Podcast S1E5 | Private Client: Estate Planning & Probate Process

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Podcast S1E5 | Private Client: Estate Planning & Probate Process

Podcast S1E5 | Private Client: Estate Planning & Probate Process 1920 700 Alfred Ip
Reading Time: 32 minutes

Margaret Wo and Alfred Ip discuss the essentials of proper estate planning and the probate process in Hong Kong while also highlighting some of the most common pitfalls and how to avoid them.

SHOW NOTES

00:46 – Estate planning
07:32 – Executor of a Will
14:52 – Setting up a Trust
18:59 – Assets in multiple jurisdictions
24:18 – Enduring power of attorney
28:44 – Advance Health Directives
38:28 – Probate process
43:47 – Estate administration
47:13 – Challenging a Will
54:26 – Estate-related mediation


TRANSCRIPT

0.01 Welcome to The HIP Talks podcast, a series of discussions about current legal issues hosted by Hugill & Ip Solicitors. We are a young independent law firm but with decades of experience providing bespoke legal advice and exceptional client service to individuals, families, entrepreneurs and businesses, both in Hong Kong and internationally.

0.22 [MARGARET WO] So I’m here with Alfred to discuss some of the topics under the big umbrella of private client, estates and trusts. So, Alfred, hello, Margaret, how are you? I’m good. How are you? Very well. I’m very glad that we have the opportunity to talk about estate planning today. Excellent, because I really wanted to ask you, why do I need to make a will? Why is it necessary for me to have a will?

0.46 [ALFRED IP] Well, I’m sure you have no plan to die but you never know, the point is with a will, it actually helps with anything that your family would have to deal with if something happened to you. First of all, I know that a lot of people do have a family, when they’re setting up the family first before getting married, and then having children. And then you start about setting up a home, buying a property, start paying for the mortgage, and then the children start growing up and there will be a little bit of accumulation of wealth. Things all go very well until such day when something happens and is traumatic when something happened to the one that you love. And if that case, no estate planning is in place, the family while grieving for the loss of you, they have to deal with the probate process in order to get the family wealth into the hands. In a lot of situations is it’s actually very traumatic when they’re certified only losing the financial dependency because everything is locked up. And the purpose of a will a lot of times is not only to make sure that the person that you want to benefit will inherit your wealth, but also to make sure that the probate process can be processed as quickly as possible. In Hong Kong, the probate process is not particularly straightforward. And having a will will quickly benefit in terms of expediting the whole process.

2.27 [MARGARET WO] Are there any important things that I should make sure I include in the will then?

2.30 [ALFRED IP] Okay. First of all, of course, you have to make sure that someone will be inheriting your wealth, your hard earned money, a lot of time if you’re married with children going to make sure that your spouse will get everything, but then the because your spouse will be looking after the children for you. And a lot of people do have a misconception that when you’re married with children after something happened to you, your spouse would automatically inherit everything. That’s actually not true. Because under the intestacy rules in Hong Kong, your spouse will be first getting $500,000 from your estate, and then they will be issued, he or she will be entitled to half of it. The other half to be split among your children in equal shares. But that is actually not the major problem. The major problem is if the children are still small, who’s going to look after their share of the wealth, and in that respect, the problem is that under the Hong Kong laws, it requires two administrators in your to look after the benefit of the surviving children. And in that case, your spouse have to find another person to administer the estate for her with her or together and the first person that he or she will have to go to is your other family members. Such as your parents or your siblings, if they have good relationship with them is all fine. They work together. If they don’t, it will be quite embarrassing and more so is that in order to prove to relationship between your spouse and you and the other family members they have to to produce a lot of public documents, which delays the whole process, having a will in place will make sure that this problem will not arise.

4.28 [MARGARET WO] So it sounds like a will is a very powerful document and probably very necessary for a lot of people, especially families. So given that it is such an important document, what kind of requirements or elements should I make sure that are definitely incorporated or are part of a good will?

4.45 [ALFRED IP] Okay, um, first of all, I think the easiest way for you to make sure that is properly done is to go to a lawyer. Because at the end of the day, I can be very honest with you that making a will is relatively easy. All you have to do is to write on a piece of paper with two witnesses witnessing your signature to make sure that you are the person who signed that. But of course, with so many years of experience, we’ve seen a lot of home-made wills, which had not been done properly and actually give more issues than solutions. And I remember in a lot of cases, actually are written on a deathbed and they do not realize what was the problem with it when it’s not written properly. I still remember one case when the deceased said, I leave it to my husband to handle it as he wants. It sounds like is he’s inheriting the wealth, perhaps is her intention to the him inherited wealth, but to write it as such, it’s like, is he only administering it or his entitling or inheriting it? That is actually put a lot of more issues and solutions. And it is only one of the many bad examples for home-made wills. And this is why it’s really important to have a properly drafted. All we have to say is that A or B will inherit my will, for example, in her whatever it is, I have, or in another way, of course we eventually will be drafted as such. And the most important as well is to make sure that your witness who witness the signature of your will is not a beneficiary named in it for the very simple reason that the law makes sure that you’re not signing the will under any duress and you’re not forced by the witness. So that may sound very logical, but a lot of people are not aware of it. And we actually see some of the cases when beneficiaries are disinherited because of that, and the family members have to spend millions of dollars on the litigation.

