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What is sham trust?

Dec 5, 2022

A sham trust is an invalid trust. If the truth of the matter is that the settlor retains full beneficial entitlement and there is no intention that the apparent beneficiaries will benefit, then what appears to be a trust may be deemed a sham. A sham trust will create this impression so that the settlor can maintain actual control of the trust. When a trust is created for an unlawful purpose, it is described as a sham trust.

These purposes may include:

  • Tax evasion;

  • Intent to defraud creditors;

  • Unlawful hiding of assets; or

  • Other fraudulent purposes

Action example:

  • The settlor instructs the trustee to transfer a significant lump sum of his trust fund to his personal bank or investment account, disregarding the beneficiary's rights and benefits.

How to prevent sham trusts arising?

UniTrust as a licensed trustee upholds the highest level of the statutory duty of care imposed under Trustee Ordinance (Cap 29) Section 3(A). One of our duties is to protect your assets from any suspicion of being a sham trust. UniTrust reserves the discretion right to proceed with any trust instruction and all transactions within a trust must be approved by our Legal and Compliance Department.

How Do Courts Treat Sham Trusts?

A sham trust will be regarded as void by a court. As a result, they will be treated as though they had never existed, and the property that was supposed to be managed by the trustee reverts back to the settlor or among creditors. In other words, the asset firewall will be demolished. It is likely that your trust will be exposed to banks, financial institutions, authorities, and even creditors. It is always possible for them to take action against the assets held by your trustee.

Ready to get started?

Unlock the power of trust with UTGL today. Take the first step by exploring our Trust Platform or create an account for an instantly rewarding experience.

© 2024 UTGL. All rights reserved.

Disclaimer: The information provided on this website is for informational purposes only. It should not be considered legal, financial or tax advice. UTGL makes no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors, omissions or delays in this information or any losses, injuries or damages arising from its display or use. All information is provided on an as-is basis.


This website may contain links to external websites that are not provided or maintained by or in any way affiliated with UTGL. Please note that the UTGL does not guarantee the accuracy, relevance, timeliness or completeness of any information on these external websites.


Links to external websites are provided as a courtesy and do not imply UTGL's endorsement of those sites or their content, products or services. UTGL assumes no liability for damages resulting from the use of or reliance upon the information provided herein.

Ready to get started?

Unlock the power of trust with UTGL today. Take the first step by exploring our Trust Platform or create an account for an instantly rewarding experience.

© 2024 UTGL. All rights reserved.

Disclaimer: The information provided on this website is for informational purposes only. It should not be considered legal, financial or tax advice. UTGL makes no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors, omissions or delays in this information or any losses, injuries or damages arising from its display or use. All information is provided on an as-is basis.


This website may contain links to external websites that are not provided or maintained by or in any way affiliated with UTGL. Please note that the UTGL does not guarantee the accuracy, relevance, timeliness or completeness of any information on these external websites.


Links to external websites are provided as a courtesy and do not imply UTGL's endorsement of those sites or their content, products or services. UTGL assumes no liability for damages resulting from the use of or reliance upon the information provided herein.

Ready to get started?

Unlock the power of trust with UTGL today. Take the first step by exploring our Trust Platform or create an account for an instantly rewarding experience.

© 2024 UTGL. All rights reserved.

Disclaimer: The information provided on this website is for informational purposes only. It should not be considered legal, financial or tax advice. UTGL makes no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors, omissions or delays in this information or any losses, injuries or damages arising from its display or use. All information is provided on an as-is basis.


This website may contain links to external websites that are not provided or maintained by or in any way affiliated with UTGL. Please note that the UTGL does not guarantee the accuracy, relevance, timeliness or completeness of any information on these external websites.


Links to external websites are provided as a courtesy and do not imply UTGL's endorsement of those sites or their content, products or services. UTGL assumes no liability for damages resulting from the use of or reliance upon the information provided herein.