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Trusts for Pets

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Love for our four-legged friends

Our most precious family and friends in later years may be of the four-legged variety and we may worry about how to provide for them after we have departed. 

It was reported by the South China Morning Post in January 2024 that a woman in China left her US$ 2.8 million estate to her beloved cats and dogs. She did have children but they never visited her and her pets were her only comfort when she was aged and ill. Her will stipulated that her entire estate was to be used to care for her pets and their offspring. The local vet clinic was apparently appointed to administrate her estate.

How does one provide for one’s pets in the event of one’s inevitable passing? The simplest way is to discuss the issue with trusted family members or friends and agree verbally that the pets will one day be adopted by a trusted family member or friend. A more formal appointment can be drafted in a will and even include a fixed amount or a regular stipend, to be distributed by the executor of the will to the pet guardian. A lump sum bequest would suffice for a trustworthy pet guardian. On the other hand, a regular stipend, coupled with specific conditions, can incentivise pet guardians to diligently fulfil their responsibilities and ensure that essential health checks are conducted on the pets in their care.

The widow of Gene Roddenberry (creator of Star Trek) passed in 2009 at the age of 76 and purportedly left a US$ 4 million trust to benefit her faithful dogs plus US$ 1 million for a helper to care for them on her estate, for as long as the four-legged beneficiaries lived. In more complex cases, it may be prudent to set up a trust if an estate is particularly large or if the testator wishes to provide for their pets’ offspring i.e., a multigenerational legacy. Depending upon the jurisdiction, there may be tax benefits associated with a trust. A further advantage of setting up a trust is that one can specify how the trust funds are to be used and managed and include provisions for checks and balances. For example, there could be three separate parties in care arrangements – the actual caregiver(s), the entity/person disbursing funds and the entity/person overseeing the arrangements. If a certain property is designated for the exclusive use of said beneficiaries during their lifetime, provisions should be made regarding its eventual sale, including when the property should be sold and how the proceeds should be distributed.

Conclusion

Providing for our precious pets in the event of our passing requires some planning and careful consideration. While a simple verbal agreement or a simple will may be sufficient for some testators, a trust can offer a more comprehensive solution for larger estates or those who wish to provide for their pets’ descendants. By taking the time to plan for our pets’ futures, we can ensure that they receive the care and comfort they deserve in their older years.

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.

ABCs of Charitable Giving

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The most beautiful bequests fulfil the dreams of their donors. Donors make charitable bequests in their wills in the hopes of leaving the world a slightly better place.

Types of bequests

Charitable bequests can be general, demonstrative, specific or residuary gifts. A general bequest is the gift of a specific amount of money or asset to a charity, without specifying how it should be used. A demonstrative bequest is a gift of a specific asset by the donor, such as an art piece, to a charity. A specific bequest is the gift of a specific amount of money or asset to a charity for a targeted purpose, such as funding for a research project. A residuary bequest is a gift of the remainder of a donor’s entire estate after all other bequests in a will have been made.

The type of charity that one selects may be cultural, environmental, scientific/medical, political or specifically targeted at a disadvantaged group/minority. For example, a donor may choose to support a cultural institution, such as a museum or a theatre, to promote arts and culture. They may choose to support an environmental organization, such as a wildlife conservation group, to protect the natural world. Scientific and medical charities, such as those focused on cancer research or disease prevention, are also popular choices. Political charities, such as those advocating for human rights or social justice, may also be considered. Finally, donors may choose to support charities that target specific groups, such as the elderly or those with disabilities.

Contact the charity

It is always a good idea to contact the charity directly to discuss a bequest in order to better understand their specific needs and their ongoing or latest initiatives. This can help ensure that the bequest is used effectively and efficiently and equally importantly, that the donor’s goals are aligned with those of the charity. Charities may also be able to provide guidance on the best way to structure the bequest, and may be able to offer recognition or other benefits (e.g., tax deductions) to the donor. The donor’s solicitor can review the guidance provided by the charity when drafting the donor’s will and/or trust document.

