Hong Kong - ensuring your Will is airtight beyond borders

20 August 2020 | Applicable law: Hong Kong

Building and protecting your vision of success extends beyond your generation. Most people are familiar with the importance of having a Will. But families are becoming increasingly international, and when taking into consideration foreign citizenship and investments, one sole Will drafted by lawyers in their country of residence is often no longer enough.

When might a simple Will be deficient?

  • You have assets in different countries
  • You have multiple residencies, citizenships, or domiciles
  • You married abroad
  • You wish to leave assets to family or friends overseas

Common problems and potential solutions

Estate tax

Mrs Tan and her entire family are residents in Singapore. She owns one property in the US and one property in the Philippines. She decides to leave the properties to her children under her Will. Upon her death, the US and the Philippines would both impose estate tax. Her children would be responsible for paying this tax and may need to sell the properties to do so. This could have been avoided had she left her US property in a special type of trust for the benefit of her husband and children, and her property in the Philippines in a trust for the benefit of her grandchildren.

Income tax

Mr Wong lives in Hong Kong and owns assets solely in Hong Kong. He executes a Hong Kong Will leaving his assets to his only son. However, his son has lived in the UK for 15 years and as such he is ‘deemed domiciled’ there. Upon inheriting Mr Wong’s assets, Mr Wong’s son will be subject to UK income tax on all new Hong Kong investment income, including the underlying income of any companies he inherits, at a rate of up to 45%. Through careful trust planning within Mr Wong’s original Will, this investment income could have remained tax-free.

Forced heirship rules

Mr and Mrs Lee live in Hong Kong and own properties in France and Italy. They execute a Hong Kong Will in relation to their worldwide assets, leaving their entire estate to each other. However, France and Italy both have forced heirship regimes, which prevent owners from freely disposing of their property. Mr and Mrs Lee’s children may therefore claim a share of the properties. This could easily have been prevented by Mr and Mrs Lee had they specifically worded their Wills to enable their Chinese (Hong Kong) nationality to govern succession.

Matrimonial property regimes

Despite now living in Singapore, Mr and Mrs Chaya were married in Thailand. They do not have children and agreed to leave the wealth they created throughout their marriage to their respective families. However, Thailand has a matrimonial property regime, under which the wealth accrued during their marriage may be treated as being owned by them jointly. This could take precedence over their Wills, such that their wealth is passed to each other and then solely to the family of the second to die, instead of being divided equally as they intended. Pre or post nuptial agreements in conjunction with carefully constructed Wills could potentially mitigate this.

Local Will and foreign assets

Mrs Zhang executes a Hong Kong Will. She owns assets in Hong Kong and the PRC. Although Mrs Zhang’s Will is valid in Hong Kong, there is a risk that it may not be recognized in the PRC. Mrs Zhang’s PRC assets will therefore not be distributed in accordance with her wishes, but instead follow the intestacy rules of the PRC: half of Mrs Zhang’s matrimonial property will be distributed to her husband, while her remaining estate will be distributed to her husband, parents, and children in equal shares. In hindsight, Mrs Zhang should have made a separate PRC Will.

Probate delays

Mr Chan has many assets in countries throughout Asia and the BVI. He executes a single Hong Kong Will in relation to his worldwide estate. Upon Mr Chan’s death, his Will must be submitted to probate at each of the probate registries and/ or courts in each different country where he holds assets, sometimes sequentially rather than simultaneously. If assets are held in civil law jurisdictions, the local succession procedures may involve using public notaries or other local experts. All of this can take years, during which Mr Chan’s family may not have any access to the assets. This can cause untold difficulties at an already stressful time. This process could have been expedited by selecting key assets and executing separate local Wills in those jurisdictions, or by consolidating certain assets within holding structures in particular jurisdictions.

Capacity issues

Mrs Ng executes a Will which covers her worldwide assets. Unfortunately, Mrs Ng loses mental capacity prior to her death. As the provisions of Mrs Ng's Will only take effect on her death, many jurisdictions prevent anyone from making any decisions on her behalf in relation to her assets whilst she is alive but incapacitated without the intervention of the courts. This could have been avoided had Mrs Ng appointed one or more persons under lasting powers of attorney (or, in some jurisdictions, enduring powers of attorney) who could manage her affairs in key jurisdictions where she holds assets in the event of a loss of mental capacity.

Next steps

Without skilful and deliberate planning, a Will could be invalid or inefficient in a multitude of circumstances. It is therefore essential to draw up a Will that takes into consideration international legal complexities and possible extenuating circumstances.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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