Thinking about inheritance laws? We understand how this can be a grim topic for you. When you are poised to receive an inheritance, it means you just lost someone who is dear to you. But death is inevitable and life has to go on.
Even though the person is no longer physically present with you, you held a special place in their heart and that’s what ultimately matters.
A study conducted by HSBC in 2013 revealed that 7 out of 10 retirees in Hong Kong intend to leave their children with some form of inheritance. This shows that many Hongkongers have succeeded in saving some legacy despite the various expenses involved in raising a family in an expensive city like Hong Kong.
While getting an inheritance is a good thing, you have to know the legalities in claiming it. You cannot merely transfer something without going through a certain process. This is why you need to know the Hong Kong inheritance laws so you will not compromise on whatever it is that you received from your loved one.
How can an inheritance be claimed after the death of a loved one?
When a person passes away in Hong Kong, all their assets will be frozen after their death. The only time it will be released is when the Letters of Administration (something issued by the court) are presented. These letters authorise a person to manage or administer the estates of the deceased.
The steps to get the Letters of Administration are as follow:
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Checking of personal property of the deceased
This is when the administrator checks if all the properties are valid. If the other properties are tied to an obligation due to a previous transaction performed by the deceased, they will compromise the inheritance. For instance, a unit cannot be sold because it was used as a collateral for a loan.
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Settling the estate duty
According to the Hong Kong inheritance laws, this is not applicable for all. The Revenue (Abolition of Estate Duty) Ordinance 2005 states that any inheritance from someone who passed away before February 11, 2006, does not have to be imposed with this fee, although transitional estates that happened between July 15, 2005, and February 11, 2006, are required to pay a nominal amount of HK$100.
However, this is only applicable if the value of the inheritance exceeds HK$7.5 million. Furthermore, any inheritance from people who passed away before July 15, 2005, will still be required to pay the estate duty. Once this is settled, you will be given the Estate Duty Clearance or Estate Duty Exemption.
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Authenticating from courts
This is the final step that will allow you to apply for the Letters of Administration. If all the properties and documents presented are in order, you can proceed with the application so all the inheritance from your deceased loved one will be released.
Once the Letters of Administration are available, the process will be an easy one. The inheritance laws only require beneficiaries to go through a simple and straightforward process if the value of the estate does not exceed HK$150,000.
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If the Deceased left a will, the beneficiaries will be given a portion of the estate according to the provisions stated. The required documents will be as follow:
- Grant of Probate, Letters of Administration
- Deceased’s Will
- Death Certificate of the Deceased
- Estate Duty Clearance or Estate Duty Exemption
- An affidavit that confirms the Executor, Grantor or Beneficiaries
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If there is no will, the heirs can apply for the Letters of Administration. The surviving spouse, children, parents, and siblings get to share the inheritance. The percentage will depend on their relationship with the deceased. The required documents will be as follow:
- Death Certificate of the Deceased
- Birth Certificate of the Deceased
- Marriage Certificate of the Deceased with surviving Spouse (if applicable)
- Birth Certificate of the Deceased’s Children
- Documents about the Estate
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A service charge will be imposed in accordance with the Hong Kong inheritance laws through the Probate and Administration Ordinance. This will depend on the gross value of the property.
If the value of the estate exceeds HK$150,000, the process is basically the same but the documents will be different.
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If there is a will, these are the documents required:
- Death Certificate of the Deceased
- Required documents of the Estate Duty Office (Inland Revenue) and Estate Duty Ordinance
- An affidavit that confirms the Executor, Grantor or Beneficiaries
- Evidence that the testator is aware of the will’s content
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If there is no will, these are the documents required:
- Death Certificate of the Deceased
- Required documents of the Estate Duty Office (Inland Revenue) and Estate Duty Ordinance
- Birth Certificate of the Deceased
- Marriage Certificate of the Deceased with surviving Spouse (if applicable)
- Birth Certificate of the Deceased’s Children
- An affidavit that confirms the Executor, Grantor or Beneficiaries
- Testimony from an independent person to confirm the applicant’s identity.
Only after completing these will the inheritance be released to the beneficiaries.
Smart financial tips after getting an inheritance
While getting an inheritance is great, it comes with a responsibility as well. Do not treat it as a gift from heaven that you will splurge with. This is not an opportunity for you to upgrade your lifestyle. Instead, it is for you to secure and improve your financial position. Here are three things you can do with the inheritance:
Invest it
The best thing to do with it is to buy shares, bonds, and mutual funds that can help you earn extra money. If you were not expecting this windfall money in the first place, you will not miss it. Do not make the mistake of putting it in a savings account. Rather, place it somewhere it can earn you a high interest.
Use it as a deposit
Another type of investment is through real estate. You can use this money to buy a property. If you already own a house, you can use it to buy a rental property. The additional income should give your finances a boost.
Fund a start-up business
You can also use this money to start your dream business. Instead of borrowing money from investors to finance your business, you can use your inheritance. This will help you start a business without any debt. Moreover, any profit that the company will earn from day one will not go to any debt payments.
Make smart decisions while handling the inheritance that your loved one left you. Help build his or her legacy through your choices about the estate left in your care.
Read Everything You Need to Know About Inheritance to know more about inheritance in Singapore.
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