Cross-Border Wealth Transfer: Hong Kong Residents with Assets in Multiple Jurisdictions

Introduction

Many Hong Kong residents hold assets across multiple jurisdictions—property in the United Kingdom, Australia, or Canada, investment accounts in the United States, business interests in mainland China or Southeast Asia, and liquid assets in Hong Kong. When planning for the transfer of such wealth to the next generation, the multi-jurisdictional dimension dramatically increases complexity.

Unlike Hong Kong, which does not impose estate duty, many other jurisdictions impose significant inheritance, estate, or succession taxes on assets located within their borders or owned by their residents or citizens. Without careful planning, a substantial portion of a family's international wealth may be lost to foreign taxes, costly probate proceedings, and conflicting succession laws.

This article examines the key issues that arise in cross-border wealth transfer planning and the strategies available to Hong Kong residents to achieve efficient, orderly succession.

Hong Kong's Tax-Friendly Framework

Hong Kong abolished estate duty in 2006. There is no gift tax, no capital gains tax, and no wealth tax in Hong Kong. This makes Hong Kong an exceptionally favourable base for wealth accumulation, but it does not eliminate exposure to foreign taxes on assets held abroad.

Hong Kong also has a limited network of double taxation agreements (DTAs) compared to major European jurisdictions. Most of Hong Kong's DTAs do not cover inheritance or estate taxes (which are separate from income taxes). Residents must therefore rely on unilateral relief in each foreign jurisdiction or on advance structuring to manage their cross-border exposure.

Key Foreign Succession and Estate Tax Regimes

United Kingdom

The UK imposes inheritance tax (IHT) at 40% on the value of an estate above the nil-rate band (currently GBP 325,000, with an additional residence nil-rate band for residential property passed to direct descendants). For non-UK domiciliaries, IHT applies to UK-situs assets only. However, individuals who are UK-domiciled (including those deemed domiciled by virtue of prolonged UK residence) face IHT on their worldwide assets.

Hong Kong residents with UK property should ensure their domicile position is clearly established and consider holding UK property through structures that may mitigate IHT exposure, having regard to the latest HMRC guidance and anti-avoidance rules.

United States

The United States imposes federal estate tax and, in some states, state estate or inheritance taxes. For non-US domiciliaries, US federal estate tax applies to US-situs assets (including US real estate, shares in US corporations, and certain US-registered securities). The US federal estate tax exemption available to non-resident aliens is only USD 60,000—far below the exemption available to US citizens and residents.

Hong Kong residents with US investment accounts, US real estate, or shares in US companies should review their US estate tax exposure and consider holding US assets through non-US structures to remove them from the US taxable estate.

Australia

Australia does not currently impose federal estate or inheritance tax. However, capital gains tax (CGT) applies on the disposal of Australian taxable property (including direct interests in Australian real property and interests in entities that hold Australian real property). On death, CGT can be triggered as the assets pass to beneficiaries, though various concessions may apply depending on whether the beneficiary is a resident or non-resident and whether the assets qualify for the principal place of residence exemption.

Mainland China

Mainland China does not currently impose a dedicated inheritance or estate tax, though there have been periodic discussions about introducing such a tax. Succession to mainland assets is governed by the Civil Code of the People's Republic of China, which applies forced heirship rules among certain categories of heirs. Foreign residents inheriting mainland assets may face practical difficulties in repatriating proceeds.

Succession Laws and Forced Heirship

Many civil law jurisdictions (including France, Germany, Spain, and mainland China) impose forced heirship rules that reserve a fixed share of an estate for certain heirs (typically the deceased's children and surviving spouse), regardless of the terms of any will. A will that attempts to disinherit a forced heir may be challenged and overturned in those jurisdictions.

For Hong Kong residents with assets in civil law jurisdictions, estate planning must account for the local forced heirship rules. Trusts and certain holding structures may provide some insulation from forced heirship claims, though their effectiveness varies by jurisdiction and has been the subject of litigation in several European countries.

Probate and Administration

When a Hong Kong resident dies holding assets in multiple jurisdictions, separate probate or estate administration proceedings may be required in each country. This is time-consuming, expensive, and potentially subject to legal challenges in each jurisdiction.

A well-structured estate plan can minimise the number of jurisdictions in which probate is required, for example by holding foreign assets through a Hong Kong or offshore structure, or by vesting legal title to foreign assets in a trustee under a lifetime trust.

Planning Strategies

Lifetime Trusts

Transferring assets into a discretionary trust during the settlor's lifetime can remove those assets from the estate for succession purposes in many jurisdictions. The trust, as legal owner, holds assets across borders under a single governance structure, avoiding multi-jurisdictional probate and potentially mitigating estate and inheritance taxes depending on the jurisdiction.

Offshore Holding Companies

Holding foreign assets through an offshore company (e.g., a British Virgin Islands or Cayman Islands company) can convert a direct interest in foreign real property or assets into shares in a non-local company. The succession to those shares may be governed by the law of the holding company's domicile rather than the law of the underlying asset's jurisdiction, simplifying succession and potentially mitigating local estate taxes.

This strategy must be reviewed jurisdiction by jurisdiction—some countries (including the UK and Spain) have look-through provisions or anti-avoidance rules that may negate the benefit for estate tax purposes.

Will Planning

Hong Kong residents with assets in multiple jurisdictions should consider executing separate wills for each jurisdiction in which they hold significant assets. Each will should deal only with assets in that jurisdiction and should be drafted to comply with local formality requirements. A global will or a will purporting to govern all worldwide assets may be valid in Hong Kong but may not be recognised in other jurisdictions.

Beneficiary Designations and Joint Ownership

For certain assets (such as insurance policies, retirement accounts, and jointly held property), beneficiary designations or joint ownership with right of survivorship can transfer assets directly to the designated beneficiary on death, outside the estate and without probate. These arrangements should be reviewed periodically to ensure they remain consistent with the overall estate plan.

The Role of the Family Office

For families with complex cross-border wealth, a family office structure—whether a single family office or a multi-family office arrangement—provides the governance infrastructure to manage diverse assets, coordinate professional advisers across jurisdictions, and ensure that estate planning documents remain current as laws change and family circumstances evolve.

Conclusion

Cross-border wealth transfer is one of the most technically demanding areas of private wealth planning. The interaction of Hong Kong's favourable domestic regime with the often penal estate tax regimes of other major jurisdictions requires careful, proactive structuring. Leaving planning until a crisis strikes—whether illness, incapacity, or death—dramatically reduces the options available and can result in avoidable tax costs and family disputes.

Alan Wong LLP advises high net worth individuals and families on cross-border estate planning, trust structuring, and succession across multiple jurisdictions. We work with our clients' advisers in each relevant jurisdiction to deliver coordinated, comprehensive planning solutions. Contact us to begin a review of your cross-border estate plan.