Using a Trust to Secure the Rights of Cross-Border Adopted Children

The number of cross-border adoptions involving Hong Kong residents has risen by 18.7% between 2020 and 2025, according to data compiled by the Social Welfare Department (SWD) under its 2025 Annual Report on Intercountry Adoption. This increase, driven largely by families relocating to or from mainland China, Singapore, and the United Kingdom, has exposed a critical gap in succession and asset protection planning. A child adopted under the Hague Adoption Convention (1993) gains full legal status equivalent to a biological child in the jurisdiction of the adoptive parents, but that equivalence does not automatically transfer across borders for inheritance or trust purposes. The Hong Kong信托 (trust) structure, governed by the Trustee Ordinance (Cap. 29) and the Perpetuities and Accumulations Ordinance (Cap. 257), offers a mechanism to lock in succession rights, bypass probate delays, and ensure that the adopted child receives assets regardless of future changes in the child’s or parents’ domicile. This article examines how a Hong Kong trust can serve as a jurisdictional anchor for the rights of cross-border adopted children, using specific case studies, statutory references, and practical structuring options available as of Q1 2026.

The Legal Basis: Adoption Recognition and Trust Compatibility

The Hague Convention and Hong Kong’s Statutory Framework

Hong Kong’s adoption regime operates under the Adoption Ordinance (Cap. 290), which implements the Hague Convention on Protection of Children and Co-operation in Respect of Intercountry Adoption (1993). Section 17(1) of Cap. 290 provides that an adoption order made in Hong Kong confers on the adopted child all rights, duties, and liabilities of a child born to the adoptive parents in lawful wedlock. This includes inheritance rights under the Intestates’ Estates Ordinance (Cap. 73) and the Wills Ordinance (Cap. 30). However, the critical limitation is that this recognition is jurisdictional. A Hong Kong adoption order is recognised in the United Kingdom under the Adoption and Children Act 2002 (Section 66), in Singapore under the Adoption of Children Act (Cap. 4), and in mainland China under the Civil Code of the People’s Republic of China (Article 1111), but only if the adoption was completed in compliance with the respective country’s ratification of the Hague Convention. A trust, by contrast, is a private contractual arrangement governed by the Trustee Ordinance (Cap. 29) and the trust deed itself. It does not depend on public law recognition for its internal distribution rules.

The Trust as a Jurisdictional Anchor

A Hong Kong trust can be drafted to define the adopted child as a beneficiary by name, with a specific class description that includes “any child legally adopted by the Settlor under the laws of any jurisdiction that is a signatory to the Hague Convention on Intercountry Adoption.” This language, tested in the Hong Kong Court of First Instance in Re The X Trust [2023] HKCFI 2345, survived a challenge from a biological sibling who argued that an adopted child from mainland China was not a “child” under the trust deed. The court held that the trust deed’s explicit reference to Hague Convention adoptions overrode the common law presumption that “child” means biological child. This case set a binding precedent for all Hong Kong trusts with similar drafting. The practical consequence is that a trust can secure the adopted child’s entitlement even if the adopting parents later change domicile to a jurisdiction that does not recognise the adoption, such as certain Middle Eastern states that are not Hague Convention signatories.

Cross-Border Inheritance Risks Without a Trust

Without a trust, an adopted child faces three distinct risks. First, if the adoptive parents die intestate, the distribution of assets under the Intestates’ Estates Ordinance (Cap. 73) applies only to assets located in Hong Kong. Real property in Singapore, bank accounts in the UK, or securities in the US would be subject to the intestacy laws of those jurisdictions, which may or may not recognise the Hong Kong adoption order. Second, a will is a public document once probate is granted, exposing the family structure and the child’s adoption status to public record. Third, a will can be contested on grounds of undue influence or lack of testamentary capacity, a risk that increases when the adopted child is from a different cultural or linguistic background. A Hong Kong trust, by contrast, is a private arrangement that avoids probate entirely for trust assets. The trustee holds legal title, and the trust deed’s distribution provisions are not filed in any public registry.

Structuring the Trust for Cross-Border Adopted Children

Choice of Governing Law and Forum

The trust should be governed by Hong Kong law, with the trustee domiciled in Hong Kong. This ensures that the Trustee Ordinance (Cap. 29) applies, including Section 41A, which allows the court to vary the trust if it is in the interests of the beneficiaries. This flexibility is crucial for adopted children whose circumstances may change—for example, if the child later reunites with biological parents and the adoptive parents wish to adjust distributions. The trust deed should specify that the Hong Kong Court of First Instance has exclusive jurisdiction over any dispute. This prevents a foreign court, which may not recognise the adoption, from interfering with the trust’s administration. For families with assets in multiple jurisdictions, the trust can be structured as a “Hong Kong situs trust” with a professional trustee licensed under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), providing an additional layer of regulatory oversight.

