Global Vietnam Lawyers would like to introduce our valued readers to an article by Mr. Tran Thanh Tung titled “Trust fund – The crown jewel of an international financial center” published in The Saigon Times, 15-2026 (1.843) on April 09, 2026.
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Throughout the evolution of global finance, few legal instruments have had as profound an impact as trust funds. Originating from the Anglo-American common law system, this concept is not only a remarkable legal innovation but has also become a fundamental framework for cross-border asset flows in the modern economy.
The origin of trust funds can be traced back to medieval England, when knights participating in the Crusades needed to entrust their assets to others for management during their absence. At the time, common law courts recognized only the legal ownership of the person in whose name the assets were registered, leading to numerous disputes and instances of injustice.
To address this limitation, the Court of Chancery developed a new mechanism based on the principle of equity: while a person could hold legal title to assets, they were required to manage the assets for the benefit of another as designated by the original owner. From this, the concept of trust fund emerged as a unique legal innovation.
The distinctive features of trust funds
The defining characteristic of a trust lies in the separation of ownership rights. Legal ownership is vested in the trustee, while beneficial ownership—the right to enjoy the economic benefits—belongs to the beneficiary. Accordingly, when the grantor or settlor transfers assets to the trustee, the trustee becomes the legal owner of those assets. The assets are thereby separated from the grantor’s estate, and the grantor ceases to have ownership rights. However, despite holding legal title, the trustee is obligated to manage the assets in the best interests of the beneficiary, in accordance with the arrangements established with the grantor. A simple example would be where a grandfather (the grantor) transfers a house to his child (the trustee), who then leases the property and uses the rental income to raise the grandchild (the beneficiary), or is required to transfer the property to the grandchild once the latter reaches the age of ownership.
The separation between legal ownership and beneficial ownership allows the asset to be shielded from the personal risks of the grantor—for instance, creditors cannot seize the asset to satisfy debts, as the grantor is no longer the legal owner. Where a trust is established as an independent legal arrangement, it may endure for hundreds of years, even after the death of the grantor, thereby serving as an effective vehicle to facilitate the transfer of wealth across generations. Over time, trusts have evolved into powerful instruments for asset management and international investment.
The crown jewel of an IFC
If an International Financial Center (IFC) is portrayed as a crown of the globalized economy, then the trust is the diamond that creates the value of the crown.
There are several reasons why trusts have become a global investment vehicle, among which three stand out:
First, their flexibility afforded by law. Trusts can be tailored to specific investment objectives. Within a trust, the trustee holds legal title to the assets, the beneficiary enjoys the economic benefits, while the grantor determines the objectives and operational rules of the trust. Accordingly, trusts can be designed for the purpose of wealth preservation and intergenerational transfer, providing educational funding for descendants, investment activities, long-term real estate development, financing scientific research, or managing family wealth.
Second, a strong instrument to protect assets. Assets held in a trust are segregated from the grantor’s personal estate, thereby mitigating risks arising from bankruptcy or legal disputes.
Third, cross-border operability. Trusts are widely recognized across international financial systems, particularly in jurisdictions adopting the Anglo-American legal system.
Trusts enable international investors to participate in investments without disclosing their identities, thanks to the confidentiality and privacy inherent in trust structures. Assets can also be managed more efficiently, as trusts are administered by professional trustees. For these reasons, trusts have become an indispensable foundation of modern International Financial Centers —where global capital demands legal certainty and a high degree of predictability.
Applicability in Vietnam.
As Vietnam aims to establish an International Financial Center, a key question arises: can trusts be incorporated into Vietnam’s legal ecosystem? The answer is that trusts are an essential instrument for any IFC seeking to attract global capital.
In its strategic direction for developing an IFC, Vietnam has signaled its intention to adopt the Anglo-American–style legal institution, including the establishment of a specialized arbitration body and courts, along with dispute resolution mechanisms aligned with common law standards. In this context, the recognition of trusts appears inevitable. If this direction is implemented in depth, trusts will naturally become an integral component of the IFC financial ecosystem.
In preparation for this trend, Vietnam has begun laying the legal groundwork for the establishment and operation of trusts. As an initial step, Vietnam has formally recognized “trust and pension fund activities” as a business line within its industrial classification system. Under Decision No. 36/2025/QĐ-TTg dated September 29, 2025, issued by the Prime Minister on the promulgation of the Vietnam Standard Industrial Classification, trust fund activity (Code 643) is classified within the broader sector of finance, banking, and insurance. This official recognition provides an initial foundation for the development of trusts, although a detailed legal framework governing their operation remains to be established.
With the promulgation of the amended Law on Enterprises 2025, Vietnam has, for the first time, formally recognized the concept of the beneficial owner within Vietnamese enterprises. This means that Vietnamese corporate law now acknowledges that, within a company, there may exist both a legal owner—the shareholder or capital contributor recorded on paper—and a beneficial owner—the person who ultimately enjoys the economic benefits of the shares or capital contributions. These are fundamental concepts underlying the trust, as discussed above.
Outstanding issues
Despite its significant potential, the application of trusts in Vietnam is likely to face considerable debate. First is the difference in legal thinking. Vietnam’s legal system follows the civil law tradition, under which ownership is conceived as unified—assets belong exclusively and absolutely to a single owner. By contrast, trusts are built on the separation between legal ownership and beneficial ownership. This divergence is not merely a technical legal issue, but reflects deeper differences in legislative philosophy and the legal conception of property.
Second is the caution exercised by regulators. Trusts and similar arrangements are sometimes associated with concerns over asset transparency and money laundering. In Vietnam in particular, they may be viewed as “disguised investments,” “concealed investments,” or even “sham transactions”—concepts that tend to trigger regulatory concerns. The practice of holding assets (such as real estate, shares, or capital contributions) in another person’s name is often regarded as a sham transaction intended to conceal the true owner of the assets. From an investment perspective, Article 36 of the Law on Investment 2025 still provides that an investment project may be terminated in accordance with civil law if “the investor conducts investment activities on the basis of a sham civil transaction.”
Given these internal inconsistencies within the current legal framework, regulators are likely to approach this legal institution with caution and close scrutiny. This, in turn, creates a need for a legal framework that strikes a balance between attracting international capital and ensuring effective state oversight.
Conclusion
Trusts are not merely investment instruments; they are a manifestation of trust itself—the fundamental element of any international financial center.
For Vietnam, the journey toward establishing an IFC represents a historic opportunity to engage with the most advanced financial institutions in the world. If appropriately designed to align with domestic legal conditions, trusts could well become the “crown jewel” of Vietnam’s IFC—reflecting not only global capital flows, but also affirming Vietnam’s emerging position on the international financial map.