Targeted or general bequests can be made to specific charities, depending on the donor’s goals and preferences. A targeted bequest is a gift to a specific charity or research program, while a general bequest is a gift to a broader category of charities or causes. For example, a donor may choose to make a targeted bequest to a favourite hospital or research institution, or a general bequest to support medical research more broadly.

Perpetual/lump sum donation?

Perpetual or lump sum bequests can also be made. A perpetual bequest is a gift that is intended to last indefinitely, such as an endowment that provides ongoing funding to a charity. This type of bequest would require careful drafting by the donor’s solicitor in terms of ongoing management of the endowment fund. A lump sum bequest is a one-time gift of a specific amount of money or asset. Perpetual bequests can provide long-term support to a charity, while lump sum bequests can provide immediate/short to medium term funding for a specific project or initiative.

Always consider taxation

When making a charitable bequest, it is essential to consider taxation. In most jurisdictions, charitable bequests are eligible for tax deductions and possibly other benefits. Donor-advised funds, popular in the US and the UK, offer a flexible solution, allowing donors to make their gifts and then recommend how the funds are used over time. This approach can be particularly useful in instances where living donors are undecided about a specific charity but wish to take advantage of the available tax deductions immediately. The drawback is a loss of control over how funds are disbursed as the institution managing the donor advised fund takes control of the fund.

Bequests are revocable

If circumstances or affiliations change during a donor’s lifetime, the revocation of a charitable bequest can be made by asking a solicitor to help write a new will or a codicil to the existing will. This can be done at any time and can help ensure that the donor’s wishes are respected and their goals are achieved.

Charitable bequests can be a powerful way to make a positive impact. By understanding the different types of bequests, selecting charities that align with one’s goals and considering taxation and other implications, donors can ensure that their bequests are used effectively and efficiently to achieve a better world.

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.

Oldham, Li & Nie to Host “Arbitration and Justice: the Compromise on Insolvency, Illegality and Conflicting Arbitration Clauses?” Panel During the 2024 Hong Kong Arbitration Week

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Oldham, Li & Nie (OLN) is pleased to announce its participation in the 2024 Hong Kong Arbitration Week, organised by the Hong Kong International Arbitration Centre (HKIAC), taking place on 21-25 October 2024.

The firm will host a panel session titled “Arbitration and Justice: the Compromise on Insolvency, Illegality and Conflicting Arbitration Clauses?” on 22 October 2024 from 5:00 to 6:30 pm.

This debate session will critically examine the compatibility between arbitration and substantive/procedural justice in light of the latest case authorities, including:

  1. Sian Participation Corp (In Liquidation) v Halimeda International Ltd [2024] UKPC 16, Re Simplicity & Vogue Retailing (HK) Co., Limited [2024] HKCA 299, and Arjowiggins HKK 2 Limited v Shandong Chenming Paper Holdings Limited [2024] HKCA 352: The availability of bankruptcy / winding-up tools for arbitration-governed debts
  2. AAA v DDD [2024] HKCFI 513: The complication of incompatible arbitration clauses in multi-contract transactions
  3. G v N [2023] HKCFI 3366: The interplay between arbitration and illegality

The session promises to deliver a thorough examination of these critical issues from various expert perspectives.

The distinguished panel will feature:

  • Prof. Anselmo Reyes, International Judge at Singapore International Commercial Court (SICC)
  • William Wong SC, Barrister at Des Voeux Chambers
  • Frances Lok SC, Barrister at Des Voeux Chambers
  • Sarah Thomas, Associate General Counsel of McKinsey & Company

They will be joined by OLN’s lawyers, Partners Dantes Leung and Jonathan Lam, with Associate Davis Hui serving as the moderator. Each panelist will offer unique insights, contributing to a robust and enlightening debate.

For more information about the 2024 Hong Kong Arbitration Week, please visit https://hkaweek.hkiac.org/event/f3e694d2-39ac-451c-aa66-cb9d9af52bc2/summary. 

To register, please visit https://hkaweek.hkiac.org/event/f3e694d2-39ac-451c-aa66-cb9d9af52bc2/regProcessStep1.

