Author: Lawyer Zhang Jingxinyue, PRC-qualified Lawyer | Singapore Registered Foreign Lawyer
Editor's note: With the recent wave of emigration, more and more high-net-worth individuals have settled or invested overseas. Many of them still retain substantial assets in mainland China, including real estate and company equity. How to plan and arrange assets both within and outside China has made the demand for "cross-border wealth succession" increasingly prominent, and related legal services such as insurance, trusts and wills have become standard.
Regarding estate succession, the scope of overseas assets and the order of succession often depend on the property law, family law, marriage law and succession law of the country where the assets are located, which in turn determines who will inherit your property. Making a will is a taboo subject for many people; however, life is unpredictable. If you do not understand the succession or will legislation of the country where you are located and do not plan in advance, leaving the outcome to fate often produces unexpected results.
Last year, AQUINAS LAW ALLIANCE LLP, the Singapore law firm where the editor works, entered into a Cooperation Agreement with the China Will Registry to provide more comprehensive and higher-quality estate planning services for cross-border parties in both China and Singapore.
This article will examine the importance of a will and the matters to note when making a will in Singapore, and will analyze the relevant legal points. This article is republished to reiterate the importance of making a will.
The importance of a will for new immigrants
Regarding estate succession, the principle followed in both Singapore and China is: where there is a will, follow the will; where there is no will, follow statutory succession.
Let us look at how assets in China and Singapore are respectively dealt with if no will is made.
01 If there is no will, how are assets in China dealt with?
(1)Basis of estate succession
According to Article 1123 of the Civil Code of the People's Republic of China, "After succession opens, it shall be handled according to statutory succession; where there is a will, it shall be handled according to testamentary succession or a testamentary gift; where there is a legacy-support agreement, it shall be handled according to the agreement." This article clarifies that, in estate distribution, the legacy-support agreement is performed first, then the will, and finally statutory succession.
(2)Order of statutory succession
Under Article 1127 of the Civil Code, an estate is inherited in the following order:
1. First order: spouse, children and parents;
2. Second order: siblings, paternal grandparents and maternal grandparents.
After succession opens, the first-order heirs inherit and the second-order heirs do not; if there is no first-order heir to inherit, the second-order heirs inherit.
For purposes of this Book, children include legitimate children, children born out of wedlock, adopted children, and stepchildren in a maintenance relationship.
For purposes of this Book, parents include biological parents, adoptive parents, and stepparents in a maintenance relationship.
For purposes of this Book, siblings include siblings of the same parents, half-siblings by the same father or same mother, adopted siblings, and step-siblings in a maintenance relationship.
Under Article 1160 of the Civil Code, an estate with neither heirs nor testamentary beneficiaries shall belong to the state and be used for public welfare; if the deceased was a member of a collective economic organization before death, it shall belong to the collective economic organization to which he or she belonged.
02 If there is no will, how are assets in Singapore dealt with?
1. Basis for estate distribution
In Singapore, estate distribution is carried out in two ways: distribution under the intestate succession law and distribution under a will. The intestate succession law includes the distribution rules, possible issues that may arise, and the actual process of distribution under the intestate succession law. The introduction to wills covers the definition of their validity, key matters to consider when drafting a will, the importance of a list of assets, the limitations of a will, and the actual process of distribution under a will.
In Singapore, if the deceased did not leave a will, or left a will that is not recognized by law, it is known as an "intestate death" (intestate), and the estate will be distributed under the Intestate Succession Act.
2. If there is no will, who inherits in Singapore?
Under section 7 of the Intestate Succession Act, the following applies:
- Only a spouse (but no children, no parents), the spouse receives the entire estate;
- Spouse and children, the spouse receives half of the estate, and the children (biological or legally recognized adopted children) receive the remaining half in equal shares;
- Only children (but no spouse), the children receive the estate in equal shares;
- Spouse and grandchildren, if the children have died leaving children, the spouse receives half of the estate and the remaining half is distributed to the grandchildren. If you have no surviving spouse or children, but you have grandchildren, they receive the estate in equal shares;
- Spouse and parents (no children), the spouse receives half, and the parents share the remaining half equally;
- Only parents (no children, no spouse), the parents share equally;
- Siblings (no children, no parents, no spouse), siblings (or children of deceased siblings) share the estate equally;
- If there are only grandparents (no spouse, children, parents, siblings or children of deceased siblings), the grandparents may inherit the entire estate;
- Uncles and aunts, if there are only uncles or aunts (but no spouse, children, parents, siblings or children), the uncles and aunts share equally.
