When a mainland Chinese entrepreneur dies, leaving assets in the Hong Kong SAR, the assets do not automatically transfer to family members. The Hong Kong SAR has its own legal system and probate process, which must be followed before assets can be accessed or distributed to the deceased’s heirs. This article briefly explains the Hong Kong SAR legal process to distribute a deceased’s assets.

First step: Are there assets in Hong Kong?

The first step would be to determine which assets fall within the legal jurisdiction of the Hong Kong SAR. These assets may include bank accounts held with Hong Kong banking institutions, shares held in Hong Kong companies, real property (real estate) held in Hong Kong and/or securities traded on the Hong Kong Stock Exchange. The administration of the above types of assets would be dealt with through the Hong Kong court process and Hong Kong law will generally govern Hong Kong real estate, regardless of the deceased’s nationality or place of residence.

The legal authority to deal with the deceased’s Hong Kong assets is granted by the High Court of Hong Kong either in the form of a grant of probate (if the deceased left a valid will naming an executor who is willing to act) or a type of letters of administration, if the deceased left no will, the will is invalid or no executor is able to act.

Did the deceased leave a Will?

If the deceased left a Will, the Hong Kong court will need to decide whether the Will is valid under Hong Kong law and whether it covers Hong Kong assets. Hong Kong recognises Wills executed in accordance with the law of the place of execution or the deceased’s domicile. If the Will was executed in the People’s Republic of China (“PRC”), issues that sometimes arise include the differences in formal requirements between the two jurisdictions, lack of clarity over asset coverage and the absence of an appointed executor. If an executor is named in the Will, the executor (usually with the help of his/her Hong Kong solicitor) applies for probate in Hong Kong.

What if the deceased left no Will or an invalid Will?

If the deceased left no Will or an invalid Will, this is deemed an intestacy and the deceased’s estate will be distributed in accordance with Hong Kong’s intestacy rules pursuant to the Intestates’ Estates Ordinance Cap 73.

Who are the heirs in an intestacy?

Very broadly speaking, the surviving spouse (with a fixed statutory legacy in specific situations) and children take priority and extended family members such as parents and siblings inherit only if closer relatives do not exist.  A suitable family member (often the surviving spouse or an adult child) applies for Letters of Administration in order to administer the estate.

What are the documents generally required of PRC heirs?

PRC heirs are typically required to present the following documentation – death certificate issued by mainland Chinese authorities, resident identity cards of the deceased and heirs, hukou registration records to prove family relationships, marriage or divorce documents if applicable and notarial certificates confirming identity and kinship. In practice, Hong Kong courts usually require these documents to be notarised by a notary public in the PRC and properly authenticated (for example, via current apostille/legalisation arrangements).

What if probate proceedings have already been completed in the PRC?

Even if probate proceedings have already been completed in the PRC, it is not possible to apply for recognition of these probate documents in Hong Kong. Unfortunately the PRC is not listed as a country under Hong Kong’s statutory resealing regime as the listed countries are all common law regimes. A fresh application in Hong Kong is required.

Are there estate duties and estate taxes in Hong Kong?

Estate duties have been abolished in Hong Kong for deaths occurring after 11 February 2006 and there have never been estate or inheritance taxes. However, tax issues may arise in the PRC and other applicable jurisdictions.

What are some practical challenges faced by PRC heirs?

As a result of the numerous complications mentioned above, some common challenges faced by PRC heirs include delays due to incomplete documentation, difficulty proving family relationships where hukou registration records differ from actual family relationships, translation (from Chinese to English) as well as notarisation requirements and disputes over the validity or interpretation of Wills (the latter complication is not unique to PRC heirs but occurs across all jurisdictions).

It is important to note that if the deceased was domiciled in the PRC, PRC succession law may be relevant in deciding who inherits movable assets in Hong Kong, although the Hong Kong court issues the grant and supervises the administration.

What is the expected timeline?

A straightforward probate application in Hong Kong takes a few months to complete. Complex cross-border estates take longer, particularly where there is no will, documents must be obtained from mainland authorities and/or heirs are in dispute about their entitlements.

Does planning ahead help?

For PRC citizens with assets in Hong Kong, advance planning can significantly reduce complications in the probate process. Many have opted to execute separate Hong Kong wills to cover their Hong Kong assets to streamline the legal process in Hong Kong, appointed executors familiar with Hong Kong laws and maintained clear records of bank accounts, shareholdings, property and other assets.

Conclusion

The passing of a loved one is one of the most difficult times in a person’s life. With the benefit of advance legal planning, heirs will be able to navigate the complicated process of probate more smoothly and avoid unnecessary stress during a time of immense grief. And with a properly drafted will, one can generally choose who should inherit one’s assets, without regard to fixed intestacy rules in Hong Kong.

In conclusion, it is advisable to seek professional legal advice if one’s estate involves Hong Kong assets.

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.