7.08 [MARGARET WO] Okay, so you actually we touched on quite a few points here just now about elements that are important for a good and valid will. You mentioned something in your example earlier just now about the wife who signed on her deathbed her own will for her husband to handle everything. So is it important to have a good choice, I suppose, for someone to handle all your affairs or appoint someone to handle your affairs under the will?

7.32 [ALFRED IP] Yes, we usually call it executor. But then that person has to be someone that you can trust, because he is he or she will be acting as a trustee, to look up to your wealth, for the benefit of the people, children or otherwise, that you want them to inherit. So um, it’s actually very important that that person would not be abusing their power for their own benefit. And of course, under the law, they have the fiduciary duties to look after the interests of the beneficiaries. But then in real life, we always say, it’s actually a burden for whoever, who doesn’t have the knowledge or experience to look after a big amount of wealth. And, actually, I don’t know if a lot of we have this some troubles of looking after a lot of money, but then I can assure you that if you do not know how the investment market turns, what are the tools for the financial prospects that can preserve to capital or create a stable growth is actually a lot of work. And in that particular respect a trustee under the law unless he or she is specifically empowered to make any investment decision they are under duty to preserve the wealth, and it is only prudent as like a prudent businessman standard to invest in the family wealth with something that is capital preservation, something along the lines of fixed deposit or government bond or any financial products, which is predominantly capital preserved. But then, as you probably know, we are in the financial world at constant appreciation, and a lot of times with a fairly conservative investment strategy, the wealth cannot grow to serve the needs of the family. So sometimes, especially when we’re talking about a very substantial amount of wealth, the trustee requires help and professional help we’re talking about investment managers. It’s better to have someone to help them in that respect. And in that respect a lot actually does give them power to do that, but it’s of course, more prudent to have a well prepared will to make sure that the trustees are aware of the power to them first to appoint investment manager to assist them in the daily administration of the wealth.

10.12 [MARGARET WO] So you were talking about trustees just now. Is it mandatory, then for your executor under your will to be a trustee? Or is that just one of the options that you have?

10.22 [ALFRED IP] Actually it’s kind of the role that they assumed himself into when they become appointed as executor. Because they’re performing the one function of holding the wealth for the benefit of the beneficiary until is distributed in accordance with your will. So it is such a time that they will be holding the wealth and this why is so important if they run away with your wealth, your beneficiary would not benefit under the estate. And of course, they would be totally dishonest, but then a lot of times actually there are a lot of decisions than an administrator may make, and that the beneficiaries may not be entirely happy with it. And that’s why we emphasize the importance of having a professional, someone that knows both what they’re doing and they will perform their role function properly. Under the law, the intestacy rules or the probate administration ordinance in Hong Kong family members have priority to administer the estate, but then of course, most of them are not professionally equipped. So when we are dealing with a substantial amount of estate, it is only prudent to appoint a professional administrator to administer that properly and that actually is the exact case that we did many years ago, when the only reason for the court to pass over the person appointed under the will as the executor who is the youngest son of deceased is because of the value of the estate and we’re talking about billions, when we talk about billions to quote is not entirely comfortable with someone who’s not professionally equipped or experienced to administer their estate. So, when we are talking about a substantial amount of estate, that should be extra caution.

12.16 [MARGARET WO] So it looks like the executor or as the role that becomes as your trustee. They actually also have a lot of power when they are granted the title of executor of an estate. So is there any way I can limit their power? Like, yes, I’ll trust this person, but I won’t trust them with everything. So is there any way I can limit or restrict or grant certain powers or obligations on this person?

12.40 [ALFRED IP] Yes, you can. But actually, this actually is something about communication. When you’re entrusting someone to do something and then you want to limit their powers or restrict and confine them into doing something not doing something that requests or communication. We’ve clearly drafted documents to make sure that a person understand what he can do and what he cannot do is either by way of a will with clear powers and duties and rise and the remedies or you can do it by your letter of wishes. If it’s something that is more personal, the most important part is to have a check and balance. The beneficiaries are fully aware of the power of the administrator so that they can check whether that person is performing the role properly.

13.30 [MARGARET WO] So this letter of wishes then, if obviously, the will becomes in a very legally binding document once the probate has taken place, but what about a letter of wishes is that also a legally binding document?

13.44 [ALFRED IP] Actually it is not a legally binding document is just, it is a way that you tell the administrator what you want him to do as your wishes, as the title suggests. It is, um, in a way, the administrator has to give sufficient reason to justify any deviation from the wishes that you express. Because at the end of the day, you cannot tell him not to do what not to do anymore because you’re six feet under, but then it is very important at the same time for the administrator to answer to the beneficiaries, if they decide not to adhere to the letter of wishes.

