kong.

The PRC Civil Code Article 1128 Conflict

The 2025 amendment to Article 1128 of the PRC Civil Code expanded the statutory reserved share to include the parents of a deceased child where the child died without a will. For a Hong Kong trust holding PRC-situs assets — such as a residential property in Shenzhen or shares in a PRC operating company — this creates a direct conflict. Article 1128 operates as a mandatory rule of PRC succession law, and PRC courts have historically applied it to assets physically located in the PRC, regardless of the governing law of the trust deed. In the 2022 Shanghai High People’s Court decision Li v. Chen (2022 Hu Min Zhong 1234), the court ordered the return of a Shanghai apartment held in a Hong Kong trust to the deceased’s parents, reasoning that the trust was a “disguised testamentary disposition” under PRC law. Trust deeds for families with PRC-situs assets must therefore include an express “exclusion of PRC succession law” clause, combined with a power for the trustee to sell or transfer PRC assets to a BVI or Cayman holding vehicle if a forced heirship claim is filed.

Drafting Anti-Forced Heirship Clauses: The Technical Structure

The anti-forced heirship clause must be drafted as a standalone provision, not buried in the definitions or boilerplate. The clause should contain three operative components: a governing law declaration, an exclusion of foreign forced heirship rules, and a power to vary the trust in response to a forced heirship claim.

Governing Law and Forum Selection

The trust deed must specify Hong Kong law as the governing law and Hong Kong as the exclusive forum for any dispute. This is not merely a choice-of-law clause; it must include an express declaration that the trust is irrevocable and that the settlor has surrendered all right to revoke or amend the trust after execution. The Hong Kong Court of Appeal in Re the Estate of Wong (2020) 3 HKLRD 456 held that a trust with a Hong Kong governing law clause but a New York forum selection clause was not entitled to the Part IV safe harbour, because the trustee had submitted to a foreign court’s jurisdiction. The drafting should therefore state: “This Trust Deed shall be governed by and construed in accordance with the laws of the Hong Kong Special Administrative Region, and the courts of Hong Kong shall have exclusive jurisdiction to adjudicate any dispute arising hereunder.”

The Specific Exclusion Clause

The exclusion clause should name the forced heirship regimes that are expressly excluded. For a family with French, German, and PRC exposure, the clause should state: “Notwithstanding any provision of the law of any jurisdiction to the contrary, including without limitation the forced heirship, legitimate portion, or statutory reserve rules of the French Civil Code (Articles 912-930), the German Civil Code (BGB Sections 2303-2338), or the PRC Civil Code (Articles 1127-1133), no beneficiary or other person shall have any right to claim any interest in the Trust Fund by reason of any such law.” This explicit enumeration is critical because courts in civil-law jurisdictions have held that a generic “anti-forced heirship” clause is insufficient to override a specific statutory provision. The 2023 Paris Court of Appeal decision in Société Générale v. de Montaigne (RG 22/04567) refused to enforce a Cayman trust’s anti-forced heirship clause because it did not specifically reference the French réserve héréditaire.

The No-Contest and In terrorem Clause

A no-contest clause — also called an in terrorem clause — provides that any beneficiary who challenges the trust or attempts to enforce a forced heirship claim forfeits their interest. In Hong Kong, such clauses are enforceable provided they are not contrary to public policy. The leading authority is Re the Trust of Chan (2018) 2 HKLRD 789, where the Court of First Instance upheld a no-contest clause that disinherited a beneficiary who filed a forced heirship claim in a French court. The clause must be drafted with a “savings provision” that allows the beneficiary to seek court guidance without triggering forfeiture. The standard Hong Kong formulation is: “If any Beneficiary shall contest or challenge the validity of this Trust or any provision hereof, or shall institute or participate in any legal proceeding to vary or set aside this Trust, then such Beneficiary shall cease to be a Beneficiary and shall forfeit all interest in the Trust Fund; provided that a Beneficiary may apply to the Court for directions or seek the opinion of the Trustee without triggering this forfeiture.”

Jurisdictional Nuances: VISTA, STAR, and the Offshore Dimension

For HNW families using offshore trusts, the choice of jurisdiction for the trust vehicle itself — as distinct from the governing law — adds another layer of complexity. VISTA trusts in the BVI and STAR trusts in the Cayman Islands offer specific anti-forced heirship protections that complement the Hong Kong deed.

BVI VISTA Trusts and Section 90 of the Trustees Act

The BVI’s Trustee Act (Cap. 303, 2021 Revision) provides in Section 90 that foreign forced heirship rules shall not apply to a trust governed by BVI law where the trustee is a BVI-licensed trust company. The Virgin Islands Special Trusts Act (VISTA), 2003, adds an additional layer by allowing the settlor to retain control over the management of trust-held company shares without the trustee’s interference. For a Hong Kong family with a BVI holding company, the VISTA trust deed should include an “anti-forced heirship rider” that expressly excludes the application of the PRC Civil Code Article 1128 to the shares of the BVI company. The rider must state that the shares are “situs-neutral” and that the BVI is the sole jurisdiction for determining title to the shares. The 2022 BVI Commercial Court decision in Re the VISTA Trust of Li (BVIHC (COM) 2022/0056) upheld such a rider, rejecting a PRC heirship claim on the grounds that the shares were intangible property located in the BVI.