Finally, if none of the above applies, the Singapore government would thank you: the entire estate will be surrendered to the state.
3. Several misconceptions and advice concerning wills in Singapore
At this point, you may feel that the result of "intestacy"/statutory succession is likely that the property is not inherited in the manner and by the persons the deceased intended. Let us examine a few common misconceptions to further explain the importance of a will:
- Many people mistakenly believe that after death, their spouse will necessarily receive all assets. This is not the case. In Singapore, if there are children or parents alive, the spouse will receive half of the estate; only when there are no children or parents will the spouse receive the entire estate. Under Chinese statutory succession, the portion of property belonging to the spouse is first separated from the couple's joint property. The remaining portion is the deceased's estate and is divided equally among all first-order heirs. The spouse inherits one of these shares. For example, if the deceased has a spouse, two children and parents, five heirs in total, the spouse can only inherit one-fifth of the deceased's estate.
- As previously noted, under Chinese statutory succession principles, parents, spouse and children are all first-order heirs, which means parents have a statutory inheritance right. However, under Singapore succession law, parents do not necessarily become heirs. Many people mistakenly think that their parents will automatically inherit their property after they pass away, or that their spouse and siblings will take care of their parents. However, as long as the deceased has children, the parents have no statutory right to inherit. Therefore, if no property arrangement is made, the parents may not receive any portion of the estate, and their later years may fall into a situation where no one cares for them.
On the other hand, many parents like to transfer property to their children's names before death. They do not consider that if anything happens to their children, the money will not return to their own pockets; instead, the children's spouse will inherit most of it.
- Under Singapore's distribution principles, apart from distribution to spouse, children and parents, in many circumstances other family members, including siblings, grandparents, and uncles and aunts, may also inherit from the estate.
- For high-net-worth individuals with substantial assets, if their parents receive a large amount of estate assets under statutory succession, after the parents pass away that portion will become the parents' estate. If the parents do not make wills, that portion will pass to siblings and other family members.
- The "children" referred to here include legitimate children and adopted children, but do not include stepchildren or illegitimate children. If you wish to leave your estate to stepchildren, illegitimate children, a romantic partner, cohabiting partner, nieces, nephews or the like, you need to make a will to confirm this. Even if your life does not involve such complex relationships, you should also consider that without a will, your family may need to spend several years before they can receive the estate. During this period, will they be able to cope with their living expenses?
- In any event, even if you have no relatives at all, who would be willing to let the law handle the assets they accumulated over a lifetime? Some friends have said that rather than let the law decide, it is better to make a will and distribute the estate to friends in need or charitable organizations.
Thus, a will truly is one of the most important legal documents we sign in our lifetime.
03 How to make a will in Singapore
- A will made overseas is very difficult for a Chinese court to recognise.
Some wills made overseas often contain arrangements for assets located in China. Can a will made overseas be guaranteed to be recognized by a Chinese court? Under Article 33 of the Law of the People's Republic of China on the Application of Law to Foreign-related Civil Relations, the validity of a will shall be governed by the law of the testator's habitual residence at the time of making the will or at the time of death, or the law of the testator's country of nationality.
In judicial practice, as long as one of the connecting factors, such as habitual residence at the time of making the will, habitual residence at the time of death, or nationality, is connected with China, Chinese courts tend to apply Chinese law as the governing law for determining the validity of the will and to judge the validity of a will made overseas. Chinese law and foreign law differ significantly in the recognition of the form and validity of wills, which therefore makes the validity of overseas wills highly uncertain in Chinese courts. For example, in a judgment of the Guangzhou Intermediate People's Court ((2016) Yue 01 Civil Final No. 9704), although the deceased made the will in the United States, his habitual residence at the time of making the will was in the United States, and his nationality at the time of making the will and death was United States, the court ultimately applied Chinese law on the ground that the deceased's habitual residence at the time of death was China.