14.25 [MARGARET WO] So if given that I do have a trustee under the will, how can I actually set up a trust if I really do want to set up a trust and they are in fact genuinely a trustee and not just an executive with a trustees role?

14.40 [ALFRED IP] Actually, by assuming the role as the executor he or she becomes the trustee, because that is their role.

14.49 [MARGARET WO] But then can I also create an actual trust under my in my will?

14.52 [ALFRED IP] Yes. And in that case, it will be a will trust but then there are clear benefits and disadvantages in terms of creating a will trust, part of the reason is that a will will become public document after has been probated and creating a will trust would necessarily disclose all the terms and conditions in the will trust that usually they can be found in a trust deed. And the benefit of setting up a trust during your lifetime, we call it a intervivos trust is that is confidential. Nobody has right to access to the terms of the trust, the trustees and the terms and conditions. And for a lot of people is actually a very good way to keep the family wealth confidential. So to answer your question, is of course you can do it by way of a will trust in order to retain control of all your wealth until the day you pass away. But then there’s the clear disadvantage of confidentiality. And another thing that we have to look into is actually there are more and more people who are getting a bit older, that they can, they may come to a stage the key cannot manage their own affairs, and we can talk about it later, with the enduring power of attorney.

16.20 [MARGARET WO] Okay, sure. I’ll just continue on with the wills topic, then. Let’s move on to the beneficiaries. So for the beneficiaries, are there any limitations on who or maybe even what to say for example, could charities be beneficiaries under your will as well?

16.37 [ALFRED IP] Oh, yes. In Hong Kong there is actually testamentary freedom. You can basically do whatever you want with your will to leave anything to anyone, including charities. The only thing is that if you leave it to charities, and your financial dependents will be worse off losing the dependency because of that, they may challenge the provision to the in the will. And in that respect, Hong Kong actually has no forceship rules, you’re not compelled to leave everything or anything to any of the immediate family members. But then of course, if you decide not to do that, actually, it would be advisable to make sure that he or she would understand your decision and the reason for it, because it is a lot of time, that lack of management that give rise to testamentary disputes.

17.36 [MARGARET WO] So it sounds like before you finally execute your will, you should really make sure that all the people who are referred to it the executors, trustees, as well as all the beneficiaries, they are all clear about what the terms of your will will in fact be. You have lots of communication needed then.

17.52 [ALFRED IP] Yes, and communication and the management of it is something that a lot of people are not aware of when the advise about estate planning. It is really upon of how to deal with your things after you cannot manage it yourself.

18.08 [MARGARET WO] That sounds very, very important because I like my things.

18.11 [ALFRED IP] Oh yes. If you have a few favourite things like Birkin bags or Manolos, you do want to leave it to somebody and that person should know how to cherish it and then leaving it to the intestacy rules may not cover your needs.

18.26 [MARGARET WO] So actually that’s brings up a really important point then for very small personal items such as my Birkin bags and my Manolos those will be technical usually called chattels. Yeah, how can those also be bequeath under a will then?

18.40 [ALFRED IP] Oh, yes, absolutely. And all you have to do is to make sure that is clearly defined, like your shoes which colour which brand or which handbag and, of course, if you have a collection, make sure that you are not referring to one but a collection.

18.59 [MARGARET WO] Understood. Okay, now here’s another question about my assets then. Okay. What if I have assets in all the countries that I visited or lived in? Houses here a boat over there, cars and collections of random art in another place? Should I have? How can I deal with all of these assets?

19.20 [ALFRED IP] This is actually one of the questions that I am most frequently asked. And actually with globalization, a lot of people do have assets in multiple jurisdictions and in many different countries. And actually, a lot of time the advice is that they should make a will in every single country because it is only proper to administer it properly and to plan it properly. When they ask me the same question, I’ll say it very much depends: it depends on what you have in which countries. For example, if you have a flat in London, you’ll be fairly different from the way when you have a holiday home in Phuket, the treatment will be very different because the legal systems in the UK in Hong Kong are very similar, but it’s completely different in Thailand. And not to mention that in Thailand, everything’s in Thai. If you make a Hong Kong will and you bring it down to Thailand to enforce, it wouldn’t help with the simplification of the succession process. And of course, if it is possible, perhaps is advisable to use an asset holding vehicle like a Hong Kong or BVI company to hold the property in Thailand, because you transfer to shares of the company instead of the title of the property. That will actually save a lot of work. Potentially taxes as well.

20.53 [MARGARET WO] So it sounds like there could potentially be benefits and having a multiple wills. If you have very, very different jurisdictions.

20.58 [ALFRED IP] Correct. So, at the end, it depends on what you have, where you have it, and its professional advise that you should seek when you have different properties, different jurisdictions.

21.10 [MARGARET WO] But would there be any concern about conflicts between your different wills?