For information about our arbitration services, please contact our Partner Jonathan Lam.

Hong Kong – A Haven for Tax-Free Transfers of Gifts

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Hong Kong stands out as a tax-free gifting jurisdiction, making it an attractive destination for individuals looking to transfer assets to lovers and other strangers alike. Unlike many other countries, Hong Kong does not levy any gift tax, allowing for tax-free gifts of property, investments and other assets (although it should be noted that transfers of real property and shares are subject to stamp duty).

This favourable tax environment has made Hong Kong a popular choice for those seeking to manage their estate planning and wealth transfer strategies. The absence of gift tax regulations in Hong Kong provides significant flexibility and planning opportunities, enabling individuals to gift assets without the burden of additional taxation.

One key aspect of Hong Kong’s gift tax policy is its broad application. Gifts made between family members, as well as transfers to unrelated parties, are all exempt from any gift tax. This simplicity and lack of complex rules or thresholds have contributed to Hong Kong’s appeal as a destination for seamless, tax-efficient gift-giving. Hand in hand with tax-free gifting is the lack of estate or inheritance taxes in Hong Kong. Normally estate, gift and inheritance taxes (or the lack thereof) go hand in hand so there is a coordinated effort to either ensure individuals are able to achieve tax-free transfers of their assets or ensure individuals are taxed on gifting their assets, depending upon the jurisdiction’s desire.

The United States – A Balance Between Gift and Estate Taxes

In contrast to Hong Kong, the United States has a more nuanced approach to gift taxation. The United States imposes a federal gift tax on certain transfers of property, with a lifetime exemption amount that is currently set at US$13.61 million per individual and US$27.22 million per couple (as of 2024).

 An individual making gifts that exceed the annual threshold amount (currently set at US$18,000 per recipient per year) must file a gift tax return and potentially pay a gift tax, depending on their overall lifetime gift and estate tax exemption usage. However, a number of gifts made between spouses (e.g., up to US$185,000 to a non-US citizen spouse) or to charitable organizations are exempt from this requirement.

The integration of gift and estate taxes in the United States aims to ensure that individuals do not simply during their lifetimes gift away their assets to avoid estate taxes upon their passing. This coordinated system helps maintain the integrity of the overall wealth transfer taxation framework in the country as there is an established estate tax regime in place at the federal and often state level, with six states also imposing an inheritance tax.

The United Kingdom

In the United Kingdom, gifts are tax-free up to £3,000 per annum for a person’s estate, which may appear quite stingy compared to other regimes but this is part of the inheritance tax system. Any unused exemption may only be carried forward one year. There is a clawback in the form of inheritance tax for some gifts made less than 7 years before one’s death. Fortunately, there are a number of other exemptions in place, such as full exemption on gift and inheritance taxes for gifts given to spouses and civil partners, provided they are UK domiciled. Regular gifts to help with living costs such as paying a child’s rent that are made out of a donor’s regular monthly income as well as gifts under £250 are also exempt. To conclude, gifts made over 7 years before death are tax-free.

The European Union – Diverse Approaches to Gift Taxation

Within the European Union, the treatment of gift tax varies significantly across member states, as would be expected. While some countries like Estonia do not impose a standalone gift tax, other countries like Germany and France have specific gift tax regimes in place. Germany, for instance, levies an intricate gift tax on transfers of property, with tax rates ranging from 7% to 50% depending on the relationship between the donor and the recipient, as well as the value of the gift. France has an even more complex system that takes into account the frequency of gifts, the relationship between the parties and the value of the transferred assets. France’s gift tax ranges from 5% to 45% for direct line relatives and up to 60% for unrelated recipients but allowances do exist.

Different approaches within the European Union highlight the importance of understanding specific gift tax regulations when engaging in cross-border wealth transfers. Individuals and families seeking to make gifts must carefully navigate the specific rules and requirements of each relevant jurisdiction.

