TRUST

The concept of a trust may initially seem unfamiliar from a continental European perspective. While trusts have been one of the most established tools of wealth planning and multi-generational wealth preservation in common law jurisdictions for centuries, they remain less widely known in Austria and Central Europe and are therefore often subject to misunderstanding. In reality, a trust is not an exotic structure but a widely recognised legal arrangement used internationally by families, entrepreneurs, investors and high-net-worth individuals to protect, manage and transfer wealth to future generations.

At Laszlovari-Thoma Private & Family Office, our objective is to introduce clients not only to traditional banking, compliance and wealth planning solutions, but also to international structures that may be less familiar in continental Europe while representing long-established practice in many of the world's leading financial centres.

The following overview explains what a trust actually is, how it is used around the world, who may benefit from it and why, in certain circumstances, a Hong Kong Trust may be considered as part of an international wealth planning strategy.

What Is a Trust?

A trust is neither a business enterprise, an investment fund nor a traditional corporate entity. Rather, it is a legal framework that allows a defined pool of assets to be managed according to predetermined objectives for the benefit of designated individuals or beneficiaries.

A key characteristic of a trust is the separation of ownership, management and beneficial enjoyment of assets. The person establishing the trust defines its objectives and operating principles, appoints the beneficiaries and transfers the administration of the assets to a trustee, who manages them in accordance with the provisions set out in the trust deed.

The primary purpose of a trust is not investment activity or return generation, but the long-term preservation, management and orderly transfer of wealth across generations. For this reason, trusts have become one of the most widely recognised instruments of family wealth planning, succession planning and international wealth structuring in many jurisdictions around the world.

Who May Benefit from a Trust?

Although trusts are often associated with wealthy families, their use is considerably broader. They are not exclusively designed for ultra-high-net-worth individuals, but may also be relevant in situations where assets, family members or business interests span multiple jurisdictions.

A trust may be particularly relevant for:

• the long-term preservation of family wealth;
• succession and generational planning;
• the future transfer of businesses or ownership interests;
• the management of assets located in different countries;
• international families or families with members residing abroad;
• situations where the management and distribution of wealth are intended to be governed by clearly defined long-term principles;
• international circumstances requiring the coordination of legal, tax and compliance considerations across multiple jurisdictions.

Every trust is established to serve specific objectives. As such, its structure should always reflect the unique circumstances, priorities and long-term goals of the family, business or wealth structure involved.

How Does a Trust Work?

The fundamental principle of a trust is the separation of the roles associated with the ownership, management and beneficial enjoyment of assets.

Settlor

The settlor is the person who establishes the trust. They determine its purpose, define its governing principles and designate the beneficiaries. The assets transferred into the trust originally belong to the settlor.

Trustee

The trustee is responsible for administering and managing the trust assets in accordance with the provisions set out in the trust deed. The trustee acts within the applicable legal framework and is expected to exercise its duties in the best interests of the beneficiaries and in accordance with the objectives of the trust.

Beneficiary

A beneficiary is an individual or group of individuals entitled to benefit from the trust. Beneficiaries may include family members, private individuals and, in certain circumstances, organisations or charitable entities.

Trust Assets

Trust assets may include cash, investment portfolios, real estate, insurance arrangements, business interests and other forms of property.

The essence of a trust lies in the ability to establish clear rules governing the management, preservation and future distribution of wealth, thereby creating a long-term framework for wealth and succession planning.

Potential Benefits of a Trust

The benefits of a trust depend on the relevant jurisdiction, the type of trust involved, the composition of the assets and the legal and tax circumstances of the parties concerned. Accordingly, a trust should not be viewed as a universal solution, but rather as a wealth planning tool that requires careful consideration and professional assessment.

When properly structured, a trust may serve a number of important objectives, including:

Wealth Preservation and Long-Term Structure

A trust can provide a framework through which assets are managed as part of a long-term family or international wealth structure rather than being held solely through direct personal ownership.

Multi-Generational Planning

Trusts are widely used in succession and generational planning, particularly where the future management and transfer of wealth is intended to extend beyond a single inheritance event.

Protection of Family Wealth and Beneficiaries

A trust may allow the rules governing the use of assets, the designation of beneficiaries and the conditions of distributions to be established in advance within a clearly defined framework.

International Wealth Planning

Trusts can be particularly relevant for families, entrepreneurs and investors with assets, business interests or family connections across multiple jurisdictions.

Structured Management of Business Interests and Assets

In appropriate circumstances, a trust may be used to structure the long-term management of business interests, real estate holdings, investment portfolios, insurance arrangements and other assets.

Coordination of Legal, Tax and Compliance Considerations

Before establishing an international trust structure, it is essential to consider the legal, tax, succession and compliance requirements of all relevant jurisdictions. A trust can only fulfil its intended purpose when established within a transparent, well-documented and legally compliant framework.

Trusts and Continental European Solutions

The objectives of wealth planning and multi-generational wealth preservation are broadly similar around the world. However, different legal systems have developed different tools to achieve these goals.

While trusts are among the most widely recognised and commonly used wealth planning structures in common law jurisdictions, continental European countries have traditionally relied on foundations and other forms of wealth management arrangements.

In Austria, for example, the Privatstiftung has long been an established instrument of family wealth planning, while other countries have developed structures reflecting their own legal traditions. A trust does not necessarily compete with these solutions. Rather, it represents a different legal approach that may offer particular advantages in certain circumstances, especially where international families, cross-border assets or multi-jurisdictional structures are involved.

The selection of the most appropriate structure should always be based on the specific objectives of the family, business or wealth structure concerned, taking into account its geographical footprint, legal environment and long-term planning requirements.

Laszlovari-Thoma Private & Family Office does not act as a trustee, trust company or asset manager. Instead, we assist clients in exploring international wealth planning opportunities and connecting with the appropriate professional advisers and service providers. Through our international network of trusted partners, we can help clients gain a better understanding of different trust structures, assess the characteristics of various jurisdictions and facilitate introductions to legal, tax, compliance and fiduciary professionals where required.

Our approach is based on the principle that selecting the right structure is not about choosing a product, but about understanding the long-term objectives of a family, business or wealth structure and identifying the most appropriate solution to support those goals.

Professional Considerations