Second, as to the ascertainment of foreign law, even if a Chinese court applies foreign law to determine the validity of a will made overseas, there is still tremendous uncertainty in the method of ascertaining foreign law and in legal interpretation by Chinese courts. This may ultimately result in some wills that are even valid under foreign law not being recognized in China.
Therefore, if making a will in Singapore, attention should be paid to the validity of the will. In practice, we generally advise clients with assets in both Singapore and China to make a Singapore will and a Chinese will separately. The Chinese will can state that overseas assets are to be distributed in accordance with the laws of the place where the assets are located and the will made under local law, and can incorporate this by reference.
1. Matters to note when making a will in Singapore
1. Validity requirements of a will
In Singapore, a will must comply with the Wills Act, such as the signing and witnessing procedures prescribed by the Wills Act.
The requirements for making a will are set out below:
- The will must be in writing.
- The testator must be at least 21 years old.
- The testator must sign at the foot of the will, or in special circumstances authorize another person to sign on his or her behalf.
- When making the will, there must be two witnesses present and, after witnessing the signing, each witness must sign to attest to the witnessing.
- Witnesses must not benefit under the will.
2. Circumstances in which a will is invalid
Under the Singapore Succession Act, a will is invalid if any of the following circumstances exist.
Type 1: Failure to comply with formalities
Failure to complete the following formalities may render the will invalid:
- It must be in writing;
- The testator must be at least 21 years old;
- The testator must sign at the foot of the will;
- There must be at least two witnesses who sign the will in the presence of the testator;
In Singapore, the following persons cannot be witnesses to a will:
- Beneficiaries of the will;
- Spouses of beneficiaries;
- Persons lacking capacity, such as persons below 21 years old, or persons suffering from certain diseases resulting in a lack of mental capacity, such as stroke, brain cancer, dementia, etc.
- To avoid conflicts of interest, a beneficiary or the spouse of a beneficiary cannot be one of the two main witnesses. However, a beneficiary can be the third witness.
Type 2: Lack of testamentary capacity
When making a will, the testator must have:
- Sound mental state, not affected by illness;
- Sound memory;
- Sound understanding.
For elderly testators, it is advisable for them to make a will with a lawyer independently, without any beneficiary present, to avoid disputes over undue influence or lack of capacity.
For testators who are blind, deaf or mute, it is important for the will to state that the testator understands the contents of the will and that the will was made in accordance with the testator's instructions.
- Type 3: Will made under undue influence
Undue influence occurs when the testator is subjected to improper influence, such as threats, intimidation, harassment or persistent persuasion, when making or signing the will.
When someone wishes the testator to make a will according to his or her wishes, this may give rise to undue influence. Elderly persons are more susceptible to such influence.
Type 4: Fraudulent will
The testator is tricked into signing a will, believing that he or she is signing another document. Fraud may also occur when two wills contain the testator's signature. The court will engage handwriting experts to examine the signature and give evidence on it.
Type 5: Failure to maintain the deceased's family members
In certain special circumstances, the deceased parent did not provide any property to his or her child, but left everything to outsiders. Because this may cause hardship to the child, if the court finds that the will is unreasonable in failing to maintain the deceased's family members, the court may order that all or part of the will be altered. Before making a decision, the court will consider factors such as the testator's reasons when dealing with a challenged will.
The person entitled to contest the will on this ground must be a family member, and must be:
- The deceased's husband or wife;
- A single (unmarried) daughter, or a daughter with mental or physical disability or who is unable to care for herself;
- A son with mental or physical disability or who is unable to care for himself;
- Infants
2. Which assets in Singapore should not be dealt with by a will?
As mentioned above, Singapore has a relatively clear and uncontroversial definition of ownership of personal property. When making a will, attention should be paid to assets that, although they are personal assets, should not be dealt with by a will.
- Joint bank accounts, which will pass directly to the other joint account holder upon death;
- Jointly owned real estate, which will pass directly to the other joint owner upon death;
- Trust assets, once a beneficiary is designated the designation cannot be changed, and trust assets are protected by law;
- Insurance policies with designated beneficiaries, once a beneficiary is designated the designation cannot be changed, and insurance assets are protected by law;
- Monies in a Central Provident Fund account, if you have nominated a beneficiary under the Central Provident Fund Act, that beneficiary will inherit your CPF regardless of what your will says;
- Other shares, bonds or bank wealth management products with designated beneficiaries;
- HDB flats, inheritance must comply with the relevant rules, otherwise they can only be sold and cannot be held.
