According to this year’s CAF World Giving Index, Hong Kong is ranked 18th out of 144 economies in the survey with 55% saying they have donated money to a charity in the past month when the survey was conducted.
Despite the global trend of a decline in the proportion who donated money, Hong Kong’s score improved by at least 3 percentage points compared to 2017. This means many people in Hong Kong want to give back to society and leave a lasting legacy.
Candice L. W. is one of such charitable people. She came from a poor family but after years of hard work and receiving a full scholarship to attend the University of Hong Kong, her life began to change. Candice built an incredible career and accumulated significant wealth. She sits on the advisory board of some Fortune 500 companies even after her retirement. She is happily married with three sons who are successful in their own careers. However, Candice’s husband recently passed away from cancer, which led Candice to decide to focus on her own estate planning.
Candice was struck as a student when reading Anne Frank’s diary and always reminded herself about the quote “No one has ever become poor by giving”. She believes that she and her family already have much more than they need and hence, she wants her estate to be used for public good, especially for causes she is very passionate about, such as cancer research and education for children in poverty. She has assets in different jurisdictions, such as Hong Kong, the U.K. and Switzerland.
Leaving a legacy
Proper legal advice is necessary to determine what is the best way to gift the different types of assets in different jurisdictions to charities. But generally, Candice’s wishes can be achieved through a well-drafted Will. The charities and their prospective entitlements need to be specifically set out in Candice’s Will. Before this can be done, the lawyer needs to make sure that Candice’s chosen charities can accept such donations and that her charitable causes are in line with the different purposes legally set out in the different jurisdictions for eventual offsets and tax reliefs. For example, in Hong Kong, pursuant to section 2 of the Inland Revenue Ordinance, “Approved charitable donation” means a donation of money to any charitable institution or trust of a public character, which is exempt from tax under section 88 of the Inland Revenue Ordinance, or to the Government, for charitable purposes.
Testamentary capacity
The above is the easy part. The real difficulty lies in the fact that although two of Candice’s sons fully embrace her wishes, one of her sons thinks the bulk of the family wealth should pass down the generations and not to strangers. He told his brothers that he believes Candice’s decision is irrational as she is losing mental capacity due to old age and grief.
Since there is a real possibility that Candice’s Will may be challenged by a family member, Candice needs a lawyer who can pre-empt such potential challenges by taking active steps to ensure and document that Candice has the requisite testamentary capacity to make a Will. To understand more about testamentary capacity, please refer to our previous article “Sound Mind, Strong Will“.
For example, in Sharp and Bryson v Adam [2006] WTLP 1059, the judge held that the presumption of capacity was rebutted due to the individual’s brain damage and his unusual decision to leave nothing to his children. The propounders of the Will were unable to prove that the individual had the requisite testamentary capacity. If the Court holds that the individual lacked testamentary capacity, the Will is invalid and the previous Will, if any, revives, or failing that, intestacy rules apply. In Candice’s case, assuming she does not have a previous Will, following Hong Kong intestacy law, her estate would be distributed equally between her three sons and charities would get nothing. This would be drastically different from Candice’s wishes.
Disinheritance
A declaration as to why the children are disinherited should also be included in Candice’s Will. This is because an individual’s adult children can make claims against the individual’s estate under sections 3 to 5 of the Inheritance (Provision for Family and Dependants) Ordinance (Cap. 481) if they can prove they were being maintained by the individual either wholly or substantially immediately before the individual’s death. In the present case, there is possibility that Candice’s son may seek to claim against Candice’s estate for his own benefit. Therefore, again, Candice would need some sound legal advice as to how to minimise this issue.
The beauty of flexibility
The good thing about making gifts through a Will is that a Will only take effect upon the individual’s death. While Candice is living and of sound mind, she can always change her wishes as to which charities to give to and in what proportions, or even if she ultimately decides to distribute some of her estate to her sons.
Our team at Hugill & Ip has extensive experience in dealing with Hong Kong’s complicated testamentary, probate and inheritance laws – so if you need further advice on these subject, get in touch with us to find out how our law firm can help.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.
