The Trust Law (Amendment) Bill 2013 (the "Trust Law Reform") is due to come into force on 1 December 2013.
The Trust Law Reform is the first major change to the Trustee Ordinance (Cap. 29) and the Perpetuities and Accumulations Ordinance (Cap. 257) since 1934, and will bring Hong Kong more into line with other common law jurisdictions such as the United Kingdom and Singapore.
Summary of key changes
The key changes include:
- Imposing a statutory duty of care on trustees (although this duty may be excluded by the trust instrument).
- A prohibition against a professional trustee excluding their liability for wilful misconduct or gross negligence.
- A new right for beneficiaries to remove and appoint new trustees without reference to the court.
- Statutory rights for settlors to reserve investment powers to themselves in the trust instrument.
- The introduction of anti-foreign forced inheritance provisions, to avoid the possible claw-back of trust assets under foreign succession laws.
- The abolition of the rule against perpetuity and the rule against excessive accumulations of income, which will allow a Hong Kong trust to last for an unlimited period of time.
The enhancement of trustee’s deemed powers including:
- The power to appoint agents to perform most of their trustee functions (save for those which are considered to be the core or essence of a trustee’s duties and responsibilities) subject to statutory safeguards on such appointment;
- An extended power to insure trust property against the risk of loss or damage up to its market value or full replacement value;
- Statutory right for professional trustees to receive reasonable remuneration; and
- A relaxation of the rules on authorised investments giving trustees more flexibility and choices in the investment of trust property.
Limited opt outs from the statutory provisions are permitted, generally by making express provision under the trust instrument.
What you need to do
- Review and, where necessary, amend your existing trust deeds to ensure that settlors, trustees and beneficiaries receive the intended benefits and protection from the Trust Law Reform and that this does not result in any unintended consequences.
- Consider excluding the impact of the Trust Law Reform where relevant and where permitted.
- Update your compliance procedures.