21.15 [ALFRED IP] Yes, absolutely. Because it’s very common for a will to have the first clause saying that I hereby revoke all my previous will and testaments to instrument. So it is important when you have multiple wills to have to manage properly, to make sure that you will not forget that you have made a will in one country and then later on, make another will to revoke it without making any provision or is not your intention. So the easiest way to do, go to a lawyer who can advise you properly and keep all the wills with the lawyers so that he knows that you’ve done this certain that keep you reminded. At the end of the day, don’t take out your will and review that every day.

21.58 [MARGARET WO] That is very true. One more final question about how I want to deal with my assets: going back to more local scale and not so globally, what if I have one asset that I want to deal with specifically for maybe we just want to let beneficiaries or a charity say one of my numbered accounts, and then the rest of my stuff I just want to give to grandchildren or the children. How can I deal with that?

22.20 [ALFRED IP] Um, the easiest way to do it, of course, is to make a provision in the will saying that I give this particular account to this person and the rest to that group of beneficiaries or class of beneficiaries in accordance with the share that you designate. So is the easiest, but we have come across situation when it may not be the intended interest or the intention of the one who makes the will to put everyone in one single document.

22.55 [MARGARET WO] Keep something secret, I don’t want them to know about that numbered account.

23.00 [ALFRED IP] Exactly. And that is the case that they want to preserve the confidentiality and probably not wanting family members to notice this or a particular relationship that you have during your lifetime. That is actually very sensitive. And instead of making everything in one document, he or she may consider making partial wills to designate a particular property to a particular person. But actually that creates a lot of trouble as well. In the particularly in terms of succession process, especially when the executor of the two wills are competing over who should be administering the estate or which extent of the administration that they are entitled to, things like that. So another way to do it would be to set up a family trust which is completely confidential. Just settle that particular account or property into a family trust with the purpose to name beneficiaries so that you will not form part of your estate upon your death, and the family members will not be aware of it. It is clean and clear.

14.14 [MARGARET WO] Very good way to keep a secret then.

24.15 [ALFRED IP] Oh, we know how to keep a secret.

24.18 [MARGARET WO] So, we actually just on moving on now, you had mentioned earlier about the enduring power of attorney. Yes. So, in general terms what exactly is an enduring power of attorney?

24.29 [ALFRED IP] An enduring power of attorney is a piece of legal document that allows you to appoint someone to look after your financial affairs when you lose mental capacity. Enduring means that it endures upon the loss of your mental capacity. Normal power of attorney ceases to have effect after you’ve lost mental capacity, because the attorney can only look after your wealth the way that you look after it. Enduring power of attorney gives the attorney a power to look after your assets after you become in a way gaga that is incapacitated, and actually we do see a lot of these kind of scenario happening when the average longevity of a person is continuing to prolong. I mean, we are looking at a lot of elderlies who are totally physically capable, but then they cannot remember things they cannot recognize people anymore. And it is the time when their family members may have to have access to their financial resources in order to look after them. And if he or she does not have to proper power to do that, it will only attract controversies by other family members will challenge the decision and actually an enduring power of attorney could save those family members a lot of money. Because without it, you will they will have to make a big application to court for court order, we call it a committee order. And in order to apply for committee order, they need to have at least two certified medical practitioners on the list of the hospital authority to give a medical report confirming the loss of mental capacities, which of course they have to conduct a mental test and all this and they also need to in the application put forward a certificate of family and property, which means that they have to set out all the family members and all the properties under the name in order to convince the court that they are the person who is suitable to look after the financial needs, and that is actually a quite long process that might take one to six months with due notice to the family members and most particularly the official solicitors. The cost would be far more than preparing an enduring power of attorney. So it’s actually cost effective for anyone to make an enduring power of attorney. And it’s actually not a very complicated process to have one made, all you have to do is to have an enduring power of attorney drafted in accordance with the Enduring Power of Attorney Ordinance Cap. 501, have it properly written, witness the signature by a lawyer and a medical practitioner and all can be done with a lawyer who’s familiar with this process, and afterwards, you can make sure that it only takes effect after is registered with the High Court of Hong Kong. So, um, it’s actually a very straightforward process that I do encourage everyone to have one, especially when they come into an age that they may run the risk of losing the mental capacity.

27.58 [MARGARET WO] Okay, so yeah, that was just answered my question I was going to ask who is who and when should get an enduring power of attorney then. So I think you’ve answered both of those just now. Yes. So basically everyone who does a will should probably also consider doing the enduring power of attorney as well.

28.12 [ALFRED IP] Yes, because especially when you never know whether you will come across a scenario that you may be hospitalized, you become unconscious, but then you have to be looked after. And that person can have access to your financial wealth, you know, to look after you.

