Do a will but do it well

?Notwithstanding the low mortality rates in much of the general population, the COVID-19 related pandemic has resulted in an increased focus on estate planning. This is to be encouraged. Most people do not have a will and there can be many benefits in having a will. Having a will is not only for the wealthy. A will can also be changed very easily[1] so does not need to be permanent.

A quick disclaimer. This is not legal advice and should not be relied upon. Not every jurisdiction operates the same system on the death of an individual. Common law systems operate under similar principles but are not identical. If you do not have a will or have an invalid will, a deceased person is regarded as “intestate”. There may also be circumstances justifying different wills for different assets.

PART I: What are the benefits of a valid will versus no will?

There are many benefits of a valid will. Such as:

1.?????You can choose who deals with your estate. For an intestate estate, there is usually a set order of family members who take up this role. This can lead to disputes.

2.?????You can set out specific wishes as to burial/ cremation etc.

3.?????You can appoint guardians for your children[2].

4.?????Estate administration may be quicker and cheaper with one or more wills.

5.?????An individual can make specific gifts both of cash and of specific chattels such as a watch or painting.

6.?????For an intestate estate there are set rules as to who shares in the estate. These are an attempt to second-guess what the “typical” person would want to do. In fact, these rules do not usually fully match the wishes of a client:

a.?????Unmarried or same sex couples often may not be fully recognised;

b.?????Children are treated equally – often whether legitimate or illegitimate;

c.?????Deferring gifts beyond the age of majority may not be possible;

d.?????The potential entitlements of parents and siblings may not meet with a client’s wishes;

e.?????Intestacy rules are not necessarily tax efficient.

PART II: Need to do a will properly

The world is far more diversified than it was a generation ago. There is no such thing as a standard family so there is no such thing as a standard will. It is relatively common to have family members from different backgrounds; unmarried couples; persons on their second or third marriage; children and stepchildren from different relationships; ?different marital regimes; residence in and assets held in various locations and so on. Thus, to prepare a will there is a minimum amount of preparation which needs to be done.

A standard template or will-writing kit may work but also there is a strong possibility that it may not. As a bare minimum the following needs to be done:

1.?????Ascertain “domicile”.

a.?????Under common law systems (or statute in certain cases such as Hong Kong) this is, in simple terms, a territory to which a person is most closely attached. A domicile of origin is established at birth and for this to be changed certain actions and events need to happen[3].

b.?????Domicile is important since the devolution of moveable assets (i.e. not real estate) is governed by your domicile. A will needs to be valid per your domicile and on intestacy moveable assets pass per the intestacy rules of your domicile.

c.?????It is also important to look at the domicile of persons such as a spouse. This can be important for matters such as UK inheritance tax.

2.?????Ascertain what you own and how you own it.

a.?????Estate administration only applies to property owned by the deceased. It does not apply to assets held as joint tenants with rights of survivorship. These assets (usually property or joint accounts) pass automatically on the death of one of the joint owners. Not all jointly owned property is held on this basis, so it is necessary to check.

b.?????Detail is important. For example, do you own a Hong Kong property or do you own the shares in a BVI company which owns the Hong Kong property? Are you the registered shareholder of a company or is there a nominee agreement?

c.?????The devolution of real estate is governed by the laws of where it is located.

d.?????Are there any specific formalities in such jurisdictions which could necessitate a different will?

3.?????Are there fixed rules which must be complied with?

a.?????These would be from heirship or matrimonial regimes which attach to property of the deceased and must generally be adhered to during estate administration.

4.?????Consider tax

a.?????Not all jurisdictions impose estate duty but many do. Real estate can attract estate taxes. How is this to be paid? From the estate as a whole or by the recipient?

5.?????Consider the “what ifs”. For example:

a.?????What if your widow(er) remarries?

b.?????What if your intended beneficiaries predecease you?

6.?????Get the execution and witnessing correct

a.?????Remember beneficiaries and their spouses should not be witnesses

b.?????Any other formalities needed?

PART III – any other pre-planning?

1.?????Make sure your family has access to some liquid assets. Estate administration can take many months.

2.?????Life Insurance (with your family members as the beneficiaries) will help but is not instant.

3.?????If you are the sole shareholder/sole director of an active company in Hong Kong or BVI, consider appointing a “reserve director”.

4.?????Consider lifetime trusts[4].

[1] And may be revoked on marriage.

[2] As part of estate planning consideration may also need to be given to temporary guardians – based locally – who can step in pending the arrival of the final guardians (particularly with COVID).

[3] Further advice should be obtained.

[4] Further advice should be obtained.