Other Notable Jurisdictions

Beyond Hong Kong, the United States and the European Union, there are several other notable jurisdictions with unique approaches to gift taxation. Australia generally does not have a gift tax, but certain gifts of real property or shares may be subject to capital gains tax or other tax implications. Canada does not have a standalone gift tax, but gifts may be subject to income tax or capital gains tax considerations once realised. Japan has a gift tax regime with progressive tax rates ranging from 10% to 55%, depending on the value of the gift, the relationship between the parties and certain deductions. Gift and inheritance taxes, working hand in hand, are high in Korea. Both gift and inheritance taxes range from 10% to 50%.

The global landscape of gift tax is a complex and ever-evolving landscape, with each jurisdiction offering its own set of rules, exemptions and tax implications. Understanding these nuances is crucial for individuals and families seeking to navigate the intricacies of cross-border wealth transfers, avoid potential double taxation and ensure compliance with the relevant gift tax regulations. To conclude, we reference the old adage, “The best things in life are free”. Not only are true love, true friendship and beautiful sunsets free, but so is tax-free gifting in Hong Kong.

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.

關於世界各地的死亡與稅收

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「在世上，只有死亡和稅收是確定難免的」這一句格言是美國其中一個開國元勳和傳奇學者短語歸於本傑明-法蘭克林。 為了避免雪上加霜，我們建議死後儘量避稅。

美國財政部於2023年2月28日報告稱，當天徵收了70億美元的「遺產稅和贈與稅」，這是自2005年以來徵收的最高金額。 隱私條例禁止披露更多細節，但人們對需要支付這筆款項的人的身份猜測紛紛、或者是作為提前規劃遺產的一部分而支付的押金（以避免將來需要支付更高的金額），或者是已故億萬富翁的延遲付款，可能是由於強制執行行動。

香港於2006年2月11日廢止了遺產稅。 此後，無需提交遺產稅宣誓書或帳目，也無需辦理遺產稅清關手續，即可申請獲得香港死亡案件的遺產授予書。

然而，遺產稅（IHT）在英國仍然適用。 個人遺產稅的徵收比例為遺產價值超過免稅額的部分只40%。 現時的免稅額為每人32.5萬英鎊。 未使用的免稅額可以轉讓給未亡配偶或民事伴侶。 這樣一個人實際上就有了65萬英鎊的免稅額。 此外，有多種免稅和減稅措施可用於减少個人所得稅。 例如，如果將所有財產遺贈給未亡配偶或民事伴侶、慈善機構或社區業餘體育俱樂部，則無需繳納個人所得稅。

在美國，2023年聯邦遺產稅免稅額為每個人1292萬美元（已婚夫妻共2584萬美元）。 聯邦遺產稅的最高稅率為40%。 美國許多州也徵收自己的遺產稅或繼承稅，免稅額和稅率各不相同。 50個州中有33個州不徵收遺產稅，包括拉巴馬州、阿拉斯加州、亞利桑那州、阿肯色州、加利福尼亞州、科羅拉多州、特拉華州或佛羅裏鄧州。

加拿大沒有聯邦遺產稅或繼承稅。 然而，一旦死亡，所有資本財產被視為處置，可能會引發離世人士遺產的資本利得稅。 離世人士的最終報稅錶必須報告所有資本收益和損失以及正常收入。 加拿大的最高邊際稅率可高達54%，具體取決於省份。

在歐洲聯盟，各成員國的遺產稅和繼承稅規則大相徑庭。 在27個歐盟國家中，有19個國家仍在徵收某種形式的死亡稅。 8個歐盟國家（奧地利、賽普勒斯、愛沙尼亞、拉脫維亞、馬爾他、羅馬尼亞、斯洛伐克和瑞典）已經廢除了繼承稅。 適用的規則和豁免因具體國家、離世人士與受益人之間的關係以及遺產規模的不同而有很大差异。 稅率也差异很大，從波蘭的0-20%到西班牙的7.65-87.6%。

