China Testamentary Trusts and Family Wealth Planning: A Guide for Cross-Border Families

Introduction

A China estate plan built around a will alone often fails at the exact moment it is needed — not because the wishes are unclear, but because the will form or the trust structure does not survive scrutiny. China's Civil Code gives a family two trust tools: a testamentary trust, created by will and taking effect at death, and a family trust, set up during life with a licensed trust company. For a family with assets, beneficiaries or heirs across borders, the second question is always which law applies.

The testamentary trust: Article 1133 of the Civil Code

Article 1133 of the Civil Code provides that a natural person may establish a testamentary trust by will. The structure is simple in concept and demanding in execution: the will names a trustee, transfers the estate (or part of it) to the trust, and directs the trustee to distribute to beneficiaries over time or on conditions. Its real value is control — a parent can hold assets for a minor child, protect a beneficiary from a bad marriage or bad debts, and stage distributions instead of handing over a lump sum. The catch is that the testamentary trust is only as good as the will that creates it.

The six will forms and why they decide everything

The Civil Code recognises six will forms, each with its own validity rules:

• Holographic will (Article 1134) — written entirely by the testator's own hand, signed, and dated;
• Will written by another (Article 1135) — requires at least two witnesses;
• Printed will (Article 1136) — each page must be signed by the testator and at least two witnesses;
• Audio-video will (Article 1137) — the testator and two witnesses must record their names or images and the date;
• Oral will (Article 1138) — only in an emergency, before two witnesses, and it lapses once the emergency passes;
• Notarised will (Article 1139) — made through a notary public.

A witness who is an heir, a legatee, or a person with an interest in the estate cannot serve as a witness, and the failure of a single formal requirement is enough to invalidate the will — which invalidates the testamentary trust inside it.

The family trust: set up during life

A family trust is established during the settlor's life, with a licensed trust company acting as trustee. Under the regulatory framework that classifies trust business, a family trust is a distinct category, and in practice it carries a meaningful entry threshold — commonly stated as no less than RMB 10 million in trust property. Its advantage over a testamentary trust is certainty: the assets are transferred into the trust now, the trustee's duties are governed by the Trust Law, and the arrangement does not depend on a will surviving challenge. The cost is the threshold, the trustee fees, and the loss of direct control over the settled assets.

Cross-border estates: which law applies

Where an estate touches more than one country, China's Law on the Application of Laws to Foreign-related Civil Relations supplies the answers: succession to immovable property is governed by the law of the place where the property is located, while succession to movable property is governed by the law of the deceased's habitual residence at death (Article 31). The formal validity of a will is governed by the law of the testator's habitual residence, nationality, or the place the will was made, whichever upholds it (Article 32), and the effect of the will is governed by the testator's habitual residence or nationality at the time the will was made or at death (Article 33). A family split between Nanjing, Hong Kong and, say, California therefore needs the conflict-of-laws analysis done before the will is signed, not after.

Practical checklist for a cross-border family

• Identify the assets and their situs first — real property follows the law of its location, which a Chinese will cannot override;
• Choose the right tool — a testamentary trust for staged control after death, a family trust for certainty during life if the threshold is met;
• Check the will's form against every jurisdiction that might review it;
• Align the trustee and the beneficiaries, and keep the trust property clearly separated;
• Confirm the current Civil Code text and the family-trust threshold with the regulator before relying on any specific number.