Before a policy goes into a trust: structure, statute, trustee and cost

Definition: a trust relationship, not an insurance product

An insurance trust places a life policy, or the money that policy will pay, under a trustee who holds, manages and distributes it according to a trust deed. Three parties make up the arrangement: the settlor (usually the policy owner), the trustee (a licensed trust company, a bank's trustee subsidiary or a private trust company) and the beneficiaries. The insurer is not one of them. It pays under the policy terms to the policy owner or to the beneficiary registered on the policy; what the trustee then does with the money is governed by the deed and is of no concern to the insurer.

That boundary defines everything that follows. The policy is a contract between insurer and policy owner, regulated under the Insurance Ordinance (Cap. 41) and by the Insurance Authority. The trust is an equitable relationship between settlor and trustee, governed by the Trustee Ordinance (Cap. 29), the Perpetuities and Accumulations Ordinance (Cap. 257) and the common law. Each document has its own terms, fees and failure modes. A lapsed policy can leave the trust empty; a trust held invalid leaves the policy intact, with the proceeds paid under the policy's own beneficiary nomination or into the estate.

Hong Kong sales material often describes a policy's own features (instalment payment of the death benefit, change of life insured, policy splitting) as "trust-like". This site does not call them trusts: they are contract terms with no trustee and no deed, and the Trustee Ordinance does not apply to them.

Two structures

Both structures appear in public Hong Kong documents. AIA's press release of 11 March 2019 describes a standby trust as one that "stays dormant" during the owner's lifetime and is "activated only after receiving the sum assured", with the owner as settlor assigning the trust as the policy's beneficiary; the referral service then required a single premium of US$1 million or an annual premium of US$100,000 on eligible products. Prudential Hong Kong's knowledge page of 11 June 2026 lists insurance policies among the assets that can be placed in a family trust.

The legal framework and the 2013 reform

Hong Kong trust law rests on the common law and two statutes: the Trustee Ordinance of 1934 and the Perpetuities and Accumulations Ordinance of 1970. The Trust Law (Amendment) Ordinance 2013 (Ord. No. 13 of 2013) was passed on 17 July 2013, gazetted on 26 July 2013 and came into operation on 1 December 2013. Six changes matter most for an insurance trust:

1. Statutory duty of care (new s.3A and Schedule 3): trustees must exercise such care and skill as is reasonable in the circumstances when investing, appointing agents, nominees and custodians, and insuring, taking into account any special knowledge they hold or hold themselves out as having. The old implied indemnity in s.32 was repealed.
2. Trustee remuneration (new Part IVB, ss.41S–41V): a trustee acting in a business or profession may charge reasonable remuneration out of the trust fund where the instrument is silent.
3. Exemption clauses (new Part IVC, s.41W): a professional trustee cannot be exempted from liability for fraud, wilful misconduct or gross negligence; the control applies to all trusts from one year after commencement.
4. Reserved powers (new s.41X): a trust is not invalid only because the settlor reserves any or all powers of investment or asset management; a trustee acting on those instructions is not in breach.
5. Foreign forced heirship (new s.41Y): for a trust governed by Hong Kong law whose trustees are all ordinarily resident or incorporated (or centrally managed) in Hong Kong, a lifetime transfer of movable property into the trust is not affected by a foreign law of inheritance if the settlor had capacity under Hong Kong law, the law of domicile or nationality, or the proper law of the transfer.
6. Perpetuities and accumulations (new s.3A of Cap. 257): the rule against perpetuities and the rule against excessive accumulations have no effect for instruments taking effect on or after 1 December 2013; a trust may continue for an unlimited period unless its terms provide otherwise. Charitable trusts remain limited to 21 years of accumulation (s.3B).

The reform also added ss.40A–40D, allowing adult beneficiaries who are together absolutely entitled to direct the retirement or appointment of trustees, and Part IVA on agents, nominees and custodians.

Trustee, beneficiary, protector and letter of wishes

The trustee holds legal title and owes fiduciary duties. In Hong Kong it may be a trust company registered under Part VIII of the Trustee Ordinance (minimum fully paid-up capital HK$3,000,000 and a deposit or bank guarantee of HK$1,500,000 with the Director of Accounting Services; application fee HK$11,250 and certificate fee HK$840, Companies Registry pamphlet of May 2025); a trust or company service provider licensed under Part 5A of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) since 1 March 2018 (application fee HK$3,440 plus HK$975 per person subject to the fit-and-proper test, licence valid 3 years, renewal at least 60 days before expiry, Registry pamphlet of March 2025); an authorized institution or its subsidiary, which must also follow the HKMA's Supervisory Policy Manual module TB-1 and its Code of Practice for Trust Business (compliance by 1 June 2023, annual declaration thereafter); or a private trust company or individual.

Beneficiaries may be named or described as a class; their interests may be fixed (enforceable at a set time for a set amount) or discretionary (dependent on the trustee's judgement). A protector is an optional office created by the deed, usually with power to replace the trustee and consent to major distributions. A letter of wishes is the settlor's non-binding guidance on how discretion should be exercised. The Inland Revenue Department's AEOI guidance treats settlor, trustee, protector and beneficiaries alike as controlling persons.

Will, nomination or trust

Hong Kong abolished estate duty with effect from 11 February 2006, so saving estate duty is not a reason to set up an insurance trust here. Section 13 of Cap. 182 provides that a policy expressed to be for the benefit of the insured's spouse or children creates a trust in their favour, and that while the trust remains unperformed the policy money does not form part of the insured's estate or become subject to the insured's debts. Many families therefore already have the "outside the estate, protected from creditors" effect without any deed; what a deed adds is management, conditions and discretion.

Costs

Fees run in four layers: a one-off set-up fee (due diligence, drafting), a fixed annual fee (lower for a standby trust before the claim), an asset-based management fee once the trust holds real assets, and charges for amendments, change of trustee or termination. Public figures are scattered: Prudential Hong Kong's page of 11 June 2026 puts annual management fees for family trusts at about 0.5%–2% of net asset value (0.2%–0.3% for simplified models) and set-up costs for traditional family trusts in the hundreds of thousands of Hong Kong dollars; AIA's 2019 referral waived the set-up fee for trusts established within six months of policy issue; Hong Kong Life's allowance form of July 2024 reimburses up to HK$5,000 or HK$8,000 of the annual fee of an insurance standby trust set up with a licensed Hong Kong trust company, within the first three policy years. These indicate scale and structure only; actual fees are those in the trustee's written schedule.

Risks, limits and cross-border families

A trust can be held invalid or a sham if the settlor keeps more than the investment and asset-management powers that s.41X protects; the policy's own risks (non-guaranteed bonuses, premium-financing loans, lapse) pass straight through to the trust; the trustee may fail or overcharge; and for modest policies with one adult beneficiary the fees outweigh any benefit. Cross-border families face a further layer that Hong Kong law does not control: Mainland residents must sign in Hong Kong and complete the Important Facts Statement for Mainland policyholders; the Mainland has been a reportable jurisdiction for AEOI since 2018, so settlor, protector and beneficiaries will be reported; and the Mainland tax treatment of overseas policy proceeds and trust distributions has no dedicated rule. This site assumes no tax outcome. The Chinese pages cover each of these points in detail.