Many people have yet to write a will, but in some cases having more than one document outlining how your assets should be dispersed can cut through a lot of red tape, experts advise.
According to Janet Hunt, managing director of professional will-writer SAR International, owning property in different countries is a primary reason for drawing up more than one will. Different documents dealing with assets in distinct areas can save time, taxes and legal fees when settling an estate.
Ms Hunt gives the example of one person who owned property in seven countries. Probate deliberations took 27 years as the will was passed to each jurisdiction, by which time the beneficiaries were either very old or had died. Besides protracted legal fees eating into the estate, the will had made no provision for what should happen if the beneficiaries died before attaining their vested interests.
'[Often] the grant of probate issued in Hong Kong won't be accepted elsewhere,' Ms Hunt said. 'The countries that were pink on the map when [Queen] Victoria was on the throne started their legal systems based on English common law. But the legal systems in Spain, Germany and France, and countries that were once French colonies are based on civil code.'
Grant of probate issued in Hong Kong is recognised in Singapore, England and Sri Lanka but only four states of Australia. Some countries accept international standards that allow property to be distributed according to the law of the person whose country it is, rather than the law of the land in which it stands, while others require the original document be presented before grant of probate is issued.
'In Hong Kong, people are buying investment property in Australia and New Zealand, some are buying in Canada and certainly in England. You can have a will that covers the property only and it can make things administratively simpler,' Ms Hunt said.
James Tsang, partner at law firm Squire, Sanders and Dempsey, said supplementary documents could bring clear tax advantages for Hong Kong citizens, with estate duty ranging from 5-15 per cent on assets in excess of HK$7.5 million. Individuals with assets in Hong Kong and the British Virgin Islands (BVI) could benefit from separate documents outlining how they wished separate nest eggs to be dispersed.
'Legally speaking [Hong Kong citizens] are not required to disclose what they have outside Hong Kong. Having those assets covered by a separate will make the grant application process for estate duty clearance much shorter and easier,' Mr Tsang said.
The BVI probate process can run simultaneously with that in Hong Kong, saving time and money in the long run.
For United States citizens, who are taxed on their worldwide income, the advantages were administrative rather than financial, Mr Tsang said. The system works particularly well when there are distinct groups of beneficiaries in different countries.
Ms Hunt cited the example of one client who had bought a house in Britain before moving to Hong Kong, marrying a Filipina and having children. He drew up one will leaving the property to his mother and sister, and another covering his Hong Kong assets for his family here.
If he had lived outside Britain for more than 17 years, he could also have shaken his British domicile status, avoiding tax on assets outside Britain. British citizens pay 40 per cent inheritance tax on assets in excess of GBP250,000 (about HK$3.07 million).
US Asia Tax & Business Services managing director Jill Elsner said US citizens were paying 18-49 per cent on estates worth US$1 million or more. The rate was on a downward trend, with estates worth less than US$1.5 million exempt in 2004-2005 and the tax due to be dropped by 2010.
Insinger de Beaufort director Debbie Annells said: 'It is clear that in some cases people need more than one will, but they have to be careful if one is done later than the other, that it doesn't affect the validity of the first will.'
Clients should inform their lawyers or will-writers about previous documents before drawing up a separate will with its own executor. Mr Tsang said: 'You need to be very careful because you don't want to have a situation where signing one will has the effect of inadvertently terminating another. You have to make it very clear that a particular will covers certain assets and has no intention of revoking the other will.'
Ms Annells said many younger people were now taking action to sort out their affairs, particularly in light of the severe acute respiratory syndrome outbreak and terrorist attacks in the US.
'The nature of Hong Kong society means that people living here should be especially vigilant about these issues. They travel a lot. They have assets in many locations. And many of them are very wealthy,' she said.