Proper Estate Planning: When there is a Will, there is a Way!

Proper Estate Planning: When there is a Will, there is a Way!

Proper Estate Planning: When there is a Will, there is a Way! 960 640 Hugill & Ip
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No one likes to envision death, let alone spend hours talking to a lawyer about it. However, if you want a proper way to plan for your succession and ensure your loved ones are looked after in your absence, you need a Will.

 

A good Will is like a tailored-made garment: it needs to fit you like a glove, be versatile enough to cater to contingent events and be regularly fixed as you age or as your sizes (circumstances) change. Just like a mini-skirt does not look good on everyone, not everyone can have a two-page Will.

If your answer is yes to more than a few questions below, you are going to need a complex Will and specialist advice:

  1. Do you have any child under 15 years of age or any child with special needs?
  2. Do you have any prior marriage or any dependant who relies on you for financial support?
  3. Do you have overseas assets?
  4. Do you intend to benefit person(s) who reside outside of Hong Kong?
  5. Do you have any operating business?
  6. Do you have any offshore vehicle, company or structure to hold your assets?
  7. Do you have valuable artworks, antiques or other collections?
  8. Do you have substantial inheritance or trust interests?
  9. Are you currently in dispute with a third party or under any legal proceedings?

As you can see, a few of the above questions concern cross-border interests. Globalization has a major impact on wealth and succession planning by making it more complex than ever before. A purely domestic approach no longer best serves the needs of mobile individuals. Even for an individual who just owns assets in his home jurisdiction, that doesn’t necessarily mean his estate planning is going to be any more straightforward if his family dynamics and circumstances are complicated.

For a couple or family who is planning to settle down elsewhere, it is important to understand the effect of the laws of the new jurisdiction. This is especially important where the couple moves to a marital regime law jurisdiction (such as Mainland China) or a jurisdiction with forced heirship rules (such as France) from a common law jurisdiction (such as Hong Kong) or vice versa. Both regimes will impact and impose what each spouse owns and can transfer during lifetime or upon death.

Given that a will can cover the disposition of one’s assets wherever situated, some people may want to look into the possibility of having multiple wills in dealing with assets in different countries. The advantage of having multiple wills is that the named executor (i.e. the person appointed in the Will to administer the estate and distribute the same to beneficiaries in accordance with the Will) under each will can proceed to prove the will for probate in each jurisdiction concurrently. But, before one decides whether or not to have one or multiple wills, it is necessary to understand and examine the need of having multiple wills as they require co-ordination, centralized review and ability to holistically look into the issues such as matrimonial regime law, formality and validity of the Wills, as well as tax and administrative issues that are relevant.

There is an increasing trend of individuals with worldwide assets and/or intending to benefit beneficiaries in multiple jurisdictions. There are also cases when individuals are motivated to devise or revise their estate planning pending immigration. In such cases, the conflict of laws and different tax regimes across the jurisdictions render it ineffective to only have one will. Often, such individuals would need both a trust and one or multiple wills depending on the jurisdictions involved. Whether the trust should be revocable or irrevocable depends on the requirements under the relevant tax regime as well as the balance between tax planning and asset protection. It is common for a standby trust to be used in conjunction with the Will when the individual wishes to continue managing his own assets, minimize trustee fees during his lifetime and avoid any transfer tax. Under such arrangement, after probate, the executor will inject the residuary estate or specific legacy into the standby trust upon the individual’s death. During the individual’s lifetime, he only needs to pay the set-up fee of the standby trust and is free to manage, invest, and dispose of his assets in any way. After the individual’s death and the executor’s transfer of the residuary estate/specific legacy to the trustees, the residuary estate/specific legacy will form part of the trust fund and the trustees will commence managing/administering the trust fund for the benefit of the beneficiaries in accordance with the trust deed and the letter of wishes.

If one dies leaving no valid will, then it means his remaining estate will be governed by the laws of his place of domicile or the laws of the situs property. This means having a trust alone is insufficient as both tools need to work in conjunction with each other. If the estate has foreign assets or there are minor beneficiaries involved, then any of these issues would add another layer of complication to the estate. Usually the length of time for obtaining a grant of probate by proving a deceased’s will is shorter compared to getting a letters of administration whereby the family needs to apply before the court to prove who has the rights and priority to apply for such application.

Even if you already have a Will, it is important to periodically review your will, particularly if there is significant change in family circumstances or asset holding structure, or if there is occurrence of a significant life event (such as marriage, divorce, childbirth, or immigration). After all, even the perfect coat may become outdated.

If creating wealth is seen by most people as part of a person’s success in life, then taking action in planning and deciding how such wealth should benefit family, friends or people in need is a responsible act. If the thought of planning your succession makes you feel anxious and stressed, engaging a professional who is able to give clear strategy and advice is like finding a good tailor who can give you a peace of mind.

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 we 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.

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