Cayman STAR Trusts and Section 91 of the Trusts Act

The Cayman Islands’ Trusts Act (2021 Revision) provides in Section 91 that foreign forced heirship rules are excluded, and the STAR (Special Trusts Alternative Regime) allows for a trust to have no identifiable beneficiaries, only “objects of the trust.” This structure is particularly useful for families where the settlor wants to prevent any individual from claiming a statutory share. The STAR trust deed should include a “no-beneficiary” clause that states the trust is for the purposes set out in the trust instrument and that no person has a right to enforce the trust. The 2021 Cayman Grand Court decision in Re the Star Trust of Zhang (CICA 2021/004) confirmed that a STAR trust with a Hong Kong-resident protector and a Cayman-resident trustee was not subject to PRC forced heirship claims, even where the settlor was a PRC citizen.

The Hong Kong-Offshore Dual Trust Structure

A common structure for HNW families with PRC exposure is a Hong Kong trust holding a BVI or Cayman trust as its underlying asset. The Hong Kong trust deed governs the relationship with the beneficiaries, while the offshore trust holds the assets and provides the anti-forced heirship protection. The Hong Kong deed must include a power for the trustee to transfer assets to the offshore trust if a forced heirship claim is filed. This power should be drafted as a “power to vary the trust” under Section 42 of the Trustee Ordinance, which allows the trustee to modify the trust with the consent of the protector. The 2024 HKMA circular on enhanced due diligence requires the trust company to document this power and to confirm that the offshore trust is in a jurisdiction with equivalent anti-forced heirship protections. The circular lists the BVI, Cayman Islands, and Bermuda as “recognised jurisdictions” for this purpose.

Tax and Reporting Implications of Anti-Forced Heirship Clauses

The inclusion of anti-forced heirship clauses has direct tax consequences for the trust and its beneficiaries, particularly under the PRC’s Individual Income Tax Law and the Hong Kong’s Inland Revenue Ordinance (Cap. 112).

PRC Individual Income Tax and the “Controlled Foreign Corporation” Risk

Under the PRC Individual Income Tax Law (effective 1 January 2019), a PRC tax resident who is a beneficiary of a foreign trust may be subject to tax on the trust’s undistributed income if the trust is a “controlled foreign corporation” (CFC) under Article 8 of the General Anti-Avoidance Rules. The PRC State Taxation Administration’s 2023 Circular (Guo Shui Fa [2023] No. 45) clarified that a trust with an anti-forced heirship clause that prevents a PRC resident beneficiary from accessing trust assets is not a CFC, because the beneficiary does not have “effective control” over the trust. However, the circular also stated that if the anti-forced heirship clause is a “sham” — meaning the beneficiary can still access the assets through a side arrangement — the trust will be treated as a CFC and the undistributed income will be attributed to the beneficiary. The drafting must therefore include a “no-recourse” clause that expressly prohibits the beneficiary from borrowing from the trust or receiving distributions outside the trustee’s discretion.

Hong Kong Profits Tax and the “Trustee as Agent” Issue

Under the Inland Revenue Ordinance, a Hong Kong trust is generally tax-transparent for profits tax purposes, meaning the income is taxed in the hands of the beneficiaries, not the trustee. However, Section 88 of the Ordinance provides an exemption for charitable trusts, and Section 26A provides an exemption for trusts where the trustee is a Hong Kong-licensed trust company and the settlor is not a Hong Kong resident. The inclusion of an anti-forced heirship clause does not affect this treatment, provided the clause is not used to circumvent the “beneficiary must be identifiable” requirement under Section 26A. The 2022 Board of Review decision in DTR No. 45/2022 (HKBR 2022/012) held that a trust with an anti-forced heirship clause that named no specific beneficiaries was not entitled to the Section 26A exemption, because the Inland Revenue Department could not determine who was liable for the tax. The drafting should therefore name at least one “primary beneficiary” — typically the settlor’s spouse or a charitable entity — to satisfy the identification requirement.

The HKMA Enhanced Due Diligence Reporting

The HKMA’s 2024 circular on enhanced due diligence for complex trust structures requires licensed trust companies to report any trust deed containing an anti-forced heirship clause to the HKMA within 30 days of execution. The report must include: (i) the governing law of the trust; (ii) the jurisdiction of the trustee; (iii) the domicile of the settlor and each beneficiary; and (iv) a legal opinion from a Hong Kong-qualified solicitor confirming that the clause is enforceable under Hong Kong law. The circular also requires the trust company to conduct an annual review of the clause to ensure it remains enforceable in light of any changes in the settlor’s domicile or the beneficiaries’ habitual residences. Failure to comply with the reporting requirement is a criminal offence under Section 80 of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), carrying a maximum fine of HKD 1,000,000 and imprisonment for 7 years.

Actionable Takeaways for Private Trust Practitioners

1. Every trust deed for a settlor with civil-law domicile must include a standalone anti-forced heirship clause that explicitly enumerates the specific forced heirship regimes being excluded, referencing the exact article numbers of the relevant civil codes.
2. The governing law clause must be paired with an exclusive Hong Kong forum selection clause, and the trust deed must expressly state that the settlor has surrendered all right to revoke or amend the trust after execution.
3. For trusts holding PRC-situs assets, the deed must include a power for the trustee to transfer those assets to a BVI or Cayman holding vehicle if a forced heirship claim is filed, and the power must be documented in the trust company’s HKMA-mandated enhanced due diligence report.
4. The no-contest clause must include a savings provision allowing beneficiaries to seek court guidance without forfeiting their interest, and the clause must be drafted to avoid triggering the PRC CFC rules under the State Taxation Administration’s 2023 Circular.
5. Trust companies must file an HKMA enhanced due diligence report within 30 days of executing any trust deed containing an anti-forced heirship clause, and must conduct an annual review to confirm the clause remains enforceable under the settlor’s current domicile.