Trust funds: the diamond on the crown of the International Financial Center

In the history of global finance, few legal instruments have been as revolutionary as the trust fund. Originating from the Anglo-American common law system, this institution is not only a legal innovation but also a cornerstone for cross-border flows of wealth in the modern economy. Origins of trusts can be traced back to medieval England, when knights participating in the Crusades needed to place their assets with others for management during their absence. At the time, the common law courts only recognized the legal ownership of the person named as the owner, leading to disputes and injustices. To address this, the Court of Chancery developed a mechanism based on equity: the asset holder can own assets legally, but must manage the assets for the benefit of others designated by the transferor. From this, the trust—a unique legal invention—emerged. A defining feature of trusts is the separation of ownership: Legal ownership belongs to the trustee, while Beneficial ownership (economic ownership) belongs to the beneficiary. Accordingly, when the grantor transfers assets to the trustee, the trustee is the legal owner, but the grantor loses ownership. Yet the trustee—though the legal owner—must manage the assets for the beneficiary’s benefit under the terms agreed with the grantor. A simple example is a father transferring a house to a son to rent and use the rent to support a grandchild (the beneficiary), or the son must transfer the asset to the grandchild when the grandchild comes of age. Despite significant potential, using trusts in Vietnam in practice will face many debates. First is the difference in legal thinking. Vietnam’s civil-law tradition emphasizes unified ownership—the property is owned by a single owner—whereas a trust is based on the separation of ownership and economic rights. The separation between legal ownership and economic ownership on a single asset allows the asset to be protected from the personal risks of the settlor—for example, creditors cannot seize the asset because the settlor no longer owns it. When a trust is established as an independent legal entity, the trust can endure for centuries, even after the settlor’s death, becoming a vehicle to transfer wealth across generations. Over time, trusts have evolved into international asset management and investment tools with broad influence. The Diamond on the IFC Crown If the International Financial Center (IFC) is likened to a crown on the globalized economy, the trust fund is the most important diamond on that crown. There are many reasons why trusts have become a global investment instrument, among which three main reasons are as follows: 1) High legal flexibility. Trusts allow design tailored to specific investment objectives. In a trust, the beneficiary holds the assets legally, the economic beneficiaries receive the economic benefits, and the settlor designs the goals and operating rules. The trust can thus be designed to preserve and transfer assets to future generations, fund education for grandchildren, invest, develop long-term real estate, fund scientific research, or manage family wealth. 2) Strong asset protection. Assets held in a trust are separated from the personal assets of the settlor, reducing insolvency or dispute risks. 3) Cross-border operation. Trusts are widely recognized in international financial systems, especially in common-law jurisdictions. Trusts also allow international investors to invest without disclosing identities due to the privacy of trusts. They can optimize asset management when the trust is managed by professional administrators. Therefore, trusts have become an indispensable foundation of modern IFCs—where global capital requires legal safety and predictability. Vietnam’s Application Against the backdrop of Vietnam aiming to build an International Financial Center, the question is whether trusts can appear in the Vietnamese legal ecosystem. The answer is that trusts are a crucial tool to attract IFCs. In shaping the IFC, Vietnam has oriented toward English-American-style institutions, such as establishing arbitration bodies and specialized courts that follow the English-American legal standards, and recognizing trusts. If this orientation is widely implemented, trusts can become a natural component of the IFC financial ecosystem. For Vietnam, the journey to build the IFC can be viewed as a historic opportunity to access the world’s most advanced financial institutions. If designed to fit domestic conditions, trusts can become a “diamond” on the IFC Vietnam crown—not only reflecting global capital flows but also affirming Vietnam’s new position on the international financial map. To prepare for this trend, Vietnam has already and continues to prepare the legal framework for the formation and operation of trusts. First, Vietnam officially recognizes the operation of trusts and pension funds as an industry within the national economy. Pursuant to Decision 36/2025/QĐ-TTg dated September 29, 2025, the Trusts activity (Code 643) is considered an industry within the financial, banking, and insurance sectors. This official recognition opens a foundation for development, though specific legal mechanisms are still to be defined. When the 2025 Enterprise Law was amended, Vietnam first recognized the concept of beneficial ownership in Vietnamese companies, meaning that a legal owner (shareholder) and a beneficial owner can exist for the same equity. These are fundamental ideas in trusts as discussed above. Open Questions Despite great potential, the practical use of trusts in Vietnam will face many debates. First is the difference in legal thinking. Vietnam’s civil-law system treats ownership as unified; assets belong to the sole and absolute owner, whereas trusts rely on the separation of ownership and beneficial ownership. This difference is not only a legal technical issue but also a matter of legislative thinking and how assets are perceived. There is also caution from regulators. Trusts and similar arrangements are sometimes viewed with concern about asset transparency and money laundering; in Vietnam, they may be seen as “underground investments,” “front investments,” or “fake transactions”—terms that can provoke discomfort. Using third parties to hold assets (land, shares, contributed capital) is often viewed as a sham transaction to conceal true ownership. Under the Investment Law, Article 36 of the 2020 Law (in effect) still allows the registering authority to terminate an investment project if the investor engages in investments based on artificial civil transactions. With these internal inconsistencies in the current legal system, authorities may approach this regime with caution and strict oversight. This underscores the need to build a balanced legal framework that attracts international capital while ensuring effective state management. Conclusion Trust funds are not merely investment tools; they symbolize trust—the core element of every international financial center. For Vietnam, the path to building an IFC can be viewed as a historic opportunity to access the world’s most advanced financial institutions. If designed to fit domestic conditions, trusts can be a “diamond” on the IFC Vietnam crown—not only reflecting global capital but also reaffirming Vietnam’s new status on the international financial map. L.S. Tran Thanh Tung (Global Vietnam Lawyers) [TBKTSG] – 19:00 13/04/2026