A Reminder Behind the Zong Qinghou Estate Dispute: Should You Also Consider Setting Up a Trust?

In July 2025, 17 months after the passing of Mr Zong Qinghou, his family wealth was thrust into the public spotlight in a dramatic way, drawing widespread attention. This was not only because Mr Zong was the founder of the Wahaha Group and once the richest man in China, but also because the inheritance of his substantial overseas assets has evolved into a cross-border trust dispute.

Three individuals, claiming to be his children and holding US citizenship, have asserted that Mr Zong established a trust in Hong Kong years ago as part of his family wealth planning. They are now seeking court recognition of their beneficiary status in order to claim a share of the estate. This matter quickly made headlines and brought the relatively unfamiliar concept of family trusts into public discussion.

Although this is a high-net-worth dispute involving a prominent Chinese family, it highlights issues that are relevant to anyone with a family, assets, and future planning needs:

• Do I need to establish a trust?

• What problems can a trust solve?

• If not properly structured, could a trust create greater legal risks?

Starting with Kevin and Karen’s Case

In our previous article on residential tenancy disputes, we mentioned Kevin and Karen. After years of living and working in Auckland, their family and careers have gradually stabilised:

• Kevin has progressed from a frontline construction worker to a Licensed Building Practitioner (LBP) and has established his own construction company;

• Karen completed an accounting degree, advanced from a junior bookkeeper to a chartered accountant, and now runs her own accounting firm;

• They have a young daughter and are planning to expand their family in the future.

Given the current Auckland property market, with relatively favourable prices and interest rates, Kevin and Karen believe it is a suitable time to transition from renting to purchasing their own home. They instructed our firm to assist with the property transaction and also sought advice on establishing a family trust. They wanted to understand what a trust is and who it is suitable for.

What Is a Trust?

In simple terms, a trust is a legal arrangement where one party (the settlor) transfers assets to another party (the trustee), who manages those assets for the benefit of designated beneficiaries.

Common reasons for establishing a trust include:

• Family wealth succession and estate planning;

• Protecting personal assets in the event of relationship or family disputes;

• Reducing the impact of business risks on family assets;

• Providing for children’s education and living expenses;

• Planning for retirement and medical needs;

• Limiting the pool of personal assets available to third-party claims.

Trust Considerations for Kevin and Karen

Generally speaking, for salaried individuals whose occupations do not expose them to significant liability risks, and where children are still young with no immediate inheritance concerns, establishing a trust may not be necessary at that stage. This is because:

• There are setup costs and ongoing administration expenses;

• Tax treatment under a trust structure can be complex and may even result in additional tax liabilities;

• If the family structure and risk exposure are relatively simple, a trust may not provide significant legal or financial benefits.

However, Kevin and Karen have reached a stage where establishing a family trust is worth serious consideration:

• Kevin, as an LBP and company director, bears legal responsibility for the quality of construction work and for the company’s contractual obligations and potential liabilities. In the event of disputes or company default, his personal assets (such as property and savings) may be exposed without proper asset protection mechanisms;

• While Karen’s professional risk as an accountant is relatively lower, as the head of her firm she still carries legal responsibilities in areas such as tax compliance and client fund management;

• Both are essentially small business owners and may face risks such as litigation, commercial disputes, and debt claims, which could extend to their personal and family assets;

• As their family grows, they are also increasingly concerned about long-term protection for their children and asset succession planning.

By establishing a trust, core assets (such as their home) can be transferred from personal ownership into the trust, effectively achieving asset separation and reducing the impact of unforeseen events on the family’s financial stability. A trust can also include “current and future children” as beneficiaries, ensuring ongoing protection and wealth succession.

A Friendly Reminder

Kevin and Karen are fictional characters, and the scenario described is intended to illustrate how trusts may be used in real-life situations. This article is for general information only and does not constitute legal or financial advice. If you are in a similar situation, you should seek tailored advice from a qualified lawyer or accountant.

Final Note: Don’t Overlook the Role of a Will

Returning to the Zong Qinghou case, in addition to the intense disputes surrounding the trust, the validity of his will has also become a key legal focus. In our daily practice, we are often asked about the relationship between trusts and wills.

In essence, a trust is used for asset planning and protection during your lifetime, while a will determines how your assets are distributed and administered after your passing. The two complement each other and should be considered together.

We will cover the functions of wills, common misconceptions, and the relevant legal requirements in New Zealand in future articles.

Contact Us

If you are considering setting up a trust, or looking to better plan the succession of your family assets, we welcome you to contact us for a consultation.

Based on your individual circumstances, we can provide tailored legal advice and practical solutions to help you protect your assets and achieve effective wealth succession in a compliant and secure manner.

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Disclaimer

Information on this site is for general information only and does not constitute legal advice. Please seek independent legal advice for your specific situation.  Use of this site does not create a solicitor-client relationship.