臺灣對超過一定門檻的資產徵收10-20%的累進遺產稅，現時設定為1330萬新臺幣，繼承人和喪葬費用可享受免稅和減稅。

新加坡沒有遺產稅、繼承稅或資本利得稅，但新加坡公司股份轉讓時可能需要繳納印花稅。

與香港一樣，澳門是中華人民共和國的一個特別行政區，也沒有繼承稅。

中國大陸曾於2002年發佈了一項關於遺產稅的規定草案，但從未通過過一項法規。 現時沒有遺產稅、贈與稅或繼承稅。

相比之下，據2021年報導，三星電子董事長李健熙的遺產將支付超過12萬億韓元（ 107.8億美元）的遺產稅。 韓國是世界上遺產稅稅率最高的國家之一。 如果離世人士擁有控股權，則可在此基礎上加收溢價。 溢價有可能超過標準遺產稅率50%。 據報導，李先生的藝術收藏，包括夏加爾、高更、米羅、莫奈和畢卡索的作品，將被捐贈給韓國國立博物館，以幫助減輕部分稅收負擔。

世界各地的遺產和繼承稅差別很大。 有些司法管轄區（如香港）完全取消了遺產和繼承稅，而其他司法管轄區則保留了複雜的扣除、免稅和邊際稅率遞增制度。 我們在做財務和遺產規劃時，必須隨時瞭解相關司法管轄區的遺產稅和繼承稅的最新情况。 製定周密的遺產規劃有助於消除或大限度地減輕繼承人的稅務負擔，確保財富順利跨代傳承。 雖然死亡和稅收可能是必然的，但死後的稅收可以通過專業指導巧妙地避免。

免責聲明：本文僅供參考。 本文中的任何內容均不得解釋為法律意見，無論是一般法律意見還是針對任何特定人士的法律意見。 高李嚴律師行不對任何人因本文所載資料而導致的任何損失和/或損害承擔責任。

香港特區中國國民在英國的繼承

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香港永久性居民可能在其他司法管轄區擁有資產。英國是近年來最常見的移民目的地之一。 

在英國和香港，死者遺產繼承法有許多共同的特點。  

死者立了覆蓋在英國遺產

如死者立了覆蓋在英國遺產的遺囑，則遺囑人最後遺囑中指定的遺囑執行人會通過英國當地遺囑認證部門申請遺囑認證，以處理死者在英國的遺產。遺囑執行人隨後須遵從遺囑分配死者的遺產。

死者沒有立覆蓋在英國遺產的遺囑

如果死者沒有立遺囑，遺產的繼承通常受成文法管轄，繼承您財產的人將根據無遺囑的法定規則管轄。一般來說，根據法例所列的類別，繼承人將是您最接近的遺屬，視乎死者的婚姻性質及死者是否有子女而定。有關詳細資訊，請參閱下表：

類詳細資訊
有配偶但無子女，父母或兄弟姐妹  配偶(或民事伴侶)將繼承所有遺產  
有配偶和子女配偶(或民事伴侶)將繼承：   所有個人物品 遺產的第一個£250,000 (如果死亡發生在2009年1月2日之前，則£125,000)剩餘部分的一半   子女將繼承遺產另外的剩餘一半。如果死者的子女已經死亡，他們原應繼承的遺產部分將平等地分配給他們的子女。
有配偶，無子女但有父母或兄弟姐妹配偶(或民事伴侶)將繼承：   所有個人物品£450,000和 剩餘部分的一半   其餘的一半由未亡父母或兄弟姐妹(如果死者沒有父母或父母已經死亡)。
無未亡配偶遺產將按以下優先順序繼承：   子女，孫子女，曾孫子女 父母 全血兄弟姐妹或其後代 半血兄弟姐妹或其後代 侄女和侄子 祖父母 全血的叔叔阿姨或其後代 半血的叔叔阿姨或其後代 政府     注意：後續類別的繼承權要等到前一類別的繼承權失去後才開始。
沒有親屬如果沒有尚存的親屬，遺產將被列為無產權財產(`‘bona vacantia’)並歸入政府。

免責聲明: 本文僅供參考。本文中的任何內容均不得詮釋為香港法律建議或向任何人提供的任何與此相關的法律建議。對於任何人因本文所含的內容而造成的任何損失和/或損害，高李嚴律師行不承擔任何責任。