Core Viewpoint - The recent family dispute involving the founder of Wahaha Group, Zong Qinghou, highlights the complexities and challenges surrounding family trusts in wealth inheritance, raising questions about their effectiveness as wealth protection tools [1][3]. Group 1: Family Trust Disputes - Three individuals claiming to be Zong Qinghou's children have filed lawsuits against the new head of Wahaha, Zong Fuli, involving a $2.1 billion offshore family trust and demands for $700 million each from the trust assets [3]. - The inheritance dispute underscores the difficulties in asset distribution within family businesses and brings family trusts back into public focus [3][4]. Group 2: Understanding Family Trusts - A family trust is designed primarily for wealth protection, inheritance, and management, allowing for customized services in asset planning and risk isolation [3]. - The core principle of family trusts is "asset independence," where assets are managed by a trustee, thus protecting them from the grantor's debts and personal circumstances [4]. Group 3: Legal Framework and Challenges - Family trusts offer more flexibility in beneficiary designation compared to traditional inheritance methods, but conflicts between trusts and wills often lead to legal disputes [4][5]. - The effectiveness of a family trust can be compromised if the grantor retains too much control over the assets, leading to potential legal challenges [6][11]. Group 4: Growth of Family Trusts in China - The family trust market in China has grown rapidly since its inception in 2012, with the scale expected to reach approximately 790 billion yuan by June 2025, reflecting a compound annual growth rate of about 38% [7]. - The diversification of assets included in family trusts has increased, with a growing proportion of insurance trusts and corporate equity being integrated into these structures [7][8]. Group 5: Comparison with Offshore Trusts - There are significant differences between domestic and offshore family trusts, particularly in terms of asset isolation and legal frameworks, with offshore trusts offering more robust protection against control retention by the grantor [8][12]. - Offshore trusts often provide better confidentiality and tax advantages, but they also require strict compliance with local laws and regulations [9][12]. Group 6: Recommendations for Effective Trust Management - To ensure family trusts function as intended, compliance in establishment and operation is crucial, including clear legal frameworks and avoidance of excessive control by the grantor [10][13]. - Experts recommend that high-net-worth individuals focus on legal compliance, choose licensed trust institutions, and avoid retaining too much control over trust assets to prevent legal challenges [13].