Another Reason to have a Will – Inter Vivos Gift

It is not uncommon for a parent to transfer properties and assets to their children as an advancement or a gift on the marriage of the children during their lifetime. However, if subsequently the parent dies intestate with only surviving children, the distribution of the intestate’s estate will be governed by the Intestates’ Estates Ordinance (Cap. 73) (“IEO”). The IEO provides, among other things, that the advancement in question would be considered to have been paid to that child towards satisfaction of that child’s share in the intestate’s estate, subject to any contrary intention expressed or circumstances of the matter.

The case of Chan Oi Kwan v Chan Fu Wing [2022] HKCFI 941 concerns two properties of the deceased, one industrial property and one residential property. The High Court examined whether the transfer of the residential property from the deceased father to the defendant son during his lifetime was an advancement under the definition of the IEO.  If so, this would mean that the residential property has to be accounted for and brought into the residuary estate, and the industrial property should be assigned to the plaintiff daughter.

Madam Recorder Rachel Lam SC cited and reaffirmed the following principles:

1. It is the plaintiff’s burden to prove that the transfer was indeed an advancement within the meaning of the IEO. An advancement cannot be a casual payment. That said, it is also not confined to gifts establishing a young person in life, or meeting some particular need of an older person. It includes anything which may fairly be described as a permanent provision for the child in question. The fact that the subject matter being transferred is substantial in value is a factor which points in favour of the subject matter being an advancement.
   
2. If it is proved, it will then fall to the defendant to prove that the deceased had a contrary intention, which is determined by examination of the facts and circumstances as to whether there is an intention to prefer the defendant to the plaintiff in relation to the amount and nature of the provision.

After examining the facts, the Court made the following observations in respect of the residential property:

1. By the time of the transfer, the defendant had already been working for a number of years, was married, and had had children.
   
2. He had acquired his own property and was living there with his family mortgage-free, while the deceased continued to live in the residential property after the transfer until he passed. This means that the defendant did not gain any immediate benefit from the transfer.
   
3. The residential property being substantial in value, whether in absolute terms or relative to the residual estate, does not equate to permanent provision.
   
4. The deceased did not take steps to transfer the industrial property to the plaintiff when he transferred the residential property to the defendant, or at any time after that.

Couple the above observations with the lack of credibility and strength on the plaintiff’s evidence, the Court held that the residential property was not an advancement.

Implications of the decision

If a gift is made to one or more of your children, and you intend for such gift to be permanent, it would be prudent to have a will with express provisions to make your intentions regarding such a gift clear.  Having such a will would minimise the risk of advancement claims such as that made in this case.

Tanner De Witt has substantial experience on contentious and non-contentious probate and we are always ready to assist.

Eddie Look