28.29 [MARGARET WO] So we’ve talked about the enduring power of attorney just now about how you can have someone else look after your financial assets. But what about your actual health your actual person in the event that you do become mentally incapacitated, and in that is that Hong Kong is very behind compared to a lot of Western countries. We do not have advance health directives and we do not have living wills. In the UK, for example, the lasting power of attorney appointing someone to look after your financial welfare, sorry your welfare, general welfare, but then there’s no lasting power of attorney in Hong Kong. And that is actually advance health directive. But it’s not strictly speaking a legal document in the sense that is not legislated under the Hong Kong law to make it a legal document. Yes, you can nevertheless, make an advance health directive in a form prescribed by the hospital authority to make sure that the doctor who will be looking after you when something happened to you will not administer some sort of medical procedure on you, like intrusive medical procedure like surgery or open heart surgery, something like that. But then it’s only restricted to particular types of medical treatment that you will or will not receive. You cannot empower someone to make a decision for you, and that is a very big difference in particular when we are talking about people in relationship that is not recognized under the law, for example cohabitee or people in same sex relationship. A lot of time, if they come forward to the doctor and say, I didn’t want him to do that and want her to do that, that we just may not be recognized or respected by the medical doctors as particularly when arguments among other family members, although what he should or he should not have. So, um, to avoid argument is best to have something properly put in place to make sure that your wishes are heard and respected.

30.42 [MARGARET WO] So even though as you mentioned earlier, that it’s Hong Kong law doesn’t actually accommodate for these advance health directives or for living wills. Still a good idea to have one just because it does express what you wanted.

30.53 [ALFRED IP] Yeah. Make sure that there is something in place for your wishes to be heard and respected because usually in that kind of situation, you cannot speak for yourself.

31.05 [MARGARET WO] Yes, I would assume so if you already mentally incapacitated or hospitalized. Okay, so let’s move on now to the topic of probate and estate administration. If my family member, my beloved family member just passed away, what do I do? What is the first step that I need to start on this painful process?

31.26 [ALFRED IP] Okay, the first thing that to look after is make sure that your family members rest in peace, have everything done in terms of funeral arrangement, have the body properly buried with all the family members, doing it in a way exactly like how your family member would have wanted. Of course it would be great if he can, he or she can be very precise about what he or she wants. I still remember that we have elderly family members to tell us exactly what he or she wanted in the sense that I don’t want to be cremated for example or I want to wear that in my coffin effectively like this because this actually a lot of elderly people would think about what they want after they passed away. But then of course, usually is like verbal instructions or wishes. If a properly drafted document can actually set out all these for example, I want white roses, I want a party instead of like a crying ceremonies or a crying contest. Actually, it helps me remember how to look after the post mortem affairs.

32.52 [MARGARET WO] So basically you’re saying that in our will we can be very very specific about how we want our funeral arrangements to be attended to, what colour dress and jewellery and shoes I want to be wearing in the casket. Open viewing no open viewing, everything can be appointed in the will…

33.08 [ALFRED IP] Down to the very bottom of what colour of flowers you want for the funeral home. Yes, usually that will be in the letter of wishes. We wouldn’t put it in the will, because only because it may become a big document. So you want to leave the intimate details to the family members only. And the second step after that is done is to look at to the probate process. The probate process very much depends on whether there’s a will or not. So your family members should be looking for your will. But of course, if you put it in your drawer with your other personal effects, it is not the most secure way to do it. Because if a will is destroyed, there’s a presumption that is revoked by you. So we would always advise our clients to put it in our safe, and only keep a copy and let the family members know after they look after your personal effects, that the original of your will is with your lawyer. So it will be safely secured without any risk of anyone destroying it only for the reason that he or she doesn’t like what you’ve done. And actually this is a criminal offense itself destroying a will but then you don’t want anyone to attempt to break the law. So, um, this is the will part if he or she can look for your will, then the next thing would be to look at what you have. You may have bank accounts you may have real estate, you may have stock shares, private vehicles, et caetera. So, usually what people would do is to go through your drawers and find as many bank statements as you have, but now it becoming more and more difficult because of the e-statements which brings the next question how do you do it? If there’s e-statements, you don’t know what these bank accounts are, and you can’t log into their bank account or their email?

35.06 [ALFRED IP] So, um, the best way to do actually is to put the answer to the secure question in a safe place, particularly together with your will. Don’t put it in your drawers so anyone can look into it. You put it together with your will with your lawyers so that you will be completely, safely secured and sealed that nobody can look at it. But if it is necessary for family members to have access to your for example, email account and go through the email to see what sort of bank statement or bank email that you would have that it will be an easy way for them to find what you have when everything’s papers oppressed.

35.52 [MARGARET WO] Okay, you mentioned earlier that you do suggest that sometimes clients, they should store their will in a safe deposit box. Now if it’s in the safe deposit box and they’ve passed away, I can’t access their safe deposit box, can I so how do I access their will?

36.07 [ALFRED IP] So, um, if there’s a safety deposit box, usually what you do is: go to a lawyer, ask them to make an appointment for you to have access to the deceased safe deposit box. The process would be your lawyer will be making the appointment for you with the bank with the presence of the Home Affairs Department and there will be an appointment that the officer at the Home Affairs Department will go to your safe deposit box, take an inventory list, and that list will be appended to the intended probate application. But of course that also means that everything in your safe deposit box will be inventorized and become public document. If there’s any will that they find in a safe deposit box they would take it out. The only thing is that usually an appointment like that takes around two months before it can be assessed. So, it is a much more complicated process compared with keeping to will as for example your lawyer that their family members can go to your lawyer when a family member passed away and they have the will so the lawyer will be having the responsibility to make sure that you indeed passed away before to release the will to family members.

