Protect Your Assets from Divorce, Bankruptcy, and Other Risks with a Private Trust

UniTrust Global
3 min readSep 15, 2023

Benefits of Setting Up a Private Trust: Asset Segregation and Protection Did you know that many celebrities and business owners prefer to use trusts to safeguard their assets from the risks associated with divorce or bankruptcy?

One of the advantages of establishing a private trust is asset protection. Trust assets have independence, meaning that once assets are transferred into the trust, they are held in the name of the trustee rather than the settlor, reducing the impact of potential risks such as divorce, bankruptcy, or other legal issues. This is because a trust provides an effective legal structure to help achieve the following objectives:

1. Asset Protection:

By injecting assets into a trust, ownership of the assets typically transfers to the trust rather than remaining in the individual or family’s name. This helps protect the assets from creditors, lawsuits, divorce, or other potential risks.

2. Divorce Risk Management:

In divorce cases, trusts can be used to safeguard one party’s assets from being subject to property division. By transferring assets into a trust, those assets are often not considered marital property, reducing the potential loss during divorce proceedings.

3. Bankruptcy Risk Management:

Trusts can also be utilized for bankruptcy risk management. When an individual or company faces bankruptcy, assets held within an established trust are typically shielded from being used to repay debts, protecting personal assets from the impact of the bankruptcy process.

4. Privacy Protection:

Trusts with jurisdiction in Hong Kong offer a higher level of privacy protection compared to banks or other financial services. Trusts are legally protected, and unless ordered by a court, trust institutions are not required to disclose trust assets or client (settlor) information to third parties. Thus, trust assets can be managed within a highly secure environment.

Separation of Ownership and Beneficial Rights of Trust Assets: Once a client (settlor) entrusts their assets to a trustee, ownership of those assets belongs to the trustee, while the corresponding benefits can be distributed according to the settlor’s wishes. Due to the transfer of ownership, these assets are isolated from the settlor, and regardless of the client’s circumstances, the trust property remains independent and unaffected.

According to the Trustee Ordinance, trust assets and the trust institution’s own assets must be kept separately, ensuring that the beneficiaries’ assets are not affected by the financial risks of the trust institution. This means that the trust institution must ensure that trust assets are managed separately from the company’s other funds, assets, and securities, avoiding commingling. Regardless of whether the trustee is dissolved, revoked, or bankrupt, the client’s trust property does not become part of its liquidation or bankruptcy estate.

If you want to learn more about trusts, stay tuned for our upcoming article in Knowledge of Trust.

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