International Succession Planning for Hong Kong Residents with Mainland China Assets

Introduction

Many Hong Kong residents have significant assets in Mainland China — whether real estate, company shares, bank deposits, or investment portfolios. Planning for the succession of these assets requires an understanding of both Hong Kong and PRC law, as well as the mechanisms available for transferring assets between the two jurisdictions on death. Without proper planning, the administration of a Mainland Chinese estate can be time-consuming, expensive, and uncertain.

PRC Inheritance Law

Succession to Mainland Chinese assets is governed primarily by the Civil Code of the People's Republic of China (which came into force on 1 January 2021), replacing the former Inheritance Law. Key features of PRC succession law include:

Statutory Order of Inheritance

In the absence of a valid will, PRC assets are distributed according to the statutory order of inheritance. The first order of heirs is: spouse, children (including adopted children), and parents. Second-order heirs (siblings, paternal grandparents, maternal grandparents) inherit only if there are no first-order heirs.

Forced Heirship

Chinese succession law includes forced heirship provisions: a testator cannot completely disinherit a minor child or a parent who has no other income or is incapacitated. Such persons are entitled to a "necessary share" of the estate regardless of the terms of the will.

Capacity to Make a Will

Under the Civil Code, any person with full capacity (i.e., an adult of sound mind) may make a will. The will must be in writing and witnessed, or notarised by a PRC notary public for enhanced validity.

Recognition of Hong Kong Wills in Mainland China

A will made in Hong Kong in accordance with Hong Kong law may be recognised in Mainland China if it complies with certain formal requirements acceptable under PRC law. However, in practice, PRC courts and notaries apply a relatively strict approach to the formal validity of foreign wills.

For assets in Mainland China, it is generally advisable to make a separate PRC-style will for the Mainland assets, in addition to any Hong Kong will. The PRC will should be drafted in Chinese, executed before a PRC notary public, and comply with PRC formal requirements.

Cross-Border Probate and Succession Administration

The grant of probate in Hong Kong does not automatically authorise the administration of Mainland Chinese assets. To deal with Mainland assets, a separate process is required:

• If the deceased made a valid PRC will: a PRC notary public (or, in certain cases, a court) will issue the relevant certification of inheritance rights
• If there is no PRC will: the heirs must go through a PRC notarisation or court process to establish their right to inherit, which can require substantial documentation (including proof of the family relationship) and may be time-consuming

For real property in Mainland China, the deed must be transferred into the heir's name through the relevant local real estate registry, which requires the completed succession documentation.

Trust Solutions for Cross-Border Estate Planning

A well-structured trust can provide significant benefits for Hong Kong residents with Mainland assets:

• A Hong Kong or offshore trust can hold shares in a Hong Kong holding company, which in turn holds Mainland assets through a wholly foreign-owned enterprise (WFOE) or other PRC entity. On the settlor's death, the trust mechanism allows the assets to pass to the beneficiaries without triggering the PRC succession process for the underlying assets
• However, this structure requires careful legal advice on PRC foreign investment rules, corporate structuring, and the ongoing operational requirements of the PRC holding entity

Tax Considerations

Neither Hong Kong nor Mainland China currently imposes inheritance tax or estate duty on the transfer of assets on death. This makes both jurisdictions relatively favourable from a succession tax perspective. However, capital gains tax may arise in Mainland China on the transfer of certain assets in the course of succession, and professional advice should be sought on a case-by-case basis.

Practical Steps for Hong Kong Residents

• Identify and document all Mainland Chinese assets and their ownership structure
• Review existing Hong Kong and PRC wills to ensure consistency and legal validity in both jurisdictions
• Consider whether a PRC notarised will is appropriate for Mainland assets
• Evaluate whether a trust or holding structure can simplify cross-border succession for significant Mainland assets
• Engage a bilingual legal team with expertise in both Hong Kong and PRC succession law

How Alan Wong LLP Can Assist

Alan Wong LLP's private wealth and trusts team advises Hong Kong residents and their families on integrated succession planning for cross-border estates, including assets in Mainland China. We prepare Hong Kong wills, trust documentation, and powers of attorney, and work with PRC counsel and notaries to ensure that Mainland Chinese succession arrangements are properly coordinated with Hong Kong planning. Our bilingual team is well-placed to assist with the documentation and administrative requirements of cross-border succession matters.