Legal update: The importance of wills upon marriage or divorce19Jun2015
One of the most challenging tasks of a family lawyer is convincing clients to insure against the unknown. In the chaos of going through a divorce with a long list of issues concerning children and money matters in the queue for resolution the human mind might not have sufficient bandwidth for a personal matter such as estate distribution or making a will.
The same goes for the excitement of forming a new family. Making a will is not a personal matter. It can severely affect the life of your beloved survivors.
Below are simple illustrations that highlight the importance of a will.
What happens if I die without a will?
This is a matter of intestacy. If you die in Hong Kong without a will your estate will be distributed in accordance with intestacy laws in Hong Kong. Assets in your estate that fall under this regime include all of your assets in Hong Kong and all of your movable assets located outside Hong Kong that are not the subject of any foreign wills.
Intestate estates are distributed to your close relatives by the order of husband/wife, children, parents, whole blood siblings, half blood siblings, grandparents, uncles and aunts and finally the government. The ratio of distribution varies by circumstances.
If you die before your spouse and two children, the first HK$500,000 of your residuary estate plus all of your personal belongings would be given to your spouse. Thereafter, the remaining residuary estate distribution would be given to your in the ratio of 50% to your spouse and 25% to each of your surviving children.
What if you want your children (or their children) to have all of your estate instead?
In an unpopular example of one of the extremities in the unknown future, if your spouse remarries later on, your estate could be applied to fund the new family. This could have been avoided by a will.
If you predecease your spouse and your parents, your spouse would be given the first HK$1 million of your residuary estate plus all of your personal belongings. The remaining value of your residuary estate would be distributed in the ratio of 50% to your spouse and 50% to your parents in equal share.
This distribution applies even if your assets such as an apartment were gifted to you by your parents. You can only avoid this by making a will to give the apartment to your parents upon your death.
I am getting married. Should I get a will?
If you do not wish for your estate distribution to follow the intestacy regime in Hong Kong, you should make a will. Marriage automatically revokes all previous wills made, unless the will is made in contemplation of your marriage.
For instance if you own shares in your family business and you made a will that distributes these shares to your parents in the event of your death, such will would be automatically invalidated upon your marriage. Until you have a new will, estate distribution in the event of your death would follow the intestate estate regime above. If you intend to get married and want to make a will for estate distribution before and after marriage, we can help with setting this up in your will.
I am going through a divorce. Do I need a will?
The divorce process in Hong Kong can be lengthy. Some divorces last for years before the final divorce decree is obtained. In the unfortunate event that you die before divorce proceedings conclude, there would be two consequences:
(a) If you do not have a will, your intestate estate will be distributed in accordance with the intestacy laws in Hong Kong which gives a substantial portion of your estate to your spouse;
(b) If you have a will made after your marriage, upon the Family Court granting the final divorce decree, all portions of your estate originally to be distributed to your spouse under such will would automatically expire. However, if you die before the final divorce decree is obtained, then your estate would be distributed in accordance with your will and including gifts originally made for your spouse before the marriage broke down.
Why are wills important?
If you wish for your hard-earned wealth to be given to those whom you wish to benefit after your death, then you should make a will. This is particularly the case if you prefer to pass your wealth to your children or your siblings in the event of death over your spouse or parents.
A will also allows you to distribute any portion of your estate to any person you nominate. This includes close friends and other relatives.
Further, you can also make specific gifts to certain individuals. Examples are:
(a) You can give all your stock portfolio to your little sister/brother upon death and the rest of your residuary estate goes to your spouse.
(b) You can give your apartment to your children and the rest of your residuary estate such as cash, investments, pension to your spouse.
(c) Your parents are divorced and you are raised by your mother only. You can make a gift of all your properties to your mother and some cash to your father, and the rest of your estate to your mother and/or anyone you nominate.
Contact us to further discuss your succession plans:
Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.