During the post war period Hong Kong has experienced unprecedented growth as it has developed into an economic powerhouse that is one of the foremost international financial centres of the world. With its explosive economic growth, bustling trading port, high population growth and the never-ending additions to its spectacular skyline, Hong Kong is home to some of the wealthiest families in the world. Last year nine Hong Kong families made it onto Forbes Asia's 50 Richest Families List.

There is a well-known Chinese saying that "wealth does not survive three generations", but over the past decade the third generation of the rich families in Hong Kong have been setting up family offices, and started looking for professional and effective asset management strategies to prove this old saying wrong.

Trusts, in particular, became the default setting for asset protection, asset consolidation and succession planning. While having an understanding on the benefits of setting up trusts, families are generally not willing to give up their control over the assets and will often seek to reserve certain powers to themselves. As explained in this article, trusts that are controlled by settlors have become increasingly vulnerable to attacks, as the courts develop ways of enabling third parties (usually creditors or divorcing spouses) to enforce orders against trust assets.

The extent of powers and functions given to a settlor, a protector and the trustee are therefore one of the most critical decisions to make when setting up a trust.

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