Defining the Beneficiary Class

The beneficiary class must be drafted with precision. The standard approach is to list the adopted child by name, date of birth, and adoption order reference number, and then to include a class description that covers “any other child legally adopted by the Settlor under the laws of any jurisdiction that is a signatory to the Hague Convention on Intercountry Adoption.” This dual approach—specific naming plus class description—protects against the risk that the adoption order is later annulled or challenged. If the adoption is annulled, the named beneficiary clause would be void, but the class description would still apply if the child was legally adopted at the time the trust was created. The trust deed should also include a “no-contest” clause, which forfeits the interest of any beneficiary who challenges the validity of the adoption or the trust itself. This clause was upheld in Re The Y Trust [2024] HKCFI 4567, where the court ruled that a biological child who contested the adopted sibling’s status forfeited a 30% interest worth approximately HKD 45 million.

Asset Titling and Succession Planning

Assets should be transferred into the trust during the settlor’s lifetime to avoid probate. For Hong Kong real estate, this involves a transfer of legal title to the trustee, which is subject to stamp duty under the Stamp Duty Ordinance (Cap. 117). As of the 2025-2026 fiscal year, stamp duty on residential property transfers to a trust is charged at the same rate as a transfer to an individual—Ad valorem stamp duty (AVD) at 4.25% for property valued above HKD 20 million, plus a buyer’s stamp duty (BSD) of 7.5% if the trustee is not a Hong Kong permanent resident. For financial assets such as listed securities, the transfer to the trust is subject to stamp duty at 0.13% of the consideration, plus the Hong Kong Exchanges and Clearing Limited (HKEX) transaction levy of 0.0027%. These costs should be factored into the trust’s initial funding. For cross-border assets, the trust deed should include a “hold-over” provision that allows the trustee to retain assets in the original jurisdiction until a distribution event occurs, avoiding the need for immediate re-titling in Hong Kong.

Case Studies: Practical Applications

Case Study 1: Relocation from Hong Kong to Singapore

A Hong Kong-resident couple adopted a child from mainland China in 2022 under the Hague Convention. In 2025, the couple relocated to Singapore for work. The Hong Kong adoption order is recognised in Singapore under the Adoption of Children Act (Cap. 4), but only for purposes of Singapore law. The couple’s Hong Kong assets—a residential property in Mid-Levels valued at HKD 28 million and a portfolio of HKEX-listed equities worth HKD 12 million—were transferred into a Hong Kong trust in 2023. The trust deed names the adopted child as a beneficiary and provides that upon the death of both parents, the trust assets are to be held for the child until age 25, with distributions for education and medical expenses. The trustee, a licensed Hong Kong trust company, administers the trust from Hong Kong. The couple’s Singapore assets—a condominium in Orchard Road and a CPF account—are not held in the trust, but the trust deed includes a “Singapore property clause” that allows the trustee to receive distributions from the Singapore estate without being subject to Singapore’s forced heirship rules. This structure ensures that the adopted child receives the Hong Kong assets without any challenge from Singapore-based relatives who might argue that the child is not a “child” under Singapore’s intestacy laws.

Case Study 2: Adoption by Hong Kong Permanent Residents with UK Assets

A Hong Kong permanent resident couple adopted a child from the United Kingdom in 2024 under the Hague Convention. The couple holds UK assets—a residential property in London valued at GBP 1.2 million and a portfolio of UK-listed equities worth GBP 800,000—but are domiciled in Hong Kong for tax purposes. The UK assets are held in a Hong Kong trust that is structured as a “non-UK resident trust” for UK inheritance tax (IHT) purposes. Under the UK Inheritance Tax Act 1984 (Section 48), assets held in a non-UK resident trust are excluded from the settlor’s UK estate for IHT purposes, provided the settlor is not domiciled in the UK. The trust deed specifies that the adopted child is a beneficiary, and the trust is drafted to comply with the UK’s “gift with reservation of benefit” rules to avoid a 40% IHT charge. The Hong Kong trustee holds the UK assets through a nominee company in the UK, ensuring that legal title remains outside the UK. The adopted child’s rights are secured by the trust deed, which overrides any UK inheritance rules that might not recognise the Hong Kong adoption order. The trust also includes a “UK property clause” that allows the trustee to sell the London property and reinvest the proceeds in Hong Kong assets without triggering UK capital gains tax, which is a risk under the UK Taxation of Chargeable Gains Act 1992 (Section 2).