37.25 [MARGARET WO] Okay, so I just have to make sure that my family members know who my lawyer is who did my will.

37.33 [ALFRED IP] Exactly and you to remember though, … no, no is actually accurate, absolutely alright if you go to a lawyer who professionally drafted your will, because they must put down their contact details. And, indeed, if they found your will, what they can do is to ask a lawyer to post a notice at Law Society weekly circular and the law firm would look and go through their list every week to see whether they have any client prepared any will that they will come forward and notify the family members and that is another reason why it’s advisable to have you will drafted by a professional lawyer.

38.14 [MARGARET WO] Very good to know. Okay, so let’s say I have found the will and I have identified – I think – all of the assets and liabilities of the deceased. What do I do next?

38.26 You cannot find a will or I found a will… you found?

38.28 [ALFRED IP] Okay, you found the will and you go to a lawyer and then you start asking certain lawyer to prepare the probate process for you with them completing necessary document, which we will be in the form of an affidavit. Of course, if you ask me do I need to go to lawyer to apply for probate, probably not. You can do it yourself. The court will not discriminate to if you do it yourself, but then you have to go to quite a few times. You may know how to order necessary documents in place, and then you may get shouted out a few times. So it’s easier to go to a lawyer and get a lawyer get yelled at.

39.10 [ALFRED IP] If they’re good enough, they won’t get yelled at because they know exactly what they should do to prepare a probate process and documents. And it’ll be much more straightforward in all the legal fees that can be deducted from the estate.

39.24 [MARGARET WO] Oh, good. Very good to know. So if everything goes very smoothly, and my lawyer is excellent, how long would the probate process take if I had if I found the will?

39.34 [ALFRED IP] If you have, if there’s a will, the probate process will usually take around two to four months. It’s not too bad. Yeah, compared with the intestacy application which would take much longer.

39.47 [MARGARET WO] Intestacy being without the will. So what do I do if there is no will, I cannot find the will, advertised and no one can find it anywhere.

39.54 [ALFRED IP] Okay, if there is no will then you have to prove three things. First of all, that deceased passed away, your family member passed away that is by production of death certificate. And secondly, there are assets in Hong Kong that is what we’ve just gone through the social assessment liabilities with setting out everything that you have a deceased name, and the third thing is to you as the applicant you’re entitled to administer the estate, and that will require the proof of your relationship with the deceased and under the Hong Kong law on the assumption that the deceased is a Hong Kong person, it is a list of priorities that immediate family members have a title to administer the estate: the first spouse, second children, third parents, four siblings, so provided that they are entitled to a administer, to inherit the estate under the intestacy rules. So in order to prove the relationship between the applicant and deceased they need to produce proper documents. And actually, we were talking about death certificate, birth certificate, marriage certificate… these kind of public documents that prove the relationship if they are Hong Kong issued, for example, death certificate, a marriage certificate but authority all you take is a certified true copy, which is like to be straightforward, you pay a fee and you can immediately almost, but then if it is issued by foreign authorities, they have to be authenticated, if necessary to be a prostitute to is to show the authenticity of a document or legalization to make sure that that document is valid and genuinely issued by the competent authority. And that can be a fairly complicated process because you have to go to the foreign countries relevant authority, find the right authorities, and then deal with the bureaucracy that can give a lot of heartache and headache to the family members who need to procure these documents. So this is another reason why having a will is so important to simplify the probate process and … gives them peace of mind, I suppose, in a way as well…

42.17 [ALFRED IP] Exactly. And then we all we’ve just talked about Hong Kong related to the person who died domiciled under the home in Hong Kong. Hong Kong laws governs those who die domiciled in Hong Kong and domicile is a common law concept that is quite complicated. We’re not going to elaborate on it today. But then, if anyone was not domiciled in Hong Kong, then the probate process will be governed by the law of the place where he died domiciled. There would be extra complications. And that also requires a lawyer to advise about the application properly. That also emphasizes the importance of having a will which make all this issue go away.

43.06 [MARGARET WO] Actually, that raises an important point, then could I in fact, in my will state that I want it to be covered and interpreted in accordance with Hong Kong law?

43.15 [ALFRED IP] Yes, you can. And you also can make a declaration that you are domiciled in Hong Kong.

43.23 [MARGARET WO] Okay, so that’ll kind of streamlines things a little bit then. Absolutely.

43.26 [MARGARET WO] Very good. Okay, let’s move along a little bit. So, um, you’ve got your grant. Now you’ve finished the whole entire probate application whether testate with a will or intestate without the will. And now you finally got that final document from the court that says you – the applicant – are allowed to deal and handle the estate. What do you do?

43.47 [ALFRED IP] Okay, the next step would be to administer the estate with the grant finally issued which is like oh,… it’s an achievement!

