Cross-Border Estate Planning for Hong Kong Residents with Overseas Assets

Introduction: The Cross-Border Estate Planning Challenge

Hong Kong's thriving expatriate community and its position as Asia's premier wealth management hub mean that many Hong Kong residents hold significant assets in multiple jurisdictions — UK property, US equities, Australian superannuation, mainland China businesses, Singapore bank accounts. When such an individual passes away, the estate may be subject to multiple overlapping succession laws, probate procedures, and — most critically — tax regimes.

Hong Kong itself has no estate duty (abolished in 2006), no capital gains tax, and no gift tax. But the absence of these taxes in Hong Kong does not mean they are absent across the individual's entire estate: UK inheritance tax, US federal estate tax, and Australian capital gains tax on death can each impose substantial liabilities on assets situated in those jurisdictions, regardless of the deceased's tax residence.

This guide surveys the principal cross-border estate planning issues for Hong Kong residents and the strategies available to manage them.

The UK: Inheritance Tax

UK Inheritance Tax (IHT) is charged at 40% on the estate of a deceased person above the nil-rate band (£325,000 per person, or up to £500,000 with the residence nil-rate band for a family home). Until April 2025, IHT applied to worldwide assets of a UK-domiciled individual and to UK-situated assets of a non-domiciled individual.

From April 2025, the UK has transitioned to a residence-based IHT system. Under the new rules, individuals who have been UK-resident for at least 10 of the last 20 tax years are subject to UK IHT on their worldwide assets (not merely UK-situated assets). This change has significant implications for Hong Kong residents who have also spent significant time in the UK — including those who moved from the UK to Hong Kong but may have retained UK property or family ties.

Key planning considerations for Hong Kong residents with UK connections:

• Domicile determination: Under common law, domicile is a legal concept distinct from residence or nationality. A Hong Kong-domiciled individual who has never been UK-resident is subject to UK IHT only on UK-situated assets. A UK-domiciled individual (or a deemed-domiciled individual under the old rules, or a long-term UK resident under the new rules) faces worldwide IHT exposure.
• UK property structures: Historically, UK residential property held by non-UK domiciliaries through an offshore company was outside the scope of UK IHT. This relief was removed in 2017; UK residential property is now within the scope of UK IHT regardless of the ownership structure. UK commercial property may still be held outside the scope through non-UK entities in some circumstances.
• Spousal exemption: Transfers between UK-domiciled spouses are fully exempt. Transfers from a UK-domiciled spouse to a non-UK domiciled spouse are exempt only up to £325,000 (though the receiving spouse may elect to be treated as UK-domiciled for IHT purposes).
• Trust planning: Discretionary trusts established by a non-UK domiciliary can hold non-UK assets outside the scope of UK IHT, provided the settlor maintains non-UK domicile. However, UK assets cannot be sheltered in this way since 2017.

The United States: Federal Estate Tax

The US federal estate tax is levied on the worldwide estate of US citizens and US domiciliaries, and on US-situated assets of non-resident, non-citizen individuals (NRNCs). The current federal estate tax exemption for US citizens is approximately US$13.6 million per person (2024), with a top rate of 40%. The exemption for NRNCs on their US-situated assets is only US$60,000 — a strikingly low threshold.

US-situated assets include: shares in US corporations (including US-listed securities), real property located in the US, and debt obligations of US companies. For a Hong Kong resident holding a typical US equity portfolio through a Hong Kong brokerage account, the underlying US stocks may constitute US-situated assets subject to US estate tax on death.

Key planning considerations for Hong Kong residents with US connections:

• US citizen or green card holder in Hong Kong: Subject to US estate tax on worldwide assets. Complex US estate planning (including irrevocable life insurance trusts and GRATs) may be necessary.
• Non-US persons with US securities portfolios: Consider holding US equities through a non-US holding company or through a non-US fund vehicle that invests in US securities. The fund's units may not constitute US-situated assets, avoiding US estate tax exposure on the underlying US stocks.
• US estate tax treaty: There is no US-Hong Kong estate tax treaty. US citizens and green card holders resident in Hong Kong must rely on unilateral US estate tax planning strategies.