Therefore, in Singapore, more consideration is needed for assets involving joint ownership and designated beneficiaries. For assets subject to government planning, such as CPF and HDB flats, it is also necessary to understand the government's special rules.
04 Estate planning is more than just making a will
Estate planning is not only preparation for matters after death. Some situations may arise during your lifetime, such as accidents or illness causing coma, memory loss or dementia. If arrangements are not made in advance, those around you may be thrown into confusion at that time. Therefore, do not wait until old age to do estate planning.
People's biggest misconception about estate planning is that it is exclusive to the wealthy. In fact, as long as you have assets, you should plan your estate. The second misconception is to think that estate planning is simply making a will.
1. Commonly used estate-planning tools and assets to consider
(1)A will is only one tool of estate planning. A complete estate plan should also include an Advance Medical Directive (AMD), and authorizing a trusted person to make financial decisions on the testator's behalf if the testator loses mental capacity.
(2)If you have assets of more than one million dollars, you may also consider establishing a living trust to ensure that heirs do not quickly squander the estate due to lack of experience or self-discipline, and to avoid probate costs and the time required for probate, transferring the assets to heirs in a shorter period of time.
(3)Assets that are personal assets but should not be dealt with by a will
- Insurance policies with designated beneficiaries: if you no longer remember whether a policy has designated a beneficiary, it is advisable to check with the insurance company;
- Monies in your Central Provident Fund (CPF) account: when planning your estate, remember to reconfirm and update the names of your CPF nominees. If no beneficiary has been nominated, CPF savings will be distributed under the intestate succession laws;
- Other shares, bonds or bank wealth management products with designated beneficiaries;
- HDB flats: inheritance must comply with the relevant rules, otherwise they can only be sold and cannot be held.
Assets should be properly arranged as part of estate planning.
(4)Insurance can be used as a planning tool
Life insurance can be an important estate planning tool. While preserving most of a person's assets, it can also create new wealth. By simply designating a beneficiary, assets can be clearly and properly distributed. Term insurance plans, single premium whole life insurance plans, universal life insurance plans, and recently launched multi-generation whole life savings plans are some of the insurance tools used for estate planning. In addition, private Integrated Shield Plans can protect our medical expenses, and the "bequest option" under the CPF Lifelong Income For The Elderly (CPF LIFE) scheme is also an estate planning tool.
2. Five steps in estate planning
(1)Take stock of your wealth
In addition to real estate, savings, stock investments, insurance policies, business shares and the like, personal collectibles such as jewellery should also be sorted out.
(2)Decide who will inherit your assets
Make a will clearly stating how the property is to be distributed when the testator passes away, and consider whether it is necessary to set up a living trust.
(3)Sign a Lasting Power of Attorney (LPA)
Appoint one or two trusted persons to handle financial decisions and even medical decisions on the testator's behalf when the testator loses mental capacity.
(4)Make an advance medical directive
If you are critically ill, relying on artificial means to prolong life may incur expensive medical expenses. If you do not want the savings originally set aside for your family to end up with the hospital, you should state your wishes through an advance medical directive while you are still mentally sound.
(5)Take action immediately
No one knows whether "misfortune" or "tomorrow" will come first. It is best to complete estate planning as early as possible.
Conclusion
Without a will and prior planning, things can easily become chaotic and often lead to family disputes. Everyone should have the awareness and willingness to plan in advance. High-net-worth clients undertaking cross-border wealth succession planning are advised to promptly seek help from domestic and foreign lawyers or professional will-making institutions, and to formulate a wealth succession arrangement that complies with the laws of both jurisdictions and can reasonably reduce the relevant tax burden. This will help avoid the risk that a will made overseas is not recognized by domestic courts and ensure that the testator's wishes are fully realized.
For more enquiries on cross-border wills, estate planning, estate administration and related matters, please contact the professional team at China-Singapore Legal News.
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This article is for informational reference only and does not constitute formal legal advice.
This article is general information and not legal advice. Specific matters require assessment by appropriately qualified professionals.