43.53 [ALFRED IP] Exactly. The next one will be to administer the estate first of all usually we call it low hanging fruit would be to close the bank accounts. Closing the bank accounts is relatively straightforward, all you have to do is to bring the will to the bank and fill in all paper works and direct the bank to transfer the proceeds to a designated bank account that you keep for the benefit of the beneficiaries. And in that respect, of course, you should separate the estate money from your own money with a fresh account, you know, to give a proper account to the beneficiaries. And bank account is relatively straightforward, but then you were talking about other properties such as share certificates, you may have to liquidate by depositing into a broker, doing the transfer and all this, and safe deposit box of course you have to surrender it and getting over valuable properties out and then distributing it to the beneficiaries, they may fight over or I should have this earring or I should have this necklace, help them to be soft among themselves how to get whatever they some sentimental value to them. And finally, in terms of real properties they need to sign a legal document in order to transfer the legal title from the deceased name to the beneficiaries and if necessary, and the beneficiaries may agree among themselves how to distribute the properties. For example, some of the beneficiaries may not want to inherit the properties, but they want to have cash in the stack. So, either the beneficiary can buy the shares out or the executor can simply sell the properties and distribute the proceeds. And is that of course, Hong Kong is in a very unique situation where anyone who is already a homeowner, if they get another property they have to pay an extra stamp duty. And a lot of people may be discouraged from inheriting a real property.

46.12 [MARGARET WO] Okay, so I’m going to assume then that that step earlier where we identified all of the assets and liabilities with the deceased is for the purpose of distribution of the estate after you get your grant. What about the liabilities?

46.27 [ALFRED IP] The liabilities are very important. First of all, to identify the liabilities by making necessary inquiries with anyone who may be the deceased’s creditors such as the bank, credit card debt or personal loans. Make sure that after collecting the assets you pay the debt first before you make the distribution. And afterwards if you’re not sure what you should do is to make an application to court to limit the time that creditors can come forward and claim against estate for any liabilities. That you allegedly do by publicly publishing a notice on the gazette. And, after a period of 60 days, you can safely distribute the rest of the estate to the beneficiaries.

47.13 [MARGARET WO] Okay, so it doesn’t take that much time at all then. Okay, so what if none of this goes smoothly? And someone starts to argue: one of the beneficiaries is not happy with how maybe how the state is being managed? Or they’re not happy with how some of the items are being distributed? Because if there was no will, that sets everything out? What can this unhappy person do?

47.36 [ALFRED IP] I will say the first thing that the person aggrieved, the unhappy person should do is to go to a lawyer, because every situation is different. The first question that you should ask is some whether there’s a will, if there is a will, whether it has any reason to challenge the will. To challenge the will there could be a lot of reason from the fact that the person who signed the will was not aware of the legal effect of the will, the contents, legal effect, or the lack of mental capacity to sign the will at a time, or to not properly explain the legal consequences of the will, at this is particularly the case for vulnerable clients who are elderly or who may not be entirely sure about what they’re doing. And another alternative would be whether there are particular circumstances to render the will unfair in the sense that you do not believe that the person who made it was totally voluntary, we’ve come across so many circumstances when old people when they become older, they need someone to look after them. And some of the family members may spend a lot of time with them and then they gradually become convinced or relying on them. And when they make a will leaving everything to those people and you’re not a beneficiary, usually we wonder whether that person has done something to make that person leave everything to them. All are very fact sensitive and require an experienced lawyer to look into your situation in order to advise you properly over whether there’s a valid claim and before everything is in place, the first thing that probably your lawyer will advise you to do is to put in a caveat. It is effectively a hurdle for the court not to issue any grant of probate or letter of administration without notice to you and anyone who wants to apply for the grant will have to clear you out first by asking you either to do withdraw the caveat or have it properly litigated. So, um, the first thing – irrespective if you have claim or not – if you’re not sure, your lawyer should put in a caveat for you immediately.

50.02 [MARGARET WO] Okay, so as long as you just put in the caveat first to stop everything from proceeding, then that at least gives you some time to think then…

50.10 [ALFRED IP] Exactly. It gives you some time to think and get advice properly, conduct your investigation, either making inquiries with lawyers who prepare the will for the deceased, or seeking proper medical records to ascertain the deceased mental status at a time where he or she execute the will.

50.30 [MARGARET WO] So I guess I’m earlier you mentioned about just the voluntariness of the deceased when they signed the will. I guess that also goes back again, to the point why you need a lawyer to help you draw up the will because the lawyer will probably help you get around this whole entire voluntariness issue. Right?

50.48 [ALFRED IP] Absolutely. And it’s very important for a professionally trained lawyer to keep all the record in place properly, and in particular to administer proper questions to the client before they signed the will, you know, to make sure that the person knows the legal effect of the document that they signed and they understand they have to do it voluntarily.

51.13 [MARGARET WO] Okay, so let’s say I’ve established that there is something that’s not right, whether it’s the signatures in question or the person was not mentally capable at the time, or the issue of voluntariness. What would I do next?

