The importance of estate planning

The importance of estate planning 遺產規劃

The dust finally settles on the legal dispute over the inheritance of Nina Wang’s multi-billion property empire. Who wins and who loses isn’t our concern, but the saga tells us the importance of a proper estate planning strategy. Without it, it’s very possible that much of your hard-earned money can end up in a mess. In worst-case scenarios, it will turn into nightmares for your spouse and/or children and may lead to prolonged legal battles among them, or even with those who you might not have expected.

As a start, estate planning can be as easy as writing a will, which can be done through a solicitor at a very affordable cost. Or you can sign your will in front of two or more witnesses, witnesses and his/her spouse should not be a beneficiary under your will. A will is a written legal instrument by which the testator, or the will writer, provides directions for the management and distribution of his or her estate after death. In Hong Kong, the writing of a Will is regulated by the Wills Ordinance (Cap. 30).

If a person passes away without a Will, which is called dying “intestate”, then his or her estate will be passed and distributed by intestate succession according to the statutory provisions under the Intestates’ Estates Ordinance (Cap. 73), which will be distributed among the spouse and children. If you’re single with no children, then the court is likely to decide who among your blood relatives will inherit your estate.

Estate planning – setting up a trust

For some people, setting up a trust in addition to a will makes more sense for their estate planning. A trust is a “legal vehicle” that enables you to put conditions on how your assets are distributed after you die, and often helps minimise gifts and estate taxes (note: Hong Kong’s inheritance tax or estate duty has been abolished since 11 February 2006).

The parties to a trust include the grantor, who is the person who transfers his properties to and sets up the trust. The trustee, who is the person given the powers and duties to collect, own, administer, invest and distribute the trust properties to the beneficiaries in the ways as instructed.

The trust is usually established by a trust instrument, often called a trust deed, which is executed by the grantor when setting up the trust. Or, the trust may take the form of a limited company and the trustees will become the directors of the trust corporation. Setting up and structuring a trust is a more complex process and you will need the help from professionals such as your private banker, financial planner, accountant, solicitor, etc.

Alternative ways to estate planning

There are many more ways you can formulate your estate planning strategy, such as using a shell company to hold and transfer your assets, restructuring the title deed to your real property, or you may also want to donate part of your estate to charities.

No matter how much wealth you have accumulated so far, it’s worth some time to review your assets, instruct in your estate plan who can inherit them, the portion each can get, when, and how. By being clear about your intentions and have an estate plan in place, you can dispel conflicts and potential legal battles among your family members or relatives after you’re gone.

Important legal Notice

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