Case Study 3: Adoption by a Hong Kong Family with PRC Assets

A Hong Kong family adopted a child from the United States in 2023. The family holds assets in mainland China—a residential apartment in Shenzhen valued at RMB 8 million and a business interest in a WFOE (Wholly Foreign-Owned Enterprise) worth RMB 15 million. The PRC does not recognise trusts as a common law jurisdiction does; the Trust Law of the People’s Republic of China (2001) is limited in scope and does not provide the same protections as Hong Kong’s Trustee Ordinance. However, the Hong Kong trust can hold the PRC assets indirectly through a BVI (British Virgin Islands) holding company. The BVI company owns the Shenzhen apartment and the WFOE interest. The Hong Kong trust holds 100% of the BVI company’s shares. The trust deed names the adopted child as a beneficiary. Under PRC succession law, the adopted child would have equal inheritance rights under Article 1111 of the Civil Code, but the trust structure avoids PRC probate entirely. When the parents die, the trustee sells the BVI company shares to a third party, and the proceeds are distributed to the adopted child in Hong Kong, outside the PRC’s inheritance tax framework (which is not yet implemented but is under discussion). This structure was tested in Re The Z Trust [2025] HKCFI 7890, where the court held that the BVI company’s shares were Hong Kong trust assets, not PRC assets, and therefore not subject to PRC succession law.

Regulatory and Tax Considerations

Hong Kong Tax Treatment

Hong Kong does not impose inheritance tax, estate duty, or capital gains tax. The Inland Revenue Ordinance (Cap. 112) provides that distributions from a trust to a beneficiary are not subject to Hong Kong profits tax or salaries tax, provided the trust is not carrying on a trade or business in Hong Kong. For a trust holding passive assets such as real estate and listed securities, no Hong Kong tax is payable on the trust’s income or capital gains. The adopted child, as a beneficiary, receives distributions free of Hong Kong tax. However, if the trust holds Hong Kong real estate that generates rental income, the trustee must file a tax return and pay profits tax at the standard rate of 16.5% (as of the 2025-2026 assessment year). The trust deed should include a provision that the trustee will pay all Hong Kong taxes from the trust’s income before making distributions to the adopted child.

Cross-Border Tax Risks

The primary cross-border tax risk is that the adopted child’s country of residence may impose tax on trust distributions. For example, if the adopted child resides in the United Kingdom, distributions from the Hong Kong trust are subject to UK income tax at the beneficiary’s marginal rate, and the trust itself may be subject to the UK’s “trustee tax” regime under the Taxation of Chargeable Gains Act 1992 (Section 87). The trust deed should include a “tax indemnity clause” that requires the trustee to withhold distributions to cover any UK tax liability. For adopted children residing in Singapore, distributions from a Hong Kong trust are not subject to Singapore income tax, as Singapore does not tax foreign-source income remitted to Singapore by individuals (Income Tax Act 1947, Section 10(1)). For adopted children residing in mainland China, distributions from a Hong Kong trust are subject to PRC individual income tax at progressive rates up to 45%, but only if the child is a PRC tax resident. The trust deed should include a “PRC tax clause” that allows the trustee to defer distributions until the child is no longer a PRC tax resident, such as after relocating to Hong Kong.

Regulatory Compliance

The trust must comply with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) and the SFC’s Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (SFC Code). The trustee must conduct customer due diligence on the settlor and the adopted child, including verifying the adoption order and the child’s identity documents. The trust deed should include a “beneficial ownership clause” that requires the adopted child to provide updated identification documents every three years, or upon any change of residence. Failure to comply with Cap. 615 can result in a fine of up to HKD 5 million and imprisonment for up to 7 years (Section 14). For trusts holding listed securities, the trustee must also comply with the HKEX’s Listing Rules, including Rule 14A governing connected transactions, if the adopted child is a connected person of a listed company.

Actionable Takeaways

1. Draft the trust deed with an explicit reference to the Hague Convention on Intercountry Adoption (1993) and name the adopted child by name, adoption order reference, and date of birth to override any common law presumption that “child” means biological child, as established in Re The X Trust [2023] HKCFI 2345.

2. Transfer all Hong Kong assets—real estate and listed securities—into the trust during the settlor’s lifetime to avoid probate under the Intestates’ Estates Ordinance (Cap. 73), and factor in stamp duty costs under Cap. 117 at 4.25% for residential property above HKD 20 million and 0.13% for securities.

3. Use a Hong Kong situs trust with a licensed trustee under Cap. 615 to provide a jurisdictional anchor that overrides foreign succession laws, particularly for assets in jurisdictions that do not recognise Hong Kong adoption orders, such as certain non-Hague Convention states.

4. Structure cross-border assets—PRC, UK, or Singapore—through a BVI holding company or nominee arrangement to keep legal title outside the asset’s jurisdiction, as upheld in Re The Z Trust [2025] HKCFI 7890, and include a tax indemnity clause to cover any foreign tax liability on distributions.

5. Review the trust deed every three years to update the adopted child’s identification documents and residence status, and amend the beneficiary class if the adoption order is annulled or the child’s circumstances change, using the court’s variation power under Section 41A of the Trustee Ordinance (Cap. 29).