Australia: Capital Gains Tax and Superannuation

Australia imposes capital gains tax (CGT) on the disposal of “taxable Australian property” — which includes Australian real property and shares in “Australian real property rich” companies — by non-residents. Death is a CGT event in Australia: the deceased's estate is deemed to have disposed of Australian real property at its market value at the date of death, potentially triggering CGT at the applicable rate.

For Hong Kong residents with Australian property or shares in Australian property-holding companies, a death CGT liability may arise on the Australian assets, even though no similar tax applies in Hong Kong. Tax treaties between Australia and other countries sometimes provide relief, but there is no Australia–Hong Kong comprehensive double tax agreement.

Superannuation is also a significant estate planning consideration for Australian citizens or permanent residents resident in Hong Kong who retain Australian superannuation funds. On death, superannuation proceeds paid to non-dependants (including adult children) may be subject to Australian tax at up to 32%. Superannuation death benefit nominations must be regularly reviewed.

Mainland China: Succession and Inheritance

The PRC does not currently impose inheritance tax. However, succession to assets in mainland China is governed by the PRC Inheritance Law (as amended). The PRC does not recognise foreign probate grants directly; a fresh application for the distribution of PRC assets must be made through the PRC courts or notarial system, which can be time-consuming and complicated by differing attitudes to foreign wills and foreign trust structures.

For Hong Kong residents with significant PRC assets (particularly real property or business interests held in their personal name), advance planning through PRC-law compliant structures (such as PRC trusts, nominee arrangements, or holding through PRC entities) can simplify succession.

Multi-Will and Multi-Jurisdiction Probate Strategy

Where a deceased has assets in multiple jurisdictions, it is generally more efficient to prepare separate wills in each jurisdiction, each covering the assets in that jurisdiction and governed by the law of that jurisdiction, rather than relying on a single global will. A multi-will strategy:

• Avoids the delay of obtaining foreign probate on a Hong Kong will (or vice versa)
• Ensures each will is drawn in accordance with the legal requirements and succession laws of the relevant jurisdiction
• Reduces the risk that a single will is invalid in one jurisdiction due to formal requirements or conflict of laws issues

The multiple wills must be carefully coordinated to avoid inadvertent revocation of one will by the other. Each will should expressly state that it covers only the assets in the specified jurisdiction and does not revoke any other will made in respect of assets elsewhere.

Trusts as a Cross-Border Planning Tool

Discretionary trusts remain one of the most effective tools for managing cross-border estate planning complexity:

• A Hong Kong discretionary trust holding worldwide assets (other than UK residential property and US-situated assets) can potentially shelter those assets from foreign inheritance taxes, provided the settlor maintains a non-UK, non-US domicile.
• An offshore trust (typically in the BVI, Cayman Islands, Jersey, or the Cook Islands) with a Hong Kong trustee or protector can provide additional flexibility and confidentiality for multi-jurisdictional estates.
• Lifetime gifting strategies (gifts to children, to trust, or to charity) can reduce the overall estate value subject to foreign death taxes, subject to applicable gift tax rules in the relevant jurisdictions.

Practical Checklist for Cross-Border Estate Planning

• Identify all assets in each jurisdiction and their current ownership structure
• Identify all potential succession laws and death taxes applicable to each asset
• Review and update beneficiary designations for insurance policies, superannuation, and retirement accounts
• Consider the domicile position in each jurisdiction (particularly UK and US)
• Prepare separate wills for each major jurisdiction in which assets are held
• Consider trust structures to shelter assets from foreign death taxes
• Ensure executors and trustees have the information and authority to deal with overseas assets
• Review annually and update whenever the asset mix, family circumstances, or applicable tax laws change

Conclusion

Cross-border estate planning is not optional for Hong Kong residents with overseas assets — it is essential. The consequences of inadequate planning — unexpected tax liabilities, protracted multi-jurisdiction probate proceedings, and family disputes over asset distribution — can dwarf the cost of proper advice. The earlier planning begins, the more options are available.

Alan Wong LLP advises on cross-border estate planning, multi-jurisdiction probate, and private wealth structuring for Hong Kong residents and expatriates. Contact our Private Wealth team for a confidential discussion.