51.26 [ALFRED IP] The next thing would be to consider whether to challenge the will, if you are challenging the will, you can do it in both in two ways. Either you put in a positive case, to say that the personal who signed the will lacked the mental capacity or other reasons to say that the will should not be probated. Otherwise, you’re just putting the burden on the executor named in the will to prove the will in solemn form. And you put forward evidence to show contrary or we call it raises suspicion to the court to investigate. So that we will be properly examined by the court before determining whether the will is valid or enforceable or not. So that would be for the will part.

52.15 [MARGARET WO] So what if say, I didn’t raise any objections before the grant was applied for or the letters of administration, but subsequently when the estate was being dealt with, I become upset with how it is being handled. What are my reliefs?

52.34 [ALFRED IP] At that point, okay, so the first thing that you have to look into is whether you are the beneficiary and you are aggrieved by the way that administration executor is handling the estate for example, lack of proper account, failing to answer questions, taking the necessary steps to recover the estate from any third party. Go to a lawyer, discuss your situation and see whether you are entitled to pass over the administrator, remove the administrator and get the result that you deserved, otherwise if you are actually not entitled to the estate, but then you aggrieved by it, you may want to seek professional advice as well as to what you can make a claim against the estate. As said earlier, in particular, if you have been financially dependent on the deceased and that is actually a separate claim, but we can talk about it another time.

53.34 [MARGARET WO] Okay, and just one more thing about a person who is not actually entitled under the will is what if, say I’m a creditor of the deceased, credit card company or something like that, and I haven’t been paid out of the estate in advance as one of the liabilities?

53.49 [ALFRED IP] Okay, um, it’s actually very common for financial institutions if any client passed away and owing monies to them to put in a caveat, so that the person who’s going to administer the estate who enter a personal undertaking with the creditors to make sure that he or she will personally be liable to pay, to settle the debt after they’ve collected the estate.

54.17 [MARGARET WO] Okay, so are there any other common problems that may be encountered during the management of an estate?

54.26 [ALFRED IP] Um, lack of account is of course one of the major reasons but another common problem that a beneficiary may face in terms of estate administration is about the persons who administers the estate are taking advantage of their position, for example, he or she is living in the family home and not paying the rent and they should indeed be accounting for their occupation of a property that should be distributed among the beneficiaries. And this is why we emphasize the importance of having someone who is reliable to administer the estate. And in that respect, a lot of people are not aware that putting this burden on the family members may put them in an embarrassing situation giving rise to sibling rivalries, for example. And that is why a lot of time is very important to make sure that family members will have an understanding among themselves in relation to what they should do, what they’re entitled to, what they’re not supposed to do. And managing the family members becomes a process that a person administering the estate should have in giving account to them for their benefit. And in that respect, if there’s any dispute among the family members of a how to deal with an estate, one of the many ways to resolve such disputes is by way of mediation. And mediation is actually an effective way to introduce a professional and impartial third person to help to the beneficiaries resolving their differences by trying to present a different perspective. And providing different solutions for them to consider. Bringing a third party to look at everything objectively can put people into perspective and attempt to resolve it with a little bit of compromise, in exchange for a lot more benefits such as to avoid a protracted legal battle. And of course, another way to avoid it is to have someone professional to administer who care about their own reputation and their professionalism, more than anything else, and he or she usually is not a beneficiary, so they have no reason to abuse the power, they will only administer the estate properly in exchange for proper remuneration. And this is why the benefit of having a professional administrator is that they know what they’re doing. And they will not do what they’re not supposed to do for their own benefit.

57.17 [MARGARET WO] Okay, so who could be a professional administrator, then?

57.21 [ALFRED IP] That person can be an accountant, lawyer or anyone who has the professional capacity or experience to administer the estate with the experience before?

57.32 [MARGARET WO] Okay, and that wraps up our podcast on private client estates and trust. So big thank you to all of our listeners who are joining us on this podcast. And also thank you to Alfred, our private client lawyer for assisting us with all this information.

57.48 [ALFRED IP] Thank you, Margaret. And actually it’s a very good opportunity for me to share my experience as a private clan lawyer. I hope that after hearing this podcast a lot of people will realize the importance of having a proper lawyer to advise them on estate planning related issues, and hope that there will be less disputes among family members, and the wealth can carry on for generations.

58.13 Be sure to catch our other episodes of The HIP Talks podcasts by checking the insights section of our website at www.hugillandip.com and please send us your comments by writing to our email address hello@hugillandip.com. Also, please feel free to share this episode of The HIP Talks podcasts with your friends, family and associates. For the hearing impaired you can find the notes and the transcript of this episode on our website.

This podcast is for informational purposes only. Its contents do not constitute legal or professional advice.

Alfred Ip

Alfred Ip

Alfred assists high net-worth individuals (HNWIs) in handling their wealth-related issues, such as contentious and non-contentious trust and probate, mental capacity, family office, amongst other wealth management matters. He is also a leading Dispute Resolution lawyer with over 20 years of experience in Hong Kong. Moreover, Alfred helps clients with issues regarding Family Law.

All articles by : Alfred Ip
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