HONG KONG SAR, CHINA Law and Practice Contributed by: Alfred Ip, Hugill & Ip
sion planning. Many wealth creators are uncomfort - able confronting their own mortality or relinquishing control of assets they have spent a lifetime building. This cultural hesitancy often results in delayed plan - ning, leaving families exposed to costly disputes and probate delays. Legal advisors must approach these conversations with sensitivity, framing succession planning not as a loss of control but as an act of stew - ardship for the family’s future. To bridge the gap between the desire for control and the need for succession, practitioners frequently rec - ommend reserved power trusts, which are expressly recognised under the Hong Kong Trustee Ordinance (Cap. 29). Such structures allow the settlor to retain specific powers, such as the power to direct invest - ments or to add or remove beneficiaries, without invalidating the trust. This provides a legally sound mechanism for the founding generation to maintain meaningful oversight whilst achieving the succession and asset protection objectives of the trust. For a broader discussion of the role of family trusts in suc - cession, see Succession Battles, Family Trusts and Inherited Wealth. 2.2 International Planning The international dimension of succession planning is a defining feature of advising high net worth families in Hong Kong. Many clients hold assets across multiple jurisdictions: real estate in the United Kingdom, Aus - tralia, or Canada; investment portfolios in the United States; business interests in mainland China; and liquid assets in Singapore or Switzerland. Simultane - ously, their children and grandchildren may be resi - dent or domiciled in jurisdictions with starkly different succession laws, including forced heirship regimes, high estate taxes or complex probate procedures. Such cross-border elements create a risk of multiple, conflicting legal regimes applying to the same estate. Without scrupulous planning, an estate may be sub - ject to probate proceedings in several jurisdictions simultaneously, each with its own procedural require - ments, timelines, and costs. Forced heirship rules in civil law countries, such as France, Italy, or certain Middle Eastern jurisdictions, may override the testa - tor’s wishes if the relevant connecting factors (domi -
cile, nationality, or asset location) are not meticulously managed. In Hong Kong, the preferred solution is to establish a centralised holding structure, typically a Hong Kong discretionary trust, in which to hold global assets. By vesting legal ownership of assets in a trustee, the assets are removed from the settlor’s personal estate and are therefore not subject to the probate process or the forced heirship rules of the settlor’s domicile or nationality at the time of death. This approach requires considered co-ordination with local counsel in each relevant jurisdiction, and particular attention must be paid to the recognition of trusts in civil law countries. For a detailed discussion of multi-jurisdictional estate planning, see Estate Planning for Assets Located in Multiple Jurisdictions. 2.3 Forced Heirship Laws As discussed in 2.2 International Planning , Hong Kong does not impose a forced heirship regime. By contrast, the jurisdiction celebrates testamentary free - dom, allowing individuals to dispose of their estate as they see fit through a validly executed will. A testator may, in principle, disinherit any family member, includ - ing children and spouses, subject to the Inheritance (Provision for Family and Dependants) Ordinance (Cap. 481). Under Cap. 481, certain categories of persons may apply to the court for financial provision from the estate of a deceased person if the will or the intestacy rules fail to make “reasonable financial pro - vision” for them. The categories of eligible applicants include: • the spouse or former spouse of the deceased; • a child of the deceased (including an adult child); • any person treated as a child of the family; and • any person who was being maintained, wholly or substantially, by the deceased immediately before death. The standard of provision varies by applicant. For a surviving spouse, the court applies a higher stand - ard of what is “reasonable in all the circumstances”, whereas for other applicants the standard is limited to what is reasonable for their maintenance. The court has broad discretion in fashioning the remedy, which may include periodic payments, a lump sum, a trans -
262 CHAMBERS.COM
Powered by FlippingBook