Many Hong Kong residents hold assets in Mainland China – from real estate in Beijing, Shanghai or the Greater Bay Area; to bank accounts (opened mainly for the utilisation of certain online payment platforms in order to enter into e-commerce with vendors in Mainland China that offer a diverse and coveted range of products).
A question frequently asked by clients in Hong Kong when putting in place their succession plan is whether a separate will is needed to deal with their mainland assets, or whether they can simply rely on a will governed by Hong Kong law. The common approach to date is to have separate wills – a “notarised will” (公证遺囑) in Mainland China to deal with mainland assets; and a “global will” to deal with the rest of the assets worldwide except for assets located in the mainland. A notarised will is one made in a notary office in Mainland China, witnessed by a notary and usually drafted in a format prescribed by the notary office.
This is due to a variety of reasons: The PRC Succession Law (继承法), which was enacted in 1985, (the “Old Law”) recognised the testamentary freedom of individuals and the validity of several types of wills, including handwritten will (自書遺囑); a will written by others on behalf of the testator (代書遺囑) and a notarised will; but once a notarised will is put in place, it cannot be amended or revoked by other types of will. A notarised will therefore takes precedence over other types of wills and provides certainty. Further, since an “inheritance right certificate” (继承证明書) issued by the notary office is required before assets in Mainland China may pass to the beneficiaries following the death of the testator, it is logical that a notarised will be preferred as the notary office will unlikely raise further queries when such will is examined in the “notarisation of inheritance” (继承公证) process.
In addition, there are no express provisions in the Old Law recognising the validity of a printed will, which is usually the format of a Hong Kong will prepared by solicitors. A printed will may thus be considered invalid in Mainland China under the Old Law and if a person only has a printed will, intestacy may result with respect to his real estate located in Mainland China. Such real estate would then pass under intestacy to his “Statutory Successors” (法定继承人) (i.e. his parents, children and spouse in the first tier (第一顺序) in equal shares, failing which to his siblings and grandparents in the second tier (第二顺序) equally).
However, the Old Law no longer applies following the enactment of the Civil Code (文法典)2020, which came into effect on 1 January 2021. The “Book on Succession” (继承篇) in the Civil Code provides a few important changes, including:
- a printed will (打印遺囑) made on instruction of the testator and executed in front of two witnesses is recognised as valid;
- a notarised will no longer takes supremacy;
- the testator may appoint an executor to administer the estate and the duties and powers of an executor are set out; as well as who may act as executor in default of appointment; and
- the testator has freedom to create a “testamentary trust” (遺囑信托).
These changes, coupled with the conflicts of law legislation which came into effect in 2011 in Mainland China, have the effect that a printed form of will validly made in Hong Kong by a Hong Kong resident governing his global assets, including any real estate (immovables) and bank accounts (movables) in Mainland China, should – subject certain conditions as mentioned below – now be recognised as valid and effective in Mainland China. The executor, selected under the Hong Kong will, should also have the authority to deal with the notarisation process in Mainland China.
When drafting the distribution provisions concerning the real estate (immovable assets) in Mainland China in the global will, certain basic requirements under the Civil Code should be taken into account:
- The testator should make provision for his Statutory Successors who have no ability to work (缺乏勞動力) nor source of income (沒有生活來源).
- If the testator intends to make a gift of such assets to any “Donee” (受遺贈人), i.e. a person other than any of the ‘Statutory Successors’, he should consider adding a provision in the will allowing the Donee to make a disclaimer at any time before distribution. Otherwise, the law provides that the Donee is deemed to have disclaimed unless he indicates his acceptance within 60 days after learning about gift. The validity of such provision is still to be decided but the Civil Code does not state that the 60 days deadline cannot be overridden by express provision in the will.
- The recognition of the creation of a testamentary trust is an exciting development and distribution of outright testamentary gifts to the beneficiaries seems no longer the only option.
The new rules governing succession under the Civil Code are still subject to further interpretation. For practical purpose, having a Chinese notarised will to deal with assets (especially the real estate) in Mainland China would still be advisable. However, in the event that a notarised will has not yet been put in place, clients should still consider having their mainland assets dealt with by a printed will in Hong Kong to avoid the results of intestacy. This is especially so since travel between Hong Kong and the mainland is still restricted, and there is uncertainty as to when one may visit a notary office for the preparation of a notarised will.