How to Establish a Trust in Indonesia

If you are familiar with trusts in Singapore, England, or the United States, you may expect Indonesia to offer the same straightforward structure: you transfer assets to a trustee, the trustee manages them, and your chosen beneficiaries receive the benefits. Indonesia has historically taken a different approach. Its civil-law system traditionally did not recognize the separation between legal ownership and beneficial ownership that sits at the heart of a common-law trust.

That position is changing. Law No. 4 of 2023 on Financial Sector Development and Strengthening, commonly called the P2SK Law, introduces a legal framework for trust-like arrangements involving a trustee, settlor, and beneficiary. However, you should not assume that every private family trust can immediately be created in Indonesia. The P2SK framework is mainly connected to commercial and financial-sector activities, and important implementing rules remain essential before the structure becomes fully practical.

So, how should you approach establishing a trust in Indonesia? I would begin with one important distinction: you must first decide whether you need a regulated Indonesian commercial trust, a bank-based trust arrangement, or a family succession structure using a PT and contractual documents.

Understand What Kind of Trust You Need

A traditional trust usually involves three (3) parties. The settlor owns the assets and establishes the arrangement. The trustee legally holds and manages those assets. The beneficiary receives the economic benefits according to the trust agreement.

Under the P2SK Law, Indonesia now recognizes trust-like activities through a special business entity that may act as a trust fund manager, or trustee. The same framework also recognizes special purpose vehicles for securitization. In this structure, assets may be transferred to and managed by a trustee for beneficiaries under a written agreement.

This is a major development because Indonesian law previously had no general private trust regime. But the P2SK framework should not be confused with an unlimited family trust system. It is a regulated structure connected to financial-sector activities, licensing, supervision, asset separation, and prescribed trustee functions.

For certain financial assets, banks can also conduct trust activities under OJK Regulation No. 27/POJK.03/2015, as amended by OJK Regulation No. 25/POJK.03/2016. Under that regime, a bank acts as trustee, the arrangement must be written, and the assets are recorded separately from the bank’s own assets. The original framework was designed for financial assets and regulated banking activities, not as a universal family estate-planning instrument.

Start with a Legal and Tax Review

Before drafting anything, you and I would need to identify the assets involved. A trust involving cash or securities is very different from one involving shares in a PT, land, a family business, or intellectual property.

Prepare an asset list that identifies:

1. the legal owner of each asset;
2. the current market value;
3. existing debts or security interests;
4. tax consequences of transfer;
5. restrictions on ownership or transfer;
6. the intended beneficiaries; and
7. the proposed trustee.

You should also review your family structure. Indonesian inheritance law is not uniform. Depending on your religion, family circumstances, nationality, and domicile, the relevant rules may involve the Compilation of Islamic Law, the Civil Code, customary law, or foreign law. A trust cannot automatically override protected inheritance rights, marital property rights, creditor claims, or tax obligations.

This is where many ambitious structures fall apart. Families often focus on control and confidentiality but forget that transferring an asset can itself trigger tax, registration, consent, or inheritance issues.

Choose a Qualified Trustee

Under the P2SK framework, the trustee is not simply a trusted relative. A trustee is expected to perform a regulated asset-management function. The trustee may be an eligible legal entity or, subject to the detailed regulatory framework, an individual. The trustee must manage the assets according to the trust agreement and applicable law.

You should verify:

1. whether the trustee has the required OJK licence or approval;
2. whether the trustee may manage the type of assets involved;
3. whether the trustee has appropriate governance and internal controls;
4. how the trustee handles conflicts of interest;
5. how trust assets are kept separate;
6. what reporting and audit duties apply; and
7. what happens if the trustee loses its licence, becomes insolvent, or resigns.

Do not appoint an unlicensed person and simply call that person a trustee. A private agreement with a family member may create a management relationship, but it may not create the legal protections associated with a regulated trust.

Prepare a Written Trust Agreement

The trust agreement is the central document. It should clearly identify the settlor, trustee, beneficiaries, trust assets, purpose, duration, management powers, distribution rules, fees, reporting, confidentiality, replacement trustee, termination, and dispute resolution.

The agreement should also explain what the trustee may and may not do. For example, can the trustee sell an investment? Can the trustee invest in a family company? Can beneficiaries request distributions? Are distributions linked to age, education, employment, health, or other conditions?

You should also include a detailed asset-transfer schedule. Every asset should be described accurately, with the relevant title documents, account numbers, share certificates, valuation reports, and transfer evidence.

Under the earlier OJK bank-trust framework, a trust agreement must address the appointment of the trustee, the beneficiaries, the rights and obligations of the parties, confidentiality, separate recording of trust assets, termination, replacement trustee, indemnity, dispute resolution, governing law, and jurisdiction. Those provisions remain a useful drafting checklist even when the P2SK Law is the principal legal reference.

Use a PT for Family Businesses when Appropriate

For a family operating business, a PT may be more practical than attempting to place the entire business directly into a trust. Law No. 40 of 2007 on Limited Liability Companies, as amended by the Job Creation legislation, including Law No. 6 of 2023, provides the corporate framework.

A PT is a separate legal entity. It can own business assets, hold shares in subsidiaries, employ management, and continue operating when family members change. Its Articles of Association can contain more than one share classification. Under Article 53 of the Company Law, the Articles may provide for shares with voting rights, shares without voting rights, special rights to nominate directors or commissioners, priority dividends, or priority rights on liquidation.

This allows you to separate control from economic benefit. For example, one class may carry voting and nomination rights, while another class provides dividend rights to the next generation. A shareholders’ agreement and perjanjian pengelolaan can then regulate management, reporting, investment limits, family transfers, and succession procedures.

However, the PT structure is not a hidden trust. Registered shareholders must be genuine owners. Indonesian law does not support a nominee arrangement in which one person is recorded as a shareholder while another secretly controls and benefits from the shares.

Report Beneficial Ownership Honestly

You must also consider beneficial-owner reporting. Minister of Law Regulation No. 2 of 2025 requires corporations, including PTs, to identify, verify, determine, report, and periodically update their beneficial-owner information. The rules apply to individuals who control the company, can appoint or remove management, receive direct or indirect benefits, or are the actual owners of funds or shares.

That means confidentiality cannot become concealment. The settlor, trustee, beneficiary, shareholder, and ultimate controller must be disclosed accurately where the law requires it.

Conclusion

You can now establish trust-like arrangements in Indonesia, but the safest route is careful classification. For regulated commercial trust activities, use the P2SK framework, an eligible trustee, a written trust agreement, and the required regulatory approvals. For family business succession, consider combining a PT, properly drafted share classes, a shareholders’ agreement, a management agreement, and valid wills.

I would not treat the P2SK Law as permission to copy an offshore trust deed and use it without adaptation. Indonesia’s trust framework is developing, and tax, licensing, trustee qualifications, and implementation rules must be checked before you proceed. Your structure should be transparent, commercially justified, coordinated with inheritance planning, and reviewed by corporate lawyer, tax adviser, inheritance specialist lawyer, and Indonesian estate planning lawyer, like Wijaya & Co.

My name is  Wijaya, writing for Wijaya & Co. We orchestrate to assist you navigate. Thank you for reading my posts.