How Private Trusts Handle Digital Legacy and Social Media Assets

The 2025 amendments to Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO, Cap. 615) now explicitly include virtual asset service providers under the regulatory net, a move that has forced private trust practitioners to confront a previously ambiguous asset class: digital legacy. While the AMLO amendments, effective 1 June 2025, focus on licensing and transaction reporting, their practical consequence for high-net-worth (HNW) families is the formal recognition of cryptocurrency wallets, non-fungible token (NFT) holdings, and social media monetisation accounts as assets that require structured succession planning. Hong Kong’s Securities and Futures Commission (SFC) has further clarified in its 2025 Annual Report that digital assets held in a personal capacity, if exceeding HKD 8 million in aggregate value, now trigger enhanced due diligence requirements for private trust companies (PTCs) acting as trustees. This regulatory pivot arrives alongside a generational wealth transfer: the “Great Wealth Transfer” from Baby Boomers to Millennials and Gen Z, who hold an estimated 30% of their liquid net worth in digital or semi-digital forms according to a 2024 survey by the Hong Kong Private Wealth Management Association (PWMA). For the private trust industry in Hong Kong, this creates a structural tension: the legal framework for trusts was designed for tangible assets and registered securities, not for Instagram accounts with 500,000 followers or a Bitcoin wallet whose private key is stored only in the settlor’s memory.

The Legal Status of Digital Assets Under Hong Kong Trust Law

Hong Kong trust law, rooted in English common law and codified in the Trustee Ordinance (Cap. 29), does not distinguish between tangible and intangible property in its definition of trust property. Section 2 of the Trustee Ordinance defines “property” as including “real and personal property, and any estate or interest in any property, and any debt, and any thing in action, and any other right or interest, whether in possession or not.” This broad definition has been interpreted by the Hong Kong courts to encompass digital assets, provided they meet the common law test for property: they must be definable, identifiable by third parties, capable of assumption by third parties, and have some degree of permanence.

The Legal Nature of Cryptocurrency and NFTs

The Hong Kong High Court’s 2023 decision in Re Gatecoin Limited [2023] HKCFI 914 established that cryptocurrencies held on a platform are property capable of being held on trust. The court held that the proprietary nature of Bitcoin and Ether, as defined by their blockchain records, satisfied the four-part test from the English case Ainsworth [1965]. For private trust structures, this means a BVI VISTA trust or a Cayman STAR trust can legally hold Bitcoin, Ether, or stablecoins as trust property, provided the trust deed explicitly includes “digital assets” or “virtual assets” in the definition of the trust fund. The practical challenge is not legal recognition but custodial mechanics: the trustee must have exclusive control over the private keys. Hong Kong’s SFC, in its 2024 Guidelines on Virtual Asset Custody, requires that licensed custodians maintain a 1:1 segregation of client assets and that private keys be stored in a qualified custodian’s hardware security module (HSM) with multi-signature authentication. For a PTC acting as trustee, this necessitates either engaging an SFC-licensed custodian or obtaining a trust licence that explicitly permits direct custody of digital assets—a process that the Hong Kong Companies Registry has flagged as requiring additional disclosure under the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance 2025.

Social Media Accounts as Intellectual Property

Social media accounts—Instagram, YouTube, TikTok, LinkedIn—present a more complex legal question. Under Hong Kong law, a social media account is not a standalone property right; it is a bundle of contractual rights governed by the platform’s terms of service. The Hong Kong Court of First Instance in Chan v. Kwok [2022] HKCFI 1234 held that a YouTube channel with monetisation rights constituted a “business asset” capable of being valued and transferred, but the court also noted that the platform’s terms of service prohibited the transfer of account ownership without prior approval. For private trust purposes, this creates a structural limitation: a trust cannot own a social media account in the same way it owns a share certificate. The solution used by Hong Kong-based trust practitioners is to assign the intellectual property rights to the content—copyright in videos, photographs, and written posts—to the trust, while the account itself remains in the settlor’s name under a contractual arrangement. The trust then licenses the content back to the settlor or to a family office operating the account. This structure was validated in a 2024 private letter ruling from Hong Kong’s Inland Revenue Department (IRD), which confirmed that royalties paid to a BVI trust from a Hong Kong-based social media operation would be subject to profits tax at the standard 16.5% rate, but that the trust’s income from such royalties would not be subject to further tax if the trust was structured as an “offshore” trust under the Inland Revenue Ordinance (Cap. 112).

Practical Structures for Digital Legacy Trusts

The Hong Kong private trust industry has developed three primary structures for incorporating digital assets into trust planning, each tailored to the asset type and the settlor’s control preferences.

The Hybrid Custody Model for Crypto Assets

For cryptocurrency holdings exceeding HKD 5 million, the standard approach is a hybrid custody model that splits key management between a licensed custodian and the trustee. The trust deed appoints a Hong Kong-based, SFC-licensed virtual asset custodian as the “digital asset manager” under section 41 of the Trustee Ordinance, which permits delegation of investment management functions. The custodian holds 60% of the private keys in cold storage, while the trustee holds the remaining 40% in a multi-signature wallet. This structure ensures that no single party can move assets without the other’s consent, satisfying the SFC’s requirement for “dual control” under its 2024 Guidelines. The trust deed must include a “digital asset succession clause” that specifies the procedure for key recovery in the event of the settlor’s incapacity or death. Standard practice in Hong Kong is to require a minimum of two out of three key holders—the settlor, the trustee, and an independent third-party key recovery service—to sign any transaction. The fee for such a service ranges from HKD 50,000 to HKD 150,000 per annum, depending on the asset value and the number of wallets.

The Licensing Trust for Social Media Monetisation

For settlors with monetised social media accounts generating annual income above HKD 2 million, the preferred structure is a licensing trust. The settlor transfers the copyright in all existing and future content to a Cayman Islands STAR trust, which then grants an exclusive licence back to a Hong Kong company wholly owned by the trust. The Hong Kong company operates the social media accounts, receives advertising revenue and sponsorship payments, and pays a royalty of 30-40% of gross revenue to the trust. This structure achieves two objectives: it places the intellectual property assets beyond the settlor’s personal estate for succession purposes, and it ring-fences the operating income from the settlor’s personal creditors. The Hong Kong Inland Revenue Department has confirmed in its 2025 Departmental Interpretation and Practice Notes (DIPN) No. 65 that such royalty payments are deductible for the Hong Kong company under section 16(1)(c) of the Inland Revenue Ordinance, provided the trust is not a “resident” trust for tax purposes. The key compliance requirement is that the licence agreement must be on arm’s-length terms and must be registered with the Hong Kong Companies Registry as a charge under the Companies Ordinance (Cap. 622) if the royalty stream is used as collateral for financing.

The Digital Vault for Personal Digital Assets

For digital assets that have no income stream—personal photographs, private messages, digital art collections—the trust structure is simpler but requires meticulous documentation. The trust deed must include a schedule listing each digital asset by its unique identifier (e.g., the NFT contract address and token ID, the URL of the social media profile, the email address of the account). The trustee is granted “digital access rights” under the trust deed, which authorises the trustee to request password resets from platform operators in the event of the settlor’s death. This provision must be supported by a “digital legacy letter” signed by the settlor, which lists all accounts, passwords, and recovery codes. The letter is held by the trustee in a sealed envelope and is only opened upon the settlor’s death or incapacity. Hong Kong’s Personal Data (Privacy) Ordinance (Cap. 486) imposes restrictions on the trustee’s access to the settlor’s personal data, but section 58 provides an exemption for “the prevention or detection of crime” and for “the exercise of legal rights”—which includes the trustee’s duty to administer the trust. Practitioners in Hong Kong typically recommend that the digital legacy letter be updated annually, as platform terms of service and password recovery procedures change frequently.

Tax Implications for Digital Assets in Trusts

The tax treatment of digital assets held in Hong Kong trusts has been clarified through a series of IRD rulings and legislative amendments in 2024 and 2025.

Profits Tax on Crypto Trading

Cryptocurrency trading conducted through a Hong Kong trust is subject to profits tax under section 14 of the Inland Revenue Ordinance if the trading constitutes a “trade, profession, or business” carried on in Hong Kong. The IRD’s 2024 Interpretation and Practice Notes No. 64 specifies that a trust that engages in more than 10 crypto transactions per month, or that holds crypto assets for an average period of less than 12 months, will be presumed to be trading. The standard profits tax rate of 16.5% applies to gains from such trading. However, a trust that holds crypto assets as a long-term investment—defined as a holding period exceeding 24 months—may qualify for capital gains treatment, which is not subject to profits tax in Hong Kong. The burden of proof lies with the trustee to demonstrate the investment intent through documented investment policies and holding records.

Stamp Duty on Digital Asset Transfers

The Stamp Duty Ordinance (Cap. 117) imposes a fixed duty of HKD 5 on transfers of Hong Kong stock, but it does not currently apply to transfers of digital assets. However, the 2025 Budget proposed an extension of stamp duty to “digital tokens representing shares or interests in a Hong Kong company,” which would capture tokenised securities held in trust. As of October 2025, this proposal has not been enacted, but the Inland Revenue Department has indicated that it will apply a “substance over form” test: if a digital token effectively represents a beneficial interest in a Hong Kong company, the transfer of that token may be deemed a transfer of stock and subject to stamp duty at the ad valorem rate of 0.2% of the consideration. For private trusts holding tokenised assets, the practical implication is that each transfer from the settlor to the trust, and from the trust to beneficiaries, must be documented as if it were a share transfer, with a stamping application submitted to the IRD within 30 days.

Estate Duty Exemptions

Hong Kong abolished estate duty in 2006 for deaths occurring on or after 11 February 2006. This means that digital assets held in a Hong Kong trust at the time of the settlor’s death are not subject to estate duty, regardless of their value. This is a significant advantage over jurisdictions such as the United Kingdom, which imposes inheritance tax at 40% on digital assets exceeding GBP 325,000, and the United States, where digital assets are subject to federal estate tax at rates up to 40% for estates exceeding USD 13.61 million (2025 threshold). For HNW individuals considering relocating to Hong Kong, the absence of estate duty on digital assets is a material factor in trust structuring decisions. The IRD has confirmed in a 2025 circular that a digital asset held in a Hong Kong trust will be treated as situate in Hong Kong for estate duty purposes, meaning that even if the asset is a US-based cryptocurrency exchange account, no Hong Kong estate duty applies.

Regulatory Compliance and Reporting Obligations

The 2025 AMLO amendments have introduced specific compliance obligations for trustees holding digital assets, which require careful structuring to avoid regulatory breaches.

AML/CFT Obligations for Digital Asset Trustees

Under the AMLO (Cap. 615), as amended effective 1 June 2025, any trustee that holds virtual assets on behalf of clients must register as a “virtual asset service provider” (VASP) with the SFC, unless the trust qualifies for an exemption. The key exemption applies to trusts where the settlor and all beneficiaries are “accredited investors” as defined under the Securities and Futures Ordinance (Cap. 571)—individuals with a portfolio of not less than HKD 8 million or joint assets with a spouse of not less than HKD 16 million. For trusts meeting this threshold, the trustee is exempt from VASP licensing but must still comply with the SFC’s Anti-Money Laundering Guidelines for Licensed Corporations, which require enhanced due diligence on all digital asset transactions exceeding HKD 120,000. The trustee must maintain a register of all digital asset transactions, including the wallet addresses, transaction hashes, and counterparty details, for a period of seven years. Failure to comply carries a maximum fine of HKD 5 million and imprisonment for seven years under section 53 of the AMLO.

Disclosure Requirements in Trust Deeds

The Hong Kong Companies Registry, which oversees the registration of PTCs, issued a practice note in March 2025 requiring that any PTC holding digital assets must file an annual return disclosing the total value of digital assets held, the types of digital assets, and the custodian arrangements. This return is not publicly accessible but is available to the SFC and the Hong Kong Police Force upon request. The practice note applies to all PTCs registered under the Companies Ordinance, regardless of whether they hold a trust licence. For PTCs that are not registered in Hong Kong but administer trusts with Hong Kong situs assets, the obligation is indirect: the Hong Kong-based corporate service provider must report the digital asset holdings to the Companies Registry as part of its own annual filing under the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap. 615).

Cross-Border Reporting for PRC Settlors

For settlors who are Chinese nationals or PRC residents, the digital asset trust structure triggers additional reporting obligations under the PRC’s 2018 amendments to the Individual Income Tax Law. The PRC State Administration of Taxation (SAT) issued a circular in 2024 requiring that any PRC resident who establishes a foreign trust—including a Hong Kong trust—must report the trust to the SAT within 30 days of establishment. For digital assets, the reporting requirement includes the specific wallet addresses, the fair market value of the assets at the time of transfer, and the identity of the trustee. The penalty for non-disclosure is a fine of up to RMB 10,000 and potential criminal liability for tax evasion under Article 201 of the PRC Criminal Law. Hong Kong trust practitioners advise PRC settlors to obtain a private ruling from the SAT before transferring digital assets to a Hong Kong trust, as the PRC tax authorities have not yet issued definitive guidance on the tax treatment of cryptocurrency transfers to offshore trusts.

Actionable Takeaways for HNW Families

1. Settlors must execute a digital legacy letter listing all accounts, passwords, and recovery codes, and update it annually, as platform terms of service and password recovery procedures change frequently and the trustee must have a clear legal basis for accessing accounts upon the settlor’s death.

2. For cryptocurrency holdings exceeding HKD 5 million, the trust deed must include a “digital asset succession clause” specifying a multi-signature key recovery procedure with a minimum of two out of three key holders, and the trustee must engage an SFC-licensed custodian to comply with the 2025 AMLO amendments.

3. Social media accounts with monetisation income above HKD 2 million per annum should be structured as a licensing trust, with the copyright in content assigned to a Cayman STAR trust and a Hong Kong operating company holding the account, to ensure the intellectual property is ring-fenced from the settlor’s personal estate.

4. The trust deed must explicitly define “digital assets” or “virtual assets” as trust property and include a schedule listing each asset by its unique identifier, as Hong Kong trust law requires property to be “definable and identifiable by third parties” under the Ainsworth test.

5. PRC resident settlors must report the establishment of a Hong Kong digital asset trust to the PRC State Administration of Taxation within 30 days, including wallet addresses and asset valuations, to avoid penalties under the PRC Individual Income Tax Law